The Austin metropolitan area consistently outpaced U.S. job growth for most of the last 25 years. The key exception was during the aftermath of the 2001 recession, the so-called “jobless recovery,” when Austin underperformed. Recently, payroll job growth in Austin has stepped down from an exceptional 5 percent year-over-year job growth in mid-2013 to 2.9 percent as of December 2014. The Austin region added more than 30,600 payroll jobs in 2014, about 7,000 less than in 2013, bringing the metro area unemployment down to a tight 3.9 percent in December.
The big story for all Texas metro areas for 2015 will be the impact of lower oil prices on their regional economies. The oil and natural gas sector accounted for about 12 percent of Texas GDP in 2012, and the Austin metro area includes significant oil and natural gas production along its eastern and southern flanks. However, Austin is also home to three big industries, which will buffer the impact of lower oil prices. Austin is the seat of Texas state government. Although the state is dependent on taxes from oil and gas production, the drag on state government employment and state projects from lower oil prices will operate with a significant lag. Second, Austin is home to the University of Texas, a major employer. Austin is also home to an extensive high-tech industry that will not be dragged down by lower energy prices. We expect Austin’s job growth to ease through 2015 and 2016, but we are not forecasting a regional recession at this time.
Austin’s real estate market remains strong, fueled by surging income growth from high-paying tech and services sector jobs. Home prices in the Austin metropolitan region have surged since bottoming out in 2011. House prices in Austin increased through 2014 at nearly double the U.S. average rate. We expect that such high home price growth will not be sustainable as job and income growth ease this year and next.
Click here for the complete Austin Regional Economic Update: Austin2014_Q4.