A&M economist: It’s going to be a long road back

Published: Jul. 2, 2020 at 5:45 PM CDT
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BRYAN, Texas (KBTX) - The latest data released by the Bureau of Labor Statistics paints a gloomy picture.

But there are bright spots in the numbers.

For one, our local unemployment rate continues to be on the decline.

The Director of the Private Enterprise Research Center in the Texas A&M Bush School of Government and Public Service, Dennis Jansen, joins First News at Four to break down what the latest data means.

KBTX: So the May unemployment data on the Metropolitan Statistical Areas (MSA’s) in Texas was just released. What jumped out at you most?

Dennis Jansen: Mostly that MSA’s in Texas experienced lower unemployment rates in general... and that follows the state of Texas. The state of Texas had a falling unemployment rate between April and May. That said the unemployment rates are still sky-high. The local rate, is what... 8.9%? That’s pretty high.

KBTX: The Bryan-College Station (B/CS) area has consistently remained among the MSA’s with the lowest unemployment rate. On the last release the B/CS area was number 2. Now we’re tied with Amarillo for the lowest. What do you attribute to that?

Dennis Jansen: As you said we typically have one of the lowest unemployment rates in Texas; and I think this is part due to the composition of the local labor force and the importance of the students to the local economy. And students as workers. When the economy expands, students move into the labor force, and sometimes that means moving into town. When the economy contracts as it has done recently, students sometimes move home, move out of town. Then they’re not counted as unemployed in B/CS area.

KBTX: Compared to January, employment in the b-c-s area has dropped roughly 12%. However, compared to other MSA’s in Texas, we’ve had it pretty easy-- with Midland and Odessa seeing numbers closer to 20%. How long will it take our economy to get those people back to work?

Dennis Jansen: This is a difficult question. When you mention Midland and Odessa, they’ve partially been hurt by the pandemic but they’ve partly been hurt by the decline in oil prices. And the resulting decline in drilling activity. Oil prices are now about $40 a barrel, but they were up to around $60 a barrel at the turn of the year. In other areas, the economy has also been hurt by this. The Houston area has been impacted a lot by the oil industry woes. Our local area has been less impacted but that doesn’t help a lot of people out of jobs or business reduced revenue or not open.

In terms of when will this end, we don’t have a lot of historical experience with the government shutting down large parts of the economy. I do say that turning off and then on again like a light switch, that’s not whats going to happen. I think people that thought that’s what was going to happen are rather disappointed in the results. Unemployment rates typically rise slowly during a recession and they fall perhaps even more slowly after the recession ends. And that’s the typical recession. This time unemployment rates took off like a rocket, but I think that’s because the government had to shut down businesses because of the virus. To get more to the point, the Federal Reserve recently released projections that the unemployment rate at the end of this year would be 9.3%. And at the end of 2021 would be 6.5% and by the end of 2022 would be 5.5%. so they’re projecting a typical slow recovery of unemployment rates. A slow decline after a recession. Now the unemployment rate in the U.S. was just announced to be 11.1% so I think the Fed might be a little bit pessimistic. This will end when government restrictions are lifted and when consumers and other individuals start to return to a more normal behavior in terms of going to restaurants, in terms of traveling, getting on airplanes. And until that happens, we’re still going to have trouble with unemployment. I think what we really need is that vaccine. I hope it comes quickly.

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