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Texas Sees Some Improvement, But Continues March Through Historic Unemployment


For the second month in a row, Texas continues its tread through historic unemployment territory. The state’s rate ticked up .2% from the original April number of 12.8% to 13% in May. But the U.S. Bureau of Labor Statistics also revised Texas’ April unemployment numbers up to 13.5%, meaning Texas has seen a drop in unemployment.

In April, the state eclipsed the previous high water mark, a 1986 unemployment rate of 9.2%.  

The state is still below the national average, but the gap is narrowing. The U.S. unemployment rate was 13.3%, having dropped nearly 1.5 points from April. 

This is the first decrease in the state unemployment rate since March 2020. According to the Texas Workforce Commission (TWC), 291,000 jobs were created in May. 

With the national jobs report showing 2.5 million jobs created in May, many hoped the state number would show a sharper improvement. 

“The level is a bit unexpected, but the direction of change is still what we expected,” said Anil Kumar, senior economist at the Federal Reserve Bank of Dallas. 

Texas was one of the first states to begin opening its economy back up, allowing businesses to reopen. With recent surges in COVID-19 diagnosis and hospitalizations, there is an ongoing debate about whether it opened too soon.

Oil markets are recovering as well with the price of West Texas Intermediate sitting at just under $40 per barrel. Two months ago it was less than half that. 

“Because of the oil prices coming up and the energy sector not as severely affected as we had expected earlier… I would expect Texas to recover faster than the U.S.,” said Kumar. 

Recovery times are as short as five years to return to pre-COVID economic activity levels. 

“The Congressional Budget office is talking about 10 year recoveries. However all of these are based on certain assumptions,” Kumar said referring to a second wave of infections. 

That assumes we don’t see widespread stay at home orders and increased outbreaks. The most deeply affected industry in Texas continues to be leisure and hospitality, with more than one-third of job losses occurring within it according to the Federal Reserve.

Credit Federal Reserve Bank of Dallas

Texas is expected to lose nearly $1 billion in taxes associated with travel and hotels this year. It is the fourth most affected state. 

In a study conducted for the American Hotel and Lodging association, the U.S. will lose nearly $17 billion in tax revenue from sales, occupancy and unemployment.

“That doesn’t even begin to look at the indirect. And what’s not listed here is property taxes which are really important for local schools and local governments. And all of these will be impacted in a big way if people decide not to travel,” said Chip Rogers, president of the AHLA.

San Antonio projects its hotel occupancy tax revenue will drop 40% from $93 million to $56 million. Travel and hospitality is one of the city’s top five industries.

About 60% of TWC’s jobs gains were in leisure and hospitality, adding 176,000 people back to the employment roles. 

“Texas businesses are opening their doors, taking precautions and working around the clock to serve all Texans,” said Aaron Demereson, TWC commissioner representing business.

Despite the modestly good news, the deep swings in employment, the misclassifications and the reevaluations of past employment numbers give many economists pause.

“I’m just a little wary of these surprising, optimistic numbers so soon,” said Thomsas Tunstall, Director of Research at the Institute for Economic Development for the University of Texas San Antonio.

But he agrees that the state has likely seen the worst of the pandemic’s economic impact.

Paul Flahive can be reached atPaul@tpr.org or on Twitter @paulflahive.

Paul Flahive can be reached at Paul@tpr.org