Economic forecast predicts slowdown, opportunities for Austin

By Teresa Pione Thursday, 15 January 2009

AUSTIN — Local economist Angelos Angelou, founder of Austin-based AngelouEconomics, presented projections at the Angelou Annual Economic Forecast Event on Jan. 15 that Austin will see slow job growth but also opportunities as Central Texas continues to fare better than the rest of the nation.

Reflecting on 2008, Angelou said factors such as population growth and retail sales led to a stronger economy in Austin than other cities nationwide.

"Despite slower wage increases, consumer spending remained strong except for the last quarter of the year," he said.

Angelou attributed population growth to migration patterns to Austin from almost all major metro areas in the U.S. and from many parts of Mexico.

He said Austin's population traditionally doubles every twenty years whether the economy is in recession or expansion and he expects the trend to continue.

The average job growth in 2008 was 2.5 percent, higher than the state's 2.2 percent average.

"Closer to home, the Texas economy continued to defy national trends gaining 222,400 new jobs in 2008," Angelou said.

Although falling energy prices have hurt the energy sector, the national savings rate grew to 6 percent nationally, the highest he has seen in three or four decades, Angelou said.

"We are gaining the most jobs of any city in the nation," he said.

Austin outperformed every national competitor in recruiting high technology businesses, Angelou said, yet local leaders should remain on guard.

"Austin cannot become complacent," he said. "The competition for high tech jobs remains fairly strong out there."

To avoid lagging behind, Angelou said individuals must support economic development including chambers of commerce and local policies to offer business incentives.

Regardless, 2009 is going to be a tough year, he said.

"Over the next two years job growth will slow down considerably," he said.

Educational and health services industries will see a 3.8 percent in job growth and government jobs will grow by 3.7 percent but the manufacturing and construction industries will see a decline of 3.8 percent, according to his forecast.

"Only three sectors will sustain the local job market in the next three years: government, professional services and health and education," Angelou said.

With a continued decline in the housing market creating downward pressure on rent and sales, there also exist opportunities, Angelou said.

"We have an unprecedented opportunity to gain the lead in new technology in areas like renewable resources," he said.

Though the next few years will be difficult as consumers plan to spend 40 percent less on consumer electronics than they spent in 2008, Angelou said he was hopeful that elected officials and entrepreneurs will make smart moves.

"Innovation remains the key to our economic prosperity," he said.

While Texas leads the nation in using wind as an energy source, the state is also losing businesses to other states like New Mexico who provide higher incentive packages and a ready workforce, he said.

The light at the end of the tunnel, he said, is that as a result of the economic slowdown, businesses will focus more on delivering quality customer service, consumers will enjoy cost reductions and real estate investment opportunities will flourish.

In response to the presentations, Realtor Paula Adkins said she feels lucky to be in Austin, but does not see the forecast as necessarily bad news.

"I am in a unique situation because my business is totally for the benefit of customers and clients, so if it is not a good time to buy and sell I would want them to wait," she said.

Adkins said although the forecast is valuable information, it will not change the way she operates her business.

Richard Wilkison, P.E., of Huitt-Zollars Architecture and Engineering Firm in Northwest Austin said the information presented confirmed what he has seen in the business world.

"We don't see the growth in the area we've been hoping for, that is, transportation," he said. "We're just waiting to see what the impact will be from the federal government."

Wilkison said the firm will go after more proposals in the public sector, such as government projects resulting from bonds, and will focus on marketing.

"We typically do a pretty good job of what we consider watching our market, but we'll spend more time going out talking to folks," Wilkison said.

Visit www.angeloueconomics.com.