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The Contrast of Employment Growth in San Antonio

The Federal Reserve Bank of Dallas recently posted an interesting article in which it discussed the slowing growth in Texas as employment growth slowed in June. However, this has not been the case in the San Antonio-New Braunfels metropolitan area. As shown in the following chart, employment growth in San Antonio picked up pace in May and June in contrast to the state economy and the other major metropolitan economies in Texas. Employment growth in San Antonio was faster than all of the other major metropolitan economies but just slightly lower than the growth in the state. Employment across the state grew 1.64% while employment grew 1.59% in San Antonio in June (Table 1). While growth in San Antonio is relatively stronger than the other major metropolitan economies, it is still below the long-term average growth rate of 2.30%.

The figures in Table 2 show the growth rates by industry in San Antonio. The growth rates highlighted in green show those growth rates across each industry that accelerated during this time period. This shows that the employment growth in San Antonio over the three months from April through June have been driven by construction, mining, and natural resources; manufacturing; trade, transportation, and utilities; financial activities; education and health services; and leisure and hospitality. Construction grew on average 2.32% over this six-month period with the biggest acceleration coming in May and June, while mining and natural resources declined -0.45% over this period. For those who live in San Antonio, it is probably no surprise that construction drove the growth in this sector. Growth in education and health services was driven by growth in health services with an average monthly expansion of 4.09% over this period. Employment in private education health services shrank -1.88% on average each month. Keep in mind that this is just private education health services, as the public schools are captured in local government.

While the state and metropolitan economies are still expanding as measured by employment growth, their growth is slowing. Maybe San Antonio continues to lead the pack in growth, but I do expect overall growth to continue to be anemic and likely even slow more across the state and the U.S.

Steve

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Unemployment Continues to Improve…With a Caveat

The unemployment rate continued its decline in August across the major metropolitan economies in Texas and across the State and U.S. as the recovery from the economic effects of the pandemic continue (see Chart 1). In San Antonio, the unemployment rate declined to 4.8%, This is 1.8 percentage points above the pre-pandemic level, so while the economy is certainly recovering, there is still a ways to go. San Antonio has the third lowest unemployment rate compared to the other major metropolitan economies in Texas with Austin having the lowest at 3.8%. The unemployment rate in Texas stood at 5.9%, a bit higher than the unemployment rate for the U.S. at 5.2%.

However, the total level of employment in San Antonio declined in July and August, as shown in Chart 2. This indicates to me that at least part of the decline in the unemployment rate in San Antonio may be due to people dropping out of the labor force and therefore, no longer being counted in the unemployment rate. This is also occurring in some of the other major metropolitan economies across the state.

While there have been monthly declines in total employment the past couple of months, the year-over-year growth rates in employment continued to be strong in August with growth in San Antonio coming in at 3.94% (see Chart 3), a good bit above the average historical growth rate in the region of about 2.3%. However, these growth rates continue to decline across most regions in the state, as well as across the entire state of Texas and the U.S. This is likely due to a regression to the mean as the recovery continues and some pull back in consumer spending due to the Delta variant. Another possible factor is the lag in business travel due to the pandemic. This especially affects those local economies with large leisure and hospitality industries like San Antonio because the convention activity is not filling in for the decline in leisure travel as the new school year began.

If we can keep making strides against the pandemic, growth should continue into the near future. This does not mean the year-over-year growth rates will increase, as they will likely tend to move more toward their long-term average rates in the respective areas as the economy gets closer to full employment. The sustained growth will also continue to push the unemployment rates down, especially as the structural unemployment is reduced.