Local Economy to Grow Further, Economist Says

In his annual predictions, Angelou says '06 will mirror '05 job gains

January 27, 2006
By Kirk Ladendorf
Austin American Statesman

Austin's economy in 2006 will look like a replay of 2005 — steady, moderate job growth and continued strengthening in the real estate, retail and service sectors — veteran economist Angelos Angelou predicts.

Angelou, who runs an Austin economic development consulting firm, said he expects the local economy to add 36,000 jobs during the next two years as the area continues its gradual recovery from the high-tech slump that occurred between 2001 and 2003.

"Austin is on a growth track that will mirror the job gains of last year," Angelou said. "Last year was the first year that we actually expanded the base beyond the previous peak" of 2001.

Angelou has been forecasting Austin's economy since 1986, and his annual predictions attract a wide following. About 900 people gathered at the Austin Convention Center for breakfast Thursday to hear the latest forecast.

The region had 682,500 jobs in 2005, according to Angelou's estimate, compared with 674,100 in 2001.

The growth of retail sales and strong housing growth reflect people's optimism about the economy and continued creation of jobs, he added.

The Austin metropolitan area's total payrolls should expand to 699,000 jobs in 2006, up 16,500 jobs from a year ago, for a growth rate of 2.4 percent, the same rate that the region saw in 2005, the forecast said. The region is composed of Travis, Williamson, Hays, Bastrop and Caldwell counties.

Retail sales are forecast to grow to $22.8 billion, up $900 million, a 4 percent increase, while population reaches 1,492,000, up 39,000, or 2.7 percent. Most of the population growth will come from people moving to the area because of jobs and the attractive lifestyle, Angelou said.

Nearly 30 percent of the new jobs in the area will be low-wage jobs paying less than $25,000 a year, Angelou said. The retail and hospitality job sectors will create a combined 4,700 jobs this year.

But growth in high-tech services and in semiconductor manufacturing will provide higher-paying jobs. Angelou expects that the announcement of a second factory for Samsung Electronics in Austin and hiring by other chip companies could spur growth this year and in the future.

The chip sector won't be the only high-tech hot spot. Angelou says Austin could fare well from major new business data centers in the area. Among those adding data centers in Austin in recent years are Dell Inc., Oracle Corp. and Home Depot Inc.

"The greatest near-term opportunity that we have is data centers," Angelou said. "This is not an opportunity that will last forever. In the next two or three years, these data centers will be deployed and then growth will slow significantly after that. But for the time being, it is a key area to focus on."

Angelou said he expects growth in multifamily real estate and single-family housing. "I am concerned a little bit about housing prices, because I think demand will continue to be strong, but the supply will be lower this year than last year."

Click here to download Angelos Angelou's Austin Forecast presentation.