Market Update: An uneven recovery
Larry Jacobson, President
An uneven recovery: Texas, Arizona among the states that have regained all their lost jobs
The U.S. economy lost 22 million jobs in March and April of 2020, a huge number that reflected the fear gripping employers, investors and consumers at the dawn of the coronavirus pandemic.
Fast forward to the end of 2021, and nearly all those jobs have come back. There is plenty of geographic nuance in that broad picture, however.
A handful of states – Texas, Arizona, Utah and Idaho – beat the rest of the country to pre-pandemic employment levels. Employment in some other states, such as California and New York, remained well below pre-recession levels as of late 2021.
First, the big picture: U.S. nonfarm payrolls stood at 152.5 million in February 2020, according to the U.S. Bureau of Labor Statistics. By April 2020, that number had plunged to 130.2 million. After a robust recovery spurred by a combination of government stimulus and widespread distribution of COVID vaccines, there were officially 149 million workers on nonfarm payrolls as of December 2021.
But a closer look shows there are leaders and laggards in the jobs comeback. Some states are still struggling to recover. California had 17.7 million workers at the start of the pandemic. By November 2021, it had 16.8 million workers, still hundreds of thousands of jobs short, according to federal statistics.
The trend was similar in New York. The state entered the recession with 9.8 million workers. By late 2021, its payrolls stood at 9 million.
Contrast the trend in California and New York with those in four states that already have recovered their job losses. Texas had 12.97 million workers on nonfarm payrolls in February 2020. The Lone Star State returned to that level by November 2021, reaching 13 million workers.
Arizona had nearly 3 million workers at the start of the pandemic and returned to that level in November 2021. Utah had 1.57 million workers at the start of the pandemic. It eclipsed that number in February 2021.
The recovery was even faster in Idaho, which had 773,400 workers at the dawn of the pandemic. It needed less than a year to recover its losses, hitting 776,400 in December 2020.
Why the uneven comeback? Look to the ways the coronavirus reshaped work. With tech employers shifting to remote work, many workers now have the flexibility to live in a less expensive area while keeping their higher salaries.
All four states that have recovered their job losses have experienced an influx of new arrivals. The population shift is driven in part by Californians who are swapping very expensive homes for more affordable properties in Texas and the Mountain West.
The median price of existing homes sold in Silicon Valley in the third quarter of 2021 was $1.65 million, according to the National Association of Realtors. Compare that to median prices in Austin ($498,400), Phoenix ($429,600), Dallas-Fort Worth ($345,200), Houston ($309,900) and San Antonio ($300,900).
In other words, even after the housing boom of 2020 and 2021, home prices in the fast-growing states are a fraction of those in Northern California.
Another factor is state tax climates. Texas has the fifth-lowest tax burden among U.S. states, and Idaho ranks No. 8, according to the Tax Foundation. Arizona and Utah also rank in the top half of states on tax burden.
California and New York, on the other hand, are known for steep tax burdens. California ranks 38th on the Tax Foundation scorecard, and New York is 50th.
The four fast-recovering states also have imposed fewer public-health restrictions during the pandemic.
All those factors are shifting job momentum towards Texas and Mountain West states. Tech firms Oracle and Hewlett-Packard have relocated their headquarters from California to Texas.
And electric car company Tesla in December officially established its headquarters in Texas. In explaining the move, Tesla founder Elon Musk pointed to California’s steep housing prices, hefty tax burden and strict lockdowns.
Here at The Jacobson Company we continue to look for investment opportunities in these regions as well as in others that demonstrate strong population and jobs growth. While we have enjoyed some considerable successes in the West, as the country adjusts to a post-pandemic world we see opportunities elsewhere.
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