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Economists say jobless report positive, but no end to recession just yet
Tuesday, December 8, 2009 by Charles Boisseau
Despite the better-than-expected U.S. unemployment report on Friday, two Austin economists predicted the local economy will remain sluggish for several months before true signs of recovery emerge.
On Friday, the U.S. Bureau of Labor Statistics said the national unemployment rate edged down to 10.0 percent in November from 10.2 percent in October, and the soaring number of job losses very nearly disappeared.
It was the best report since the recession began in December 2007, said economists, who noted that while the economy still is cutting jobs — 11,000 jobs were cut by employers last month – the latest losses were far less severe than in recent memory; in the prior three months, payroll job losses had averaged 135,000 a month. While 15.4 million people remain unemployed, and another 9.2 million were “involuntarily” working part-time because they can’t find full-time jobs, the steep drop in job losses gives reason to hope the economy could start adding jobs sooner than they previously expected in 2010.
“The short version is: This is sort of one small indicator that the negative impacts are cresting in the national recession,” said Jon Hockenyos, founder of TXP, an economic analysis and public policy consulting firm. “Things may improve in 2010 a little more quickly than we thought they would.”
He noted that the unemployment rate is a “lagging” economic indicator, meaning that employers first need to see improving sales and other positive economic factors before they will begin to hire new permanent workers.
“2009 has been a bad year, but it looks like 2010 will be better — particularly toward the end of the year,” Hockenyos said.
Austin economist Angelos Angelou cautioned that the dire economic conditions remain and the national economy still has a long climb toward recovery – as does Austin and Texas.
“We have some ways to go,” Angelou said. “I think we are going to go from here to the next few months — and longer — where the numbers will tell one thing but the real situation will tell another. I don’t know anyone I speak to feels the economy is out of the recession.”
“We’re not out of the woods, not with 30 million unemployed,” Angelou said, providing a rough estimate of how many people were unemployed, working less than they want to, stuck in temporary jobs or had given up looking for jobs because they were discouraged. “We’re going to watch out how many jobs are created — not how many less jobs weren’t created than expected. We have another quarter or two to go before we will have appreciable job growth.”
Austin and Texas have both generally fared better than the nation as a whole during the recession, as local and state jobless rates, employment levels and real estate values haven’t fallen off as far as in many other places, the economists said.
Local jobless numbers are reported later in the month. In the most recent report, the five-county Austin-Round Rock region’s unemployment rate stood at 7.2 percent for the third month in a row in October, according to the Texas Workforce Commission. A year earlier, the regional jobless rate was 4.6 percent. The region has lost 3,400 jobs, a 0.4 percent rate, in the 12 months ended in October 2008. (Statewide, the jobless rate stood at 8.3 percent in October, compared with 5.3 percent a year ago.)
Austin in particular has benefited from the stabilizing force provided by the state and other government jobs, and also continues to attract some new residents, people attracted to the quality of life and the city’s “creative class,” Hockenyos said.
Even so, this “net in migration” to Austin has seen a startling drop off, with only about 5,000 net new residents moving to the Austin area this year, compared with 35,000 a year earlier, Angelou noted. “That’s a 40,000 negative swing,” he said.
Austin’s retail sales tax revenues are another troubling trend, the economists said. Austin sales taxes revenues were $120.9 million through October, down 10.8 percent from $135.5 million in the same period of 2008, according to the state Comptroller of Public Accounts. This makes Austin the third-biggest loser among the state’s 20 largest cities in terms of percentage of declines in sales tax revenues this year. (Plano, with a 12.6 percent drop off, and Round Rock, with an 11.5 percent decline, lost the most.)
Statewide, Texas collected $1.52 billion in sales taxes in October, a 12.8 percent decline from October 2008. Sales taxes provide about half of the state’s general revenue, which pays for education, prisons and other basic programs.
While more saving by consumers is a good thing long term, in the short-term it is painful for the economy, the economists said.
“People are nervous and they are lowering their spending patterns,” Hockenyos said.
Angelou also mentioned several other clouds for the Austin economy. Venture capital spending – funds often used to fuel fast-growing start-up companies –is only about one-third of the level of a year ago, he said.
And, Austin has ended up on the short end when trying to lure expanding businesses. Austin has lost about a dozen renewable energy firms to other cities, Angelou said, citing solar panel manufacturers and wind-turbine companies.
“We don’t seem to have found our competitive position in terms of economic development. We’ve lost a lot of projects,” he said.
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