Austin's economic outlook strong

Forecaster predicts job growth and home sellers' market

to continue this year.

By Kirk Ladendorf
AMERICAN-STATESMAN STAFF
Friday, January 26, 2007

Since it emerged from its high-tech slump three years ago, Austin has steadily added jobs, people, retail stores and traffic.

All those facets of the economy are going to keep going strong over the next two years, economist Angelos Angelou said Thursday at his annual economic forecast breakfast.

Job growth will remain strong, averaging 3.4 percent, and will fuel population growth, which will spur continued strong demand for housing and retail space.

"Austin is going to become one of the hottest real estate markets in the United States," Angelou told the audience at the Austin Convention Center.

"In my view, this is going to remain a seller's market for some time to come," he said. "We will continue to defy what is happening at the national level," where sales and prices have slumped in formerly booming areas on the East and West coasts.

Angelou is a prominent economic development consultant who has issued annual forecasts for 21 years. He underestimated job growth during the tech boom, was slightly bullish during the downturn and last year estimated job growth of 2.4 percent. Job growth ended up at 3.2 percent.

On Thursday, Angelou painted a picture of broad-based economic growth for Central Texas.

"It is not any one sector that is driving it," he said. "We are firing on all eight cylinders."

Angelou forecasts that the five-county Austin metropolitan area will add 24,400 jobs in 2007 and 26,100 in 2008, compared with 22,400 last year.

The downside, Angelou said, is that 20 percent or more of those new jobs will be low paying, with annual wages of less than $20,000.

Because Austin's unemployment rate remains low and job growth strong, it depends on new arrivals to fill many jobs. The metro area is forecast to add a combined 83,500 people over the next two years, most of them newcomers from other Texas cities and other states.

The metro area edged above 1.5 million residents in late 2006, Angelou said, and by the end of 2008, it will be close to 1.6 million.

Retail sales grew by $2.5 billion in 2006, up 11 percent for the year, partly because of the arrival of several major suburban retailers. Retail sales growth is expected to slow to an average of $2.2 billion a year for the next two years. Retail sales are expanding much faster outside of Austin than inside, Angelou noted.

A record 17,000 homes were built in Central Texas in 2006, and Angelou expects at least another 32,000 will be added over the next two years.

Angelou said he expects the metro area will have 55,000 additional cars over the next two years, which, he said, makes continued improvements to roads and highways imperative.

Austin can leverage its expertise in electronics and software to keep adding high-paying jobs, but it needs to also look toward new areas, including life sciences, clean energy, big computer data centers and nanotechnology, he said.

The University of Texas and the Sematech semiconductor research consortium will play leading roles in opening up some of those new growth areas, he said.