Why does Texas labor market just keep surging in 2023?

The health care sector, which was slammed by the pandemic, added 32,400 jobs over the past year in Dallas-Fort Worth. Here, resident Dr. Kimberly Hastings prepares for a cataract surgery training simulation in the operating room at the Orbis Flying Eye Hospital in Fort Worth Alliance Airport. (Shafkat Anowar/The Dallas Morning News/TNS)
The health care sector, which was slammed by the pandemic, added 32,400 jobs over the past year in Dallas-Fort Worth. Here, resident Dr. Kimberly Hastings prepares for a cataract surgery training simulation in the operating room at the Orbis Flying Eye Hospital in Fort Worth Alliance Airport. (Shafkat Anowar/The Dallas Morning News/TNS)

The hiring spree just keeps on going.

Despite higher interest rates and a wave of high-profile layoffs in the tech industry, the Dallas-Fort Worth job market is still expanding at a strong pace. The region added 16,900 jobs in January, the most since October, with a surge in health care hiring providing a major push.

For the 12 months that ended in January, D-FW added nearly 226,000 jobs, roughly double the average annual gains before the pandemic, according to the U.S. Bureau of Labor Statistics.

That's an increase of 5.7%, the highest among the most populous metros and well ahead of the U.S. growth rate of 3.3% over the same period.

"The labor market has been much more resilient than people expected," said Mallory Vachon, senior economist at LaborIQ, a Dallas-based software services company that focuses on jobs and pay. "The overall volume and the net jobs added have just been surprising. Obviously, there's still a lot of demand out there."

In January, Texas added 48,600 positions, the 16th consecutive month of record employment in the state. Those numbers, combined with some recent upward revisions, were so strong that the Federal Reserve Bank of Dallas doubled its forecast for full-year job growth -- just a month after releasing its initial projections.

In early February, the Dallas Fed projected Texas job growth would slow to 1.4% in 2023 and the state would add 193,000 jobs. Now, the Dallas Fed expects Texas to grow 2.8% and add 380,000 jobs this year.

In December, Texas had just over a million job openings, a high-water mark it's been hovering around for several months. In February 2020, just before the pandemic, the state had 531,000 openings.

At the same time, unemployment remains near historic lows. In January, the Dallas-Plano-Irving metro division had an unemployment rate of 3.5%, and the Fort Worth-Arlington side was 3.6%. For context, the average U.S. unemployment rate over the long term, spanning many decades, has been 5.7%.

In Texas, there are almost two job openings for every unemployed person in the labor force.

More signs of the tight job market: One health care company said it was lowering education and licensing requirements for several hundred openings in order to expand the applicant pool, according to this month's Beige Book from the Federal Reserve.

Some school districts cut back to four days a week in part to deal with staffing shortages, the Beige Book said, and airlines said pilot staffing problems were constraining capacity.

"The shortage in the workforce is still one of the No. 1 issues" in health care, said Stephen Love, CEO of the Dallas-Fort Worth Hospital Council, whose members include dozens of hospitals in the region.

He's encouraged by the recent growth in health care jobs, especially in this region. For the 12 months that ended in January, health care and social assistance added 32,400 jobs in Dallas-Fort Worth, according to data from the Bureau of Labor Statistics.

That's the biggest year-over-year increase except for the immediate rebound after the 2020 pandemic lockdowns. The one-year growth rate of 8.2%, easily topped the growth for all nonfarm jobs and most other sectors.

The health industry was slow to recover from the pandemic because many patients put off routine care and screenings to avoid the risk of infection. Yet those on the payroll faced unusual stress when dealing with COVID-19 patients.

"During the pandemic, we had quite a few retirements because people were burned out," Love said. "They were frustrated, and it was very tough on them."

Hospitals lost many employees who became traveling nurses to work on the front lines of the pandemic -- and greatly boost their salary. Texas officials responded to the COVID health emergency, in part by providing 26,000 supplemental health care positions.

That statewide program ended almost a year ago, and health care hiring soon started to accelerate.

Last month, Love met with local hospital leaders in human resources and nursing, and much of the focus was on staffing. Many hospitals are looking for more than general nurses, he said; they need radiology technicians, respiratory therapists and specialty nurses in surgery, emergency care and labor and delivery.

"We're still facing some real critical staffing issues here in North Texas," Love said, despite the increase in hiring over the past year.

Another indicator of the limited supply of health workers: The national unemployment rate for hospitals was a microscopic 1.4% in February, according to government data.

Some big layoffs have garnered national attention, including this week's 10,000 job cuts by Facebook parent, Meta -- which follows Meta's announcement of 11,000 layoffs in November. In general, layoffs were running well below trend for the past two years, according to LaborIQ, but the company projects those numbers will rise to a more normal level in '23.

Some industries, such as mortgages and banking, are being buffeted by higher interest rates while the tech sector is dealing with a post-pandemic slowdown.

"But those folks don't seem to stay unemployed for long," Vachon said.

The duration of unemployment is falling for many. In February, 31% of the unemployed took 15 weeks or more to get a job. A year earlier, 38% required that much time, the Bureau of Labor Statistics reported.

"After implementing a minimum wage of $15 per hour, we assumed that our applicant pool would increase," a food manufacturer told the Dallas Fed in January. "That hasn't been the case. We are still trying to fill open positions that have been open for months."

In the same January survey by the Dallas Fed, half the business executives said they were trying to hire or recall workers, and 60% said they had staffing shortages.

LaborIQ projects that two key measures -- hires and people quitting their jobs -- will fall back to a more normal range this year. But job openings are expected to be about 40% higher than before the pandemic. That will keep the labor market strong, especially in Austin, Dallas and Houston. LaborIQ ranks the top 150 markets for workers, and the Texas metros hold the top three spots, followed by Tampa and Phoenix.

"Job openings have just remained persistently high," Vachon said.

Small and medium-sized companies, which struggled to hire during the pandemic, are still eager to add staff, she said, while others are reluctant to cut back.

" We are likely overstaffed by about 15% right now," a textile maker told the Dallas Fed. "But [we] are not willing to lay off or cut hours as we're unsure if things will pick up."

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