It seems Texas has arrived to the recession fashionably late, the question now is how long will we stay? The current economic woes began to be felt in some parts of the nation at the end of 2007, the official beginning of this recession. Texas began to feel the squeeze at the end of 2008, a full year later.
Austin in particular has only recently started to feel the economic pain that the rest of the country has been experiencing for the last year. According to a recent Austin-American Statesman article, Texas could cut as much as 296,000 jobs in 2009, particularly in the previously booming sectors like construction and financial services. Analysts predict the state unemployment rate could go up to 8 percent.
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Austin was looking recession-proof for most 2008 and the situation is hardly dire at this point, with a 6.4 percent unemployment rate still under the national average. But local economic analyst Angelos Angelou predicts things will get worse and recovery will be slow. "When you look at the stock market, unemployment rates, job growth levels, this economic downturn has put us back 15 or 20 years," he said in the Austin-American Statesman recently. He doesn't believe it will take decades for Austin to be booming again, but it won't be soon.
There was some pleasant news about housing starts, which rose unexpectedly in February. According to the Associated Press, "the Commerce Department said new home construction rose to an annual rate of 583,000 in February from a revised 477,000 in January. Economists forecast construction would drop to a pace of around 450,000 units, according to Thomson Reuters. Building permit applications, a key measure of future activity, also rose unexpectedly."
Some analysts found this news very encouraging and went so far as to hope this could signal "some kind of normalization" in the housing market. Home building has certainly been one of the worst hit industries in this recession and Austin has felt that pain, too. But the Federal Reserve's recent decision to buy up more mortgage backed securities could stimulate lending and get people borrowing again. The Fed's hope is this will lead to more home loans on both existing homes and new home starts.
So where does all of this leave Austin? While jobs are still being created in Texas, the workforce is expanding. Austin is a great place to live and because the city has weathered the recession well so far, people are continuing to move here. This is good news and bad news. In general the continual influx of new residents is good for the housing market. But Austin's dependence on high technology jobs is having an effect on the city's economy.
It is likely that Austin's unemployment rate will continue to rise. Analysts predict companies like Dell, Inc. will continue layoffs through 2009. As companies streamline, Austin's high tech landscape is going to look somewhat different. But new industries are likely to come in and fill the void, particularly in the areas of green technology.
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