ThinkWhy™ It Matters
The Austin Employment Landscape:
- Job growth is slowing
- More people are entering the labor force
- Unemployment rate is increasing
- Average hourly earnings growth is slowing
- Housing is becoming less affordable
The Austin labor market is experiencing a slowdown from its high rate of growth over the past five years. If your company serves the Healthcare/Education and Government industries, which are experiencing the slowest job growth, your revenues may decline as these customers are spending less.
Businesses may want to:
Slow hiring plans for the balance of the year and 2020.
Reduce investments or consider cutting costs.
Spend more on employee uptraining and cross training.
Average Hourly Earnings Growth (all private employees, July 2019)
With job growth slowing, more people entering the workforce, and the unemployment rate increasing, average hourly earnings growth is slowing after a long run up since its $29.93 peak in December 2018.
So far in 2019, average hourly earnings have dropped by 5.6 percent, pushing the hourly rate down to $28.26, about the same level as in September 2017.
Unemployment Rate (June 2019)
The unemployment rate increased from 2.2 percent in May to 2.7 percent in June.
Austin is seeing an expansion in the labor force because more people want to take advantage of the higher level of wages.
While Austin’s unemployment rate increased this month, the Austin, San Francisco, and San Jose metros all had an unemployment rate of 2.7 percent in June, the lowest of 51 metro areas with a population of 1 million or more.* These three metros are not only tech hubs, but they also share talent, which explains the similar employment situations.
*Source: BLS’ June 2019 Current Population Survey (CPS), published August 1, 2019.
Job Growth by Industry (July 2019)
The rate of job growth in the Austin metro is rapidly slowing, as compared to the year prior. Annual job growth was 2.3 percent** with a job gain of 24,700. These rates are well below the five-year average for Austin, with this metro experiencing the slowdown mainly this year.
If your company serves industries seeing slow job growth, your revenue may decline as customers spend less.
Companies within the industries below are outperforming Austin’s average annual job growth of 2.3 percent.The industries highlighted in green are experiencing faster growth trajectories this month, as compared to the five-year average.
For investors looking to expand their portfolio, companies within these industries should be considered for sale and acquisition opportunities.
Industries with job growth BELOW the Austin Metro Annual Average (2.3 percent in July 2019), may experience revenue declines.
For instance, a company that provides technology or IT services to a hospital (healthcare industry) may want to reevaluate the sectors to which they target their products or services. Although the tech sector in this metro area is strong, those that provide products or services to a receding industry, could take a hit to their bottom line.
Without the job growth, uptraining or cross-training internal teams could provide marginal revenue growth opportunities.
Source: U.S. Bureau of Labor Statistics
Cost of Housing
The cost of living in the Metro has gradually increased as net migration to the area has pushed home prices and apartment rents above the national average. According to the National Association of Realtors, home prices grew by 4.1 percent to $343,700 in Q2 2019.
However, relatively speaking, compared to other high-tech metros like San Francisco, Austin remains affordable. When considering talent share between the major tech hubs, Austin is still a strong contender for employees looking to relocate or businesses looking to recruit or expand operations.