The Federal Reserve Bank of Dallas publishes a monthly report on San Antonio economic indicators, and in its most recent report, they published the following chart showing the fluctuations in restaurant reservations compared to 2019 in San Antonio and Texas. As they note, the demand for dining in restaurants fluctuates directly with the number of COVID cases, which accounts for the softening trend since June with the exception of the spike over Labor Day weekend. Another interesting trend the graph shows is the separation between dining demand in San Antonio and Texas over this past summer. Throughout the time period covered by the graph, the changes in San Antonio and Texas tracked very closely, but it seems the large amount of tourist activity in San Antonio over the summer generated a surge in demand for dining at restaurants in San Antonio over this past summer that was considerably larger than the activity across the state. It looks like the trend lines are back to moving more closely together following the Labor Day weekend and the return to school.
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.
Employment in the San Antonio economy actually declined in July compared to June, as shown in the following table. Compared to the employment level in Feb. 2020, the month before the pandemic hit, employment in San Antonio was still down 25,500 jobs as of June and then in July decreased another 900 jobs to now being off by 26,400 jobs. The employment situation worsened in August as total employment was down 29,200 jobs compared to February 2020. These trends are probably reflecting many novel factors at play in the labor market, not only in San Antonio but across the U.S. and the world.
The unemployment rate in San Antonio has declined from 5.5% in June to 5.1% in July, and now it is sits at 4.8% in August. If the unemployment rate is going down while employment levels are also going down, this seems to me to indicate that the decline in the unemployment rate is due to people dropping out of the labor force instead of finding jobs. This may be due, in part, to the reduction/expiration of unemployment benefits, but it does not seem to indicate that the removal of those benefits had the large impacts on employment that some believed would be the case. Other factors seem to be driving workers’ decisions. Dr. David Autor puts forth an interesting explanation of what may be happening in his New York Times opinion piece (Autor, 2021). Regarding the effects of unemployment benefits, he refers to research showing that states which dropped the federal unemployment benefits this summer have seen very small declines in their unemployment rates. The Financial Times also recently published research on this same phenomenon (Smith and Zhang, 2021). Furthermore, Autor points out that Europe and Britain did not expand their unemployment benefits in a substantial way, and yet, they are also experiencing a labor shortage, too (Autor, 2021).
Having to put your son or daughter in child care has also been put forth as a possible explanation for the labor shortage, but as Autor notes, “women with children have since returned to work at almost the same rate as women without children, meaning access to child care isn’t the main culprit” (Autor, 2021).
He argues that the main reason for the labor shortage is “people’s valuation of their own time has changed.” In other words, many potential workers have decided that it is no longer worth working in a low wage job where they are also likely to be without benefits. As shown in the table above, those industries where wages are lowest are also those where there is high person-to-person interaction and thus, where workers are at increased risk of exposure to COVID. Instead, some are choosing to spend more time with their family and pursue other leisure activities that enhance their standard of living even if it reduces their incomes and consumption (Autor, 2021).
In addition to the explanation put forth by Autor, other factors may also explain what is happening in the labor market in San Antonio. It is clear in the table above that the leisure and hospitality industry and the education and health industry account for most of these job losses. As of June, leisure and hospitality accounted for 17,900 of the decline in jobs, and 8,600 of the jobs lost were in education and health. The employment situation improved in the leisure and hospitality industry in July where the reduction in employment compared to Feb. 2020 declined to 15,800, but the employment level worsened in August to 18,000 jobs. I think this may be due to the rather robust summer vacation season coming to an end followed by convention activity that is still depressed due to the pandemic. The situation got a bit worse in the education and health industry with employment being down 12,100 in July over this same time period but improved in August as the decline reduced to 10,200 jobs. The leisure and hospitality industry and education and health comprise a large part of the San Antonio economy. Besides the shift from leisure visitors to conventions as summer has ended that is possibly affecting employment in the leisure and hospitality industry, there is also much anecdotal evidence of workers in the leisure and hospitality and education and health industries leaving their jobs to seek employment in other industries for many of the reasons already stated. I suspect other metropolitan areas where these industries are a big component of the local economy are seeing similar effects.
It is also worth noting that in the industry that has shown the largest growth since Feb. 2020 by a wide margin, professional and business services, the growth declined from being up 9,900 jobs in June to only being up 6,300 jobs in July. Looking at the data on this industry in more detail, most of the decline occurred in the administration and waste services industry, for which I do not have an explanation. Employment levels did improve a bit in August with total employment in this industry being 7,100 jobs above the February 2020 level.
It is also important to keep in mind the wage levels of the workers most impacted by the economic effects of the pandemic. The average wage is presented in the table above and is calculated using data from the Quarterly Census of Employment and Wages for Bexar County. The average wage across all industries is $56,126 as of 2019, and of the four industries with below average wages, three of those industries are also the three most impacted by the pandemic in terms of declines in employment. This is no surprise as we have known that the economic effects of the pandemic have disproportionately fallen on those at the lower end of the income scale. As mentioned earlier, these are also likely to be the people most impacted by the loss of unemployment benefits, and given the other aforementioned factors at play in this labor market, it may also be deleterious to the overall economic recovery as their spending and engagement in the economy possibly declines.
Even more so, the adjustments happening on the supply-side of the labor market as discussed above indicate that the persistent labor shortage is due to structural changes, as workers reassess the value of their time and/or seek to transition to employment in different industries or different jobs in the same industry. The upshot is that the recovery back to pre-pandemic employment levels will take longer than if these effects were not occurring. This means that facilitating these adjustments is of utmost importance to helping those seeking to transition to new careers, but it is also vital to reducing the time it takes the economy to fully recover.
Autor, David. Sep. 4, 2021. “Good News: There’s a Labor Shortage.” The New York Times. https://www.nytimes.com/2021/09/04/opinion/labor-shortage-biden-covid.html
Smith, Colby, and Zhang, Christine. Sep. 21, 2021. “End to U.S.’s Extra Unemployment Benefits Gives Little Boost to Labour Market.” Financial Times. https://www.ft.com/content/d13b204d-a0c0-4eeb-bbfa-a4b0ce1d1c3f
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.
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.
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.
I recently finished the update to the economic impact of the creative industry in San Antonio and was honored to present it at the creative industry luncheon this past Wednesday.
The presentation can be found here.
In 2016, employment in the industry totaled 20,363 with incomes reaching over $914 million. Output was over $3.3 billion with a bit over $1 billion of that being exported from the region. Once multiplier effects are taken into consideration, the total impacts on employment amounted to 24,885 full-time equivalent positions earning incomes of $1.1 billion and registering a total economic impact of about $4.0 billion.
I had the honor to speak yesterday at the Excel Beyond the Bell San Antonio Annual Summit on the results of a study I did with Eddie Molina on the net benefits or return on investment that this network of out-of-school time agencies contribute to the local community. In short, for every dollar invested in these programs, the valuable services they provide to the youth of San Antonio returns $3.66 in benefits to the community.
These agencies serve 55,000 youth, which is a staggering number in and of itself, and they make a profound impact on many of these kids’ lives. Additionally, while this study did not look directly at their potential impact on economic development, these programs are vital to the future development of San Antonio’s economy, since they are playing such a big role in developing the future workforce and enhancing the quality of life of the community.
I recently presented an update to my 2016 forecast for the San Antonio economy.
Please find the full presentation slides here.
In short, the growth in the San Antonio economy has slowed this year as anticipated. As shown in the following two graphs, through July, employment had grown 2.15% compared to July of 2015 and unemployment was at 2.8% (seasonally adjusted). My forecast for San Antonio this year was for employment growth between 2.25-2.75% and an unemployment rate in the range of 3.5-3.7%. While the July figures are slightly outside these ranges, I am leaving my forecast as is with the recognition that employment growth may end the year a bit lower than 2.25% and unemployment may come in at a rate slightly above 3.7%.
Please feel free to contact me with any questions regarding the report.
I gave a speech today to the San Antonio chapter of the Commercial Real Estate Women.
The topic was the potential for the San Antonio and Austin metropolitan areas to merge into a metroplex or mega-region.
The presentation can be found here: The Emergence of a San Antonio/Austin Metroplex.
Thank you to CREW for the invitation to speak.