Local economy fares better than nation

Local economy fares better than nation

By Shannon Colletti Friday, 11 April 2008

Georgetown businesses support theory that Austin region is doing well

With oil above $100 a barrel, subprime mortgage foreclosures high and murmurs of a national recession persisting, Central Texas is likely to see some effects. At this time, however, many say that the local economy is strong and its future bright.

“We’ve got a very robust local economy, and it continues to outperform the national economy,” said Mel Pendland, Georgetown’s chamber of commerce president. “All the indications are that what we have is healthy and sustainable.”

Reasons why

Growth rate is typically a good indicator of economic strength, and Central Texas is in the midst of a population boom. As people flock to the area, they fill jobs, buy homes and pump dollars into the economy.

“Recent growth rates are very good, and future projections show that Williamson County in particular is in the cross hairs of some excellent long-term growth,” said Mark Thomas, economic development director for Georgetown.

A second indicator is the unemployment rate. Area unemployment is 3.8 percent, lower than the national average of 4.6 percent.

Danny Klingler, project manager at consulting firm Angelou Economics, said real estate is one important reason why the regional economy has been resistant to the nation’s downturn.

“You didn’t have the level of a housing bubble that you had in a lot of other markets, where homes had become ridiculously overpriced. Here it’s been fairly steady. You have a very affordable housing market.”

He did note that the subprime mortgage issue has affected this region. There has been a dip in the rate of construction, but the region is still seeing an active development community.

Overall, the Central Texas economy looks strong, and several Georgetown businesses support that claim.

“Based on what we’re hearing and seeing, the companies we visit with are very strong,” Thomas said. “The manufacturers we talk to have plenty of orders. We have not really heard of anyone that is experiencing a downturn.”

Retail sales

Although national retail sales were down over the holidays, Holly Shell, manager of Georgetown’s Wonderful Things, said business has never been better for the gift shop.

“I know everyone has been saying it seems like the economy is in a rut, but we had the best Christmas season we’ve ever had [in terms of sales],” she said. “Our business continues to be strong.”

Kay Gray, owner of the clothing and accessories store Kay’s Kloset, moved her store to its current location two years ago because she needed more room.

“I think we’re doing really well in today’s economy compared to what I hear over the nation,” Gray said. “Our sales are up 15 to 20 percent over the last year. I don’t know exactly why. I think people are really interested in hometown businesses and not traveling as far [to shop.]”

Manufacturing

TASUS Texas, a Toyota supplier that is headquartered in Bloomington, Ind., opened a new plant in Georgetown in September 2005. General manager Walt Barkalow said the company chose Georgetown because it was rich in employees with injection molding experience and was a community that “fit the bill almost perfectly.”

Since it began production, TASUS Texas has more than doubled its employees and increased its sales by about 700 percent. The company is almost at capacity in its 48,000 sq. ft. facility and plans to move into a second building next year. Barkalow said the company is doing better than its long-term planning had predicted.

“Our local economy seems to be pretty good,” he said. “Central Texas is faring much better than the rest of the country. Cedar Park, Leander, Hutto, Taylor and Georgetown are all on a tremendous growth boom. I think a lot of that is businesses wanting to move to this area and the economic development folks doing a good job of scouting out people and showing them what we have in Central Texas to offer.”

Commercial development

Tamiro Ventures is another local business that is thriving, despite the threat of a national recession. Founded three years ago, the real estate development and architectural design company began design on Tamiro Plaza, a four-story medical complex located downtown. Phase one should be finished this summer.

Robert Choi, development officer at Tamiro Ventures, said there is enough interest from tenants to fill the building at least twice, and the company is moving on to phase two, which will expand the building the length of the block.

“We wouldn’t be planning phase two if we didn’t know there was a lot of interest,” Choi said.

Tamiro Ventures has other projects in the works as well, including development in Cedar Park and other parts of Georgetown.

“I think Georgetown is still strong,” Choi said. “The real estate and local economy tend to be quite stable. We’re a high-income city in a very strong growth region. That doesn’t look like it’s going to stop any time soon.”

Residential housing

As the local retail, manufacturing and development sectors remain strong, the real estate sector is holding its own.

“The greater Austin metropolitan area is doing considerably better than the rest of the nation in the housing market,” said Roy Jones, co-owner of Georgetown-based Home Source Mortgage. “Year on year, it’s not as robust as last year, but not every year can be a record year — and ’06 and ’07 were awfully good years.”

Jones said the region was fortunate that it did not experience the big run up in home prices that places such as California and the East Coast did.

“We just had nice, moderate increases of 3, 4, 5 percent a year. There really isn’t a real estate bubble here like there was in so many areas,” he said.

Jenel Looney, a residential realtor with Moreland Properties, Inc. and the creator of HometownGeorgetown.com/blog, said another thing the region has to its advantage is that new jobs are being created. The people who are going to fill those jobs will need homes, so the area’s economic outlook looks very good, she said.

“Cautiously optimistic”

Although many agree the local economy is strong relative to the nation, some say residents should not get too comfortable.

“You have to be careful of saying we’re different, we’re Austin,” said Jim Nolen, distinguished senior lecturer in the finance department at the University of Texas. “We’re reading our own press clippings here and thinking whatever happens in California and the rest of the world doesn’t affect us here, and eventually it does.”

Nolen said he is “cautiously optimistic” about Austin’s economic forecast.

“Overall, I think the positive news is that people want to come here. There’s reasonable job growth and that bodes well for us surviving this downturn better than most communities,” he said. “Now’s the time to be cautious and tread lightly, but we need to also be thankful that we are where we are because we’re in a lot better shape than most places.”

How Georgetown compares to the U.S.
Key indicators of both economies
Indicator	Georgetown	United States
Unemployment rate (2007)	3.80%	4.60%
Population growth rate (Feb. 2007 and Feb. 2008)	6.59%	0.95%
Median income (2006)	Individual: $24,547* Household: $60,642* * Williamson County	Individual: $25,795 Household: $48,200
Gross retail sales (Q1-Q3 2007)	$787.32 million	$2.98 trillion
New jobs created	17,813 (2002) 23,092 (2006) +29.6%	130,340,000 (2002) 136,092,000 (2006) +4.4%
Existing single-family home sales	1,145 (2005) 1,280 (2006) +11.8% 1,203 (2007) -6.0%	6,180,000 (2005) 5,677,000 (2006) -8.1% 4,939,000 (2007) -13.0%
Median sales price of existing single-family homes (2007)	$185,375	$217,900
Sources: Bureau of Labor Statistics; U.S. Census Bureau; City of Georgetown; Texas Comptroller of Public Accounts; Jenel Looney, Moreland Properties realtor; Rural Capital Area Workforce Development Board
Note: All figures are estimates

Nationally, the government is taking steps to increase economic growth, as well.

• Tax rebate
  • Congress passed a tax rebate Feb. 7 that will give most taxpaying single households $600, couples $1,200 and disabled veterans $300 as early as May.
    • Supporters believe lower income households are more likely to spend a tax rebate than save it, meaning money will quickly be pumped into the economy, giving it a boost.
    • Those that oppose the rebate believe this attempt at boosting the economy could weaken the dollar, causing inflation.
• Federal rate cuts
  • The Federal Reserve also cut the federal funds rate, which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans, from 4.25 to 3.5 percent last month, citing a weakening economic outlook as its reason.

What is a recession?

While there is no strict definition for the term recession, there are two main ways recessions are determined.

Unofficial recession - Some professionals consider the economy in recession when there are two consecutive financial quarters when the gross domestic product decreases.

Official recession - However, in the U.S., the official determiner of a recession is the Business Cycle Dating Committee at the National Bureau of Economic Research. One way NBER determines if there is a recession is by following business cycles. NBER economists give more weight to personal income, the national employment rate, sales in manufacturing and trade, and industrial production than the GDP. Often a recession is not officially labeled as such until long after it begins. Recessions are a natural economic reaction to periods of economic growth.

What Hutto and Taylor say

In your opinion, how strong is the local economy?

Kurt Johnson, Hutto chamber of commerce president:

“The Central Texas economy is somewhat stronger than the nation’s economy overall. However, one cannot overlook two troublesome trends: the massive layoff at Dell announced March 31 and the downturn in the housing market [which] hits the Hutto area harder than it hits Austin or the bedroom suburbs west of Round Rock. Hutto has a high foreclosure rate per capita, and the employment opportunities still need to mature ... however, our trip through these difficult waters will be shorter than in other parts of the country.”

Jim Aanstoos, Taylor chamber of commerce president:

“I think it’s doing great. We have a lot of people looking at Taylor. It’s primed for light manufacturing opportunities because we’ve got very good highway access to major transportation corridors in all directions, and we still have low cost of land. Also, the East Williamson County Higher Education Center, which we’re in the process of building the first building for, is going to be a major economic boon to Taylor and this whole regional area for the next 50 years.”