The Unemployment Rate in San Antonio in April: A Projection Based on Comparison to the US Rate

Recently, the unemployment rate in the U.S. in April was reported at 14.7%, which may actually be about 5% higher as discussed in my post from yesterday. In my projection of the effects of the pandemic on the San Antonio economy, I forecast that the unemployment rate in San Antonio might reach between 14-21%. The unemployment rate for Texas and the metropolitan areas will not be reported until May 22, so the question is: what will the unemployment rate in San Antonio be in April? Going back to January 1990 (as far back as data on the unemployment rate in San Antonio are reported), the monthly average unemployment rate in San Antonio was 4.9% compared to the average U.S. unemployment rate of 5.8%. So, the unemployment rate in San Antonio is 0.9 percentage point lower than the U.S. rate on average.  If this relationship holds, this means the unemployment rate in San Antonio in April will be 13.8%. “If this relationship holds” might be a big assumption, since the industries that have taken the brunt of the impacts of the pandemic – accommodations and food services, retail, and health care – are such a large part of the San Antonio economy. This could mean that the unemployment rate in San Antonio in April will be about the same or possibly even higher than the rate for country.

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A Couple of Key Data Points to Better Understand the Current Depth of Unemployment

The unemployment rate in the U.S. was recently reported to be at 14.7% in April. Here is a link to the full report released by the U.S. Bureau of Labor Statistics. It is somewhat lengthy, but as always, it is worth a quick look, especially since this report contains some insightful information beyond the headline unemployment rate.

One insight is the difficulty in being able to correctly capture the data due to the unique situation caused by the pandemic. This is highlighted in the following statement from the report.

However, there was also a large increase in the number of workers who were classified as employed but absent from work. As was the case in March, special instructions sent to household survey interviewers called for all employed persons absent from work due to coronavirus-related business closures to be classified as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses (pp. 5-6).

As noted in the statement, they calculate that the unemployment rate would have been close to 20% if this data was accurately reported.

A second data point of note is that when those who are marginally attached to the labor force and the total employed part time for economic reasons are considered, the unemployment rate (technically referred to as U-6), was 22.8% in April (see Table A-15 in the report).

I hate to highlight more bad news, as if 14.7% of the labor force being unemployed was not bad enough, but in order to really understand the depth of the economic recession we are in, I think it is important to consider these figures.

Some definitions: Those marginally attached to the labor force include people who are not currently looking for a job but have indicated they would like to work and have looked for a job in the past 12 months. This also includes discouraged workers who have become discouraged about their prospects of finding a job and have dropped out of the labor force. Those employed part time for economic reasons are the workers who would like to work full time but can only find part time work.

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GDP and the Role of Women in the San Antonio Economy

My colleague, Belinda Román and I, have been working on a study of a more accurate measure of the role of women in the San Antonio economy. The results were released this past Wednesday at the San Antonio Hispanic Chamber’s Women’s Award Luncheon. The presentation can be found here.

This is the first study done under our new Women in the Economy Research Program at the SABÉR Institute. There is still much to be researched in this area, but we began by calculating what the gross domestic product of the San Antonio metropolitan economy would be if the non-market household production activities were counted in GDP and if women received equal pay to men.

Household production includes, in part, activities like child care, yard work, preparing meals, house cleaning, maintenance and repairs of the house, and travel time related to such activities.

As of 2016, GDP in San Antonio was $109.3 billion, and with these adjustments, GDP would be about $149.1 billion. We are still working to complete the full report, but it will be released in July.

Steve

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San Antonio 2018 Economic Forecast

I had the pleasure and honor of being on a panel at an event this past Friday hosted by Texas CEO Magazine in partnership with the Bill Greehey School of Business at St. Mary’s University in which I presented my economic forecast for the San Antonio economy in 2018.

The presentation can be found here.

Employment growth in San Antonio remains healthy but has been slowing a bit over the past twelve months, which follows a similar pattern to the other major metropolitan economies across the state through August. Given the length of the economic expansion, growth rates have regressed toward the long-term average. The unemployment rate in San Antonio is still quite low at 4.1% in August, but it has started to tick up over the past year.

Again, a similar pattern is occurring across the other major metropolitan areas, too. We are at the point in this phase of expansion where the economy is at or very near full employment, so growth is going to be driven by population growth and/or growth in productivity, so it is difficult to see that growth will be much greater than average, if it is at all in 2018. For next year, I believe we continue to see growth in San Antonio with employment increasing in the range 2.25-2.50%, which is around the historical average growth rate of 2.43%. I project that the unemployment rate in 2018 will probably be in the range of 4.00-4.25% in San Antonio in 2018.

You will also see in the slides that I think we need to consider the possibility of the U.S. economy going into recession in the next two to three years. This is simply due to the fact that the current expansion is already 100 months old, which makes it the third longest in history. If growth continues over the next two to three years, it will become the longest expansion in history.

If we learned anything in the last recession, it is that growth does not go on forever. The expansion is long in the tooth. As already mentioned, growth in the foreseeable future is going to come from population growth and/or higher levels of productivity. Given the trends in demographics with the aging baby boomer generation and limitations being put on immigration, it is difficult to see where the population growth is going to come from in the next few years. Boosts in productivity are, in part, going to be driven by technological change, and while that is exceedingly difficult to forecast, it is hard to envision from where the boost in productivity will come in the near future. With this in mind, it seems that the odds are pretty high that the economy will run out of steam within the next two to three years.

Of course, all of this is contingent on various risks, and the biggest risk I see at this point is political risk. The national and global political situation has injected a massive amount of uncertainty into the business and economic environment. This, in and of itself, can be a deterrent to economic growth, but it certainly makes economic forecasts more difficult.

Steve

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Broad-Based Growth Continues in San Antonio

With the exception of the information sector, growth continues across all other sectors of the San Antonio economy through June of this year. The growth is lead by large increases in the construction, mining, and natural resources sector (just indicated as construction/mining in the chart) and the education and health sector. I suspect most of the employment gains in the former sector has probably come from the construction industry, but with the recovery of oil prices and activity beginning to pick-up in the Eagle Ford Shale area, the mining and natural resources industries have likely contributed their parts as well.

Growth in the education and health sector is probably driven by the continued strong expansion in the healthcare industry in San Antonio. Professional and business services (indicated as prof. services in the chart) has also shown some nice increases in employment growth this year.

The question is whether or not these sectors will continue to show strong growth.

As long as the economy keeps humming along, the construction industry is probably going to continue to grow, but there are indications that the economy is reaching capacity (as noted in my previous post) and housing prices are starting to move beyond the level of affordability for many folks.

Regarding the mining and natural resources industry growth, this is going to be driven, in part, by what oil prices do. I do not think anybody really knows where oil prices are headed over the next few years, but I think the experts feel like there will be some increase.

It seems to be a safe bet that the healthcare industry will continue to grow. However, many of the healthcare organizations in San Antonio receive a large portion of their revenues from federal government sources, so the wild card is what ultimately happens with healthcare policy and the federal budget. That may be more difficult to predict than oil prices.

Employment Growth by Industry San Antonio June 2017

NOTE: TTU is the trade, transportation, and utilities sector.

 

Feel free to contact me with any questions.

Steve

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Growth Slowing in Texas and Its Major Metropolitan Economies

I recently gave a speech to the Rotary Club of Seguin titled, “Past, Present, and Future of the Central Texas Economy,” in which I discussed the current economic situation in Texas and across the major metropolitan economies in the state. Growth across the state and in these metropolitan economies has been slowing this year, as expected, but over the past few months, the rates of growth have dipped below long-term trends for San Antonio and below growth rates for the U.S. and even below 1% growth year-over-year in some of the other areas (See chart below). With employment growth of 2.55% in August, Dallas leads the way.

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There are several factors that play into this. Houston has seen its economy fall into recession since the decline in oil prices, and as the state’s largest metropolitan economy, this downturn ripples through other local economies. Another big factor is that labor markets in these economies are very tight, and there just might not be enough labor to fuel the continued growth we have seen over the past few years. I believe this is especially acute in Austin but could also be playing an important role in San Antonio and other areas.

Additionally, slowing growth around the globe and the continued strength of the dollar have certainly negatively impacted exports, and I can’t help but wonder if uncertainty around the U.S. presidential election has caused at least a bit of the slowdown. I still need to assess the prospects for 2017, but I want to see the results of the presidential election. Regardless of that result, though, it seems likely that some of these headwinds will continue into next year.

If you’d like to see the presentation, it can be downloaded here.

Steve

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Brexit’s Potential Impact on the San Antonio Economy

With the United Kingdom voting to leave the European Union, it is worth considering the impact it might have on the San Antonio economy. This basically translates to how it might affect the U.S. and Texas economies because I don’t think it will have any direct effects on the San Antonio economy since there is not a very strong connection between the San Antonio and United Kingdom economies. However, there is a reasonable chance that the uncertainty and chaos caused by Brexit throws the United Kingdom and European Union economies into recession. The best I think we can hope for it that it has no effect. I can’t envision a scenario where Brexit increases economic growth in the U.K or the E.U.

While the United Kingdom’s economy is not big enough to throw the U.S.into recession, according to The Economist, “…Britain is big enough for a recession there to have a meaningful effect on Europe’s economy. As a rule of thumb, whatever the reduction in Britain’s GDP growth, Europe’s economy will suffer a drop of about half as much.”

If a recession in Britain does drag Europe into a recession, the ripples across the pond could drag the U.S. economy into a period of slower growth possibly leading to a recession because the European Union taken together is the largest economy in the world. GDP in the European Union was $18.51 trillion in 2014 compared to GDP in the United States of $17.42 trillion in 2014.

In 2015, U.S. exports to the European Union amounted to $272 billion which equated to 13.36% of all exports (See Trade data). This makes the European Union the second largest export market for the U.S. behind Canada at $281 billion. Mexico is the third largest export market receiving $236 billion in exports from U.S. companies. Exports to the United Kingdom were $56 billion in 2015 (2.76% of all exports). While Texas has the largest volume of exports among all states (See Exports by state 2015), the United Kingdom accounted for 1.8% of total exports from Texas in 2015. This relatively low volume of trade does not mean Texas and the San Antonio economies will be immune from the effects of Brexit. If growth in the U.S. economy slows, it is likely that growth in the Texas and San Antonio economies will follow suit.

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