Why Austin Remains Strong and Will Recover Early as the Economy Improves

Commentary by:
David Tandy
President, Gracy Title Company

As the Austin Chamber of Commerce recently noted, even though Austin showed a slight job loss in June, compared to other cities, we continue to be the number one city in year-over-year job growth of the Top 50 Metro Areas. Even with Austin’s substantial increase to a 7.1% unemployment rate, we still ranked number three for the lowest unemployment in the Top 50. Austin has several factors which provide a strong foundation for job creation and long-term economic strength:
Highly educated workforce. Not only does Austin and the surrounding area have an amazing 122,000 students enrolled in colleges and universities, but graduates want to stay in the Austin area. The Chamber lists another 300,000 college students within 200 miles of Austin, most of whom also would love to live in Austin when they graduate. In the world of “knowledge workers,” businesses increasingly relocate where they can find a highly educated workforce, or at least companies will create satellite divisions in those markets.
Population growth. The Perryman Group’s latest forecast indicates that the Austin-Round Rock MSA will gain about 75,400 new wage and salary jobs from 2008 to 2013. In June, Bizjournals published their analysis of county-by-county growth patterns within each state, and used that information to predict metropolitan growth at five-year intervals between 2005 and 2025. During this 20-year span, Austin is projected to climb 13 notches from 38th to become the 25th largest metro area in the U.S.
Stable home prices. Despite the drop in the number of MLS transactions, home prices remain strong. While most large markets in the U.S. experienced a substantial increase in home prices from 2001 to 2006, and therefore a substantial decline from 2006 to present (some by as much as 50%), Austin’s single-family median home price has remained amazingly stable.
Austin ranks high as a place to relocate and expand a business. Kiplinger, a D.C.-based publisher of business forecasts and personal finance advice, ranked Austin 8th in its recently released 2009 “Best Places to Live” report. This year’s report emphasized the best cities for work—looking for cities that have stable employment rates in key job areas as well as providing new career opportunities. The report placed a premium on places that will lead the country in employment growth when the recovery takes off. Entrepreneur magazine’s August issue ranks Austin the tenth-best start-up city in America and Forbes ranked Austin number one for economic recovery! The Forbes analysis highlighted the diverse base of business in Austin and projected that the Austin economy will grow by $5 billion by the end of 2010. The Austin Chamber of Commerce has seen a spike in inquiries and company visits. According to the chamber’s data from January 1 through May 31, the Austin region has seen 76 site visits in that time frame from companies looking to relocate. During the same period last year, there were 54 site visits, and in 2007, there were 43.
Austin also benefits from the favorable business climate of Texas. No large state compares when it comes to being business-friendly. Texas was recently named the country's Number One state for business by Directorship, a publication that caters to corporate boardroom leaders. Additionally, the U.S. Department of Commerce named Texas the top exporting state in the nation for the seventh year in a row based on 2008 export data.
Fiscal responsibility. The Economist recently ran a series of articles comparing Texas and California, noting among other things the favorable business climate and low tax rates in Texas. Even more critical was the difference in the budgets of the two states. Of course, California is not the only state running out of money and slashing education and other budgets. The National Conference of State Legislatures recently reported that 11 states raised taxes this year, eight tapped into “Rainy Day” funds and two states relied solely on spending cuts to balance their budgets. Texas was not included in any of these categories. While many large population states were unable to balance their budget this year, Texas remains economically healthy with a balanced budget—an amazing accomplishment in this economic recession. For these reasons and many more, Austin and Texas are in an excellent position to do well when the overall economy begins to recover.