- Labor
The tech industry is a cornerstone of economic growth and innovation in Texas. Austin, Dallas, and Houston are the three major tech hubs in the state and have attracted numerous tech giants and startups alike. The rising level of tech employment helped fuel the high rate of economic growth in Texas. However, a recent series of layoffs in the tech industry has impacted workers in the tech industry and the broader employment landscape of some tech-heavy areas. This blog delves into the post-pandemic tech layoffs in Texas and its effect on the state's labor market and unemployment rate.
Despite its widespread usage, the so-called tech industry is actually not well-defined. The Texas Workforce Commission (TWC) has taken steps to provide a definition using data from the Bureau of Labor Statistics (BLS) in its Current Employment Statistics (CES) program. The CES program provides estimates of employment, hours, and earnings of workers on nonfarm payrolls on a monthly basis. The TWC uses these CES industry codes to define what it calls key tech industry employers. These CES industry codes are based on better-known North American Industry Classification System (NAICS) codes. More specifically, the NAICS structure is hierarchical, so a sector can be broken down into sub sectors and then into industry groups. The CES industry codes do not always map to each of the NAICS sectors, sub sectors, or industry groups.
Here, we use the CES industry codes identified by the TWC as key tech industries. The exception is in Figure 1, where we use data from the BLS’s Quarterly Census of Employment and Wages (QCEW) due to limited availability of region-specific key tech industry data in the CES. The Quarterly Census of Employment and Wages (QCEW) provides a comprehensive count of employment based on information reported by all businesses covered under the Unemployment Insurance System. As its name implies, the QCEW is only available quarterly, and there is a lag of several months after the end of each quarter before the QCEW data is available. The QCEW follows the same structure of NAICS codes and is the principal source of benchmark data for the more timely CES monthly estimates. CES estimates are revised at the end of each calendar year based on QCEW benchmarks. We focus on the CES in order to capture the more recent monthly trends in tech layoffs that we can see in the key tech industry codes as identified by the TWC.[1]
Figure 1 below shows the trend of the average employment of the key tech industry, broken down by the major metro tech hubs of Austin, Dallas and Houston. 76% of the total tech employment in Texas comes from these three large metro areas, with the remaining 24% from other areas of the state. There is a noticeable upward trend in key tech employment numbers from 1990 until the dot com bubble burst in the early 2000’s, at which point there was a reduction in employment in the major tech hubs of Dallas and Austin. From 2010 onward, tech employment again began growing, almost to the present date. After the early 2000s decline, companies such as McAfee, Trend Micro, Apple, Google, and Facebook established significant operations in Austin, while Dallas experienced increasing employment in cybersecurity, software development and data analytics. The growth of the tech industry in Houston was not as explosive as that of Austin and Dallas, as Houston had more employment opportunities in the energy sector. The maroon line aggregates the data for the entire state, showing the overall robust growth trend noticeable from 2010 onwards.
Figure 1: Employment of the Tech Industry (1990-2023) by Selected Tech Hubs
Source: Texas Workforce Commission, QCEW
A wave of tech layoffs started in Texas (and nationally) in early 2023. This followed the rapid hiring and expansion that occurred during the peak of the Covid-19 pandemic, as tech companies anticipated continued growth and demand. By late 2022, economic uncertainties, rising inflation and a slowdown of tech growth led many companies to reassess their workforce needs, and there were significant layoffs across the industry.
An important feature of tech is that tech professionals work in many industries, not just in firms identified by the TWC as tech, so that attempts to quantify their number provides only rough estimates of total numbers (see footnote 1). Demand for tech professionals is spread over many industries, including manufacturing industries such as semiconductors and other engineering fields. Based on data from the CES and the TWC definitions, in April 2024 there were 1,271,500 employees engaged in the overall tech employment landscape in Texas. The total nonfarm employment reported in April 2024 in Texas was 14,139,900. That is, 9.0% of the total workforce in Texas is tech-related.
Based on the CES, the TWC identified[1] key tech-related employment sectors, and Table 1 shows the April 2024 date for sectors.
Table 1: Employment by Key Tech Industry, April 2024
Source: Texas Workforce Commission and CES
A more granular picture is painted by looking at a particular tech-specific sector. As of April 2024, Computer Systems Design and Related Services occupied 36% of the total key tech-related employment in Texas according to the TWC (Table 1). The CES series Computer System Design and Related Services corresponds to NAICS[1] 5415 which encompasses computer programming services, system design services and supporting software services.
Since this sub-sector employs the largest number of the tech professionals, we turn to Figure 2 below to illustrate the total employment and monthly changes just within this sub-sector for the period February 2020 to April 2024. With the onset of the pandemic and the consequent technology boom, this subsector saw a period of steady growth till it reached a peak in January 2023 with 284,333 employees . In 2023 and into the first months of 2024 several tech companies in Texas experienced significant layoffs starting with Meta / Facebook, Indeed, Accenture, Cognizant, and Dell, among others. This slowed employment growth in NAICS 5415, as reflected in the almost plateaued blue line from early 2023. The monthly employment changes are represented by the red bars showing significant gains and losses (more losses) from 2023 onwards.
Figure 2: Total Employment and Monthly Changes in The Computer and Related Services (February 2020 - April 2024)
Source: FRED
With visible losses in the Computer and Related Services Industry, we might ask how widespread were the employment losses in the broader tech sector, and how much did these tech sector issues impact the broader Texas economy.
Table 2 compares employment changes from April 2020 to April 2024 in the key tech industries, the aggregated tech sector (the sum of each key tech industry), and other industries in Texas not classified as key tech industries. The table provides the yearly percent change in employment from April to April of the next year, beginning with 2020 - 2021, 2021 - 2022, 2022 - 2023, and 2023 - 2024. We can see that in Texas, along with the Computer Systems Design and Related Services Industry, the Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services Industry also shared an adverse labor market experience between April 2023 and April 2024 when the tech layoffs actually became more pronounced. The above two industries saw employment fall by 4% and 3%, respectively, during that period. Both of these industries reflected large increases in employment the previous year, by 19% and 15%, respectively. The table also points out that the percent change in employment over the years slowed down in both key tech related industries and in other (non-tech) industries post April 2023.
Over the entire four years, the Computer Systems Design and Related Services Industry showed the highest growth at 32%. Computing Infrastructure Providers grew 27%, and Semiconductor Manufacturing 22%. Telecommunications saw minimal growth of 2.1%. Collectively, these key tech industries grew 20% in these four years, while other (non-tech) industries grew by 22.9%.
Table 2: Percent Change in Employment in the Key Tech Industries and Other Industries from April 2020 to April 2024
Source, Texas Workforce Commission and CES.
How did tech employment changes impact the broader Texas economy? The answer is unclear. Other industries and key tech related industries grew at roughly the same pace over the period, with tech growing faster in 2022 and 2023, but slower in 2024. Figure 3 below shows the trend of the seasonally adjusted unemployment rates from February 2020 to April 2024. Recently the seasonally adjusted unemployment rate in Texas increased slightly, from 3.9% in March 2024 to 4.0% in April 2024, and the Austin metro area also saw an uptick in its unemployment rate from 3.3% in March 2024 to 3.4% in April 2024. In Dallas and Houston, the unemployment rates remained unchanged from the previous month at 3.8% and 4.2% respectively. Taking a longer view, the Texas unemployment rate has remained stable over the period and has risen from 3.9% in September 2022 to 4.0% in April 2024, with fluctuations between 3.9% and 4.1% along the way. Despite a slowing of job growth, there is no large change in the unemployment rate.
Figure 3: Unemployment Rates, Texas and Tech Hubs February 2020 to April 2024
Source: FRED
Overall, while the tech layoffs have posed challenges to specific workers, and have had an impact in tech heavy areas such as Austin and Dallas, the broader labor market in Texas has shown great resilience, with job growth in other sectors helping to balance the state's employment landscape. The tech layoffs have garnered much attention in the press, but the overall impact on the state is hard to detect in the observed data.
Endnotes
- See key Texas tech industry codes. These include Computer and Electronic Product Manufacturing, Semiconductor and Other Electronic Component Manufacturing, Telecommunications, Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services, Architectural, Engineering, and Related Services, Computer Systems Design and Related Services
NAICS North American Industry Classification System.
Approximately because the tech sector is not identified federally.
