New data from the Dallas Fed indicates that the Texas job market will increase by 3% by the close of 2023. So, is it possible that the Texas job market remains hot, even now? That depends on your definition of hot versus, say, amiably warm?
The sweltering summer began with a concerning Texas job market. While Dallas Fed Researchers Aparna Jayashankar and Yichen Su admitted job growth was robust across most sectors, leisure and hospitality, along with manufacturing, had taken a hit. By the end of June, survey respondents remained concerned about weakening demand, high interest rates, and a potential recession. Worries over the cost of labor shot back up to September 2022 levels, too.
By the end of July, the Dallas Fed reported accelerated job growth and a “resilient” Texas job market, with the state adding around 33,500 jobs.
“Strength in July was led by robust increases in leisure and hospitality and construction employment, and by gains in manufacturing and education and health,” says Luis Torres, Dallas Fed senior business economist. While admitting information services, oil and gas, and professional and business services reported job losses, Torres and his fellow economists forecasted 404,100 jobs will be added to the Texas job market this year, with employment in December 2023 hitting 14.0 million.
A special manufacturing outlook report released at the end of August showed Texas factory activity had contracted again. Less than one-third of businesses say they’ve been able to pass most or all of their higher costs on to customers, and significantly more say cost pass-through has become harder over the past three months than say it has become easier. Even the persistent heat wave has had a negative impact on production/revenue for nearly a quarter of Texas businesses, although Texas service sector activity expanded at a slightly faster pace in August than the prior month.
With all its highs and lows, one thing has remained constant: Texas outperforming the nation as a whole. According to Texas Workforce Commission data from August, the state now has its largest workforce in history, with a staggering 15,111,900 workers participating in the Texas job market at one time. The U.S. Bureau of Labor Statistics reports that, between July 2022 and July 2023, Texas added over 441,000 jobs, the most of any state in the nation. Between February 2020 and the end of 2022, the state accounted for roughly 35% of the country’s net increase in employment.
That doesn’t mean there aren’t any job seekers. Population growth in Texas continues to outpace job growth (we gained 470,708 new residents in 2022). From 2000 to 2022, Texas gained 9,085,073 residents, more than any other state and almost 3 million more than Florida, the next largest-gaining state, according to the U.S. Census Bureau. As Business Insider’s Jacob Zinkula remarks, “Plenty of Americans have moved to Texas in recent years, but the state’s population growth has also been driven by another factor — native-born residents aren’t leaving. Eighty-two percent of Texans born in the state still resided there as of 2021.”
So, Texas is a better state than most for employers and job seekers alike. But there are still economic challenges to contend with. Some we covered above and others, well, are still being speculated about. One, in particular, is being called a “forever” labor shortage. In short, fewer people will be working by the end of the decade than in recent generations. As The Business Journals Senior Reporter Andy Medici points out, the labor force participation rate is expected to drop from 62.2% in 2022 to 60.4% in 2032. It had been as high as 67.4% in 2000 and was 63.3% before the Covid-19 pandemic.
“This is driven in large part by population shifts, as baby boomers retire and the number of Gen Z workers entering the labor force is smaller than previous generations, which economists and demographic watchers have long viewed as a slow-burning structural problem exacerbated by the pandemic,” Medici says.
Now, keep in mind that Texas has attracted more new workers than most states. This epidemic of a “forever” labor shortage is being fueled nationally by slower population growth from fewer births and a drop in immigration over the past several decades. But Texas has experienced moderate increases across all components of population change: natural increases (more births than deaths), around 29% from net domestic migration gains, and 22% from net international migration gains. Contrast this with Florida, where growth stemmed mainly from domestic migration.
This Census Bureau data suggests, again, that the Texas job market is better positioned than most to weather the storm. But that doesn’t mean we’ll avoid the storm altogether. Employers may still need to try new tactics, which, Medici points out, can include hiring more contract workers and rethinking recruiting and retention strategies altogether.
“Smaller businesses in particular might not be able to keep up with the demands of filling open roles in a world where technology is quickly changing and online job postings are no longer enough,” he admits. For ideas on how to take advantage of the Texas job market relative to the rest of the country, drop our recruiters a line.