The recent employment numbers released by the Texas Workforce Commission and the Bureau of Labor Statistics indicate that Houston’s year over year job losses rose to 95,100 jobs, the largest decline in jobs since the second phase of Houston’s energy bust in 1986. Surprisingly, the local unemployment rate held steady at 8.4%. Part of this apparent inconsistency is revealed by a closer look at the employment numbers and an understanding of why so much emphasis is placed upon year-over-year numbers.
Because it is quite difficult to seasonally adjust urban/regional data, most analysts like to use the year-over-year comparisons because you are always comparing the same month, and thus avoid most of the seasonality problems (though even this doesn’t solve problems caused by variations in when Easter occurs or when school workers laid off for the summer return to the labor force). We at the IRF try to seasonally adjust the Texas Workforce Commission data, but recognize that it produces imperfect results. However, there are virtually no seasonality effects between July to August, and thus the simple comparison between the two months is useful.
In doing that the labor market picture for Houston takes on a whole different light. Of Houston’s 12 major sectors reported by the TWC, 7 actually experienced job growth last month. Those still losing jobs were the predictable ones: mining, durable goods manufacturing (much of which is in the production of oil field equipment), construction, and information services. Overall Houston shed 4,000 jobs in August in comparison to July, but 3,500 of these were in local public education which has not yet seen its summer layoffs return for the school year (TWC has yet to pick them up). So by excluding the public sector, we see that net private sector job losses in Houston were just 500 jobs. This is still a decline, but far better than expected and the best performance since the beginning of the year. So why did the year-over-year job loss increase so much last year? Because last year Houston added almost 9,000 jobs between July and August, while this year employment was essentially flat.
Does this mean that the Houston economy is following the national lead towards the beginning of a recovery? Well, despite these encouraging numbers, it is too early to tell. First of all, the national numbers themselves remain mixed, suggesting that the long awaited national economic recovery has not yet arrived. Secondly, because urban economic data has so much statistical noise associated with it, it is still too early to say that Houston’s economy has stabilized, let alone begun to recover. The best employment data in the fall are the October numbers which are typically unaffected by either back-to-school effects or Christmas hiring. Unfortunately, those numbers will not be released until November, so we’ll have to wait and see if the last two months of Houston’s employment data represents a truly positive trend.
Read Previous Houston Updates
- Houston Update (August 26, 2009) - "Might the Houston Contraction Be Moderating?"
- Houston Update (June 23, 2009) - "The Houston Economy's Freefall"
- Houston Update (May 22, 2009) - "Houston Update Houston’s economy deteriorating even faster than expected."
- Houston Update (March 13, 2009) - "Data Revisions Show That The Houston Slowdown Is Already Here!"
- Houston Update (November 29, 2008) - "Houston Slowdown Continues"
- Houston Update (June 18, 2008) - "Houston Stays On Top"
- Houston Update (July 16, 2008) - "Houston's Economy Slows"
- Houston Update (August 19, 2008) -
"Home Market Woes Worsen"
- Houston Update (September 9, 2008) - "
Is the Houston Slowdown for Real this Time?"
- Houston Update (September 22, 2008) - "Houston's Economy Slows Even Before Ike"
- Houston Update (November 18, 2008) - "Houston’s Economy To Slow Significantly"
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