Dr. Ray Perryman: Worst may be over for Texas economy
As with the US numbers a couple of weeks ago, Texas experienced an expected uptick in employment in May.
The Perryman Group - As with the US numbers a couple of weeks ago, Texas experienced an expected uptick in employment in May. The addition of 237,800 jobs led all states and was by far the largest monthly gain that Texas has ever seen. Given all of the bad news for the economy, it’s nice to have at least an initial signal that the worst may be over.
Even so, there remains a long journey to recovery and some perspective is in order. Employment in the state is still 917,800 lower than last May and even further below where it would have been without the pandemic. Moreover, the gain was more than a million fewer than the number lost in April (1,298,900). We are seeing businesses continue to reopen, and jobs have been added as a result.
While the recovery has begun, it remains to be seen how smooth or steady it will be. Dropping 1.3 million jobs in April and getting back less than 20% of them in May is clearly not the “V-shaped” comeback that some are touting. Moreover, we can’t expect to add jobs at this rate for months on end. Once the rush of rehiring in restaurants, retail outlets, bars, and personal service establishments stabilizes, the pace of improvement will slow. The ongoing high levels of new claims for unemployment suggest that, while the national recovery will likely be more rapid than 2008 (Texas was aided by an oil boom), it will take about two years to return to 2019 employment levels.
Everything could change, however, if we see a major surge in COVID-19 cases and hospitalization. Some increase in cases in Texas was expected with the relaxation of the most stringent social distancing measures, but the spike is higher than necessary due to lack of adherence to safety recommendations and is becoming alarming. If hospital capacity remains at acceptable levels and hotspots are carefully monitored and effectively addressed, we should be able to avoid another broad shutdown (which would be devastating to the economy but may be unavoidable at some level if current trends continue).
It is important to recall that the economic crisis was fostered by a health crisis, and full economic recovery depends on controlling the virus. While it is imperative to restore the economy and lessen the suffering that the shutdown has caused, it is equally imperative that we all follow appropriate behavioral guidelines.
Turning the corner in the jobs market for now is a welcome step along the path to revitalizing the Texas economy. The underlying structure was sound before the pandemic and a return to solid growth is on the horizon, but a little patience may be required along the way. Be safe!!