Fed Report says Austin business still strong and growing — but at a slower rate

austin-overtures-sightseeingFrom today’s Austin Business Journal:

In at least one key economic indicator, the stellar growth of Austin’s business scene is slowing down and has been for some time, according to data released by the Federal Reserve Bank of Dallas this month.

That indicator is the Business Cycle Index, a key metric followed by economists for its insight into broad economic trends at the national, state and local level. It looks most closely at changes in the local unemployment rate, nonagricultural employment, wages and retail sales. For the Austin area, the business-cycle index expanded at an adjusted rate of 7.1 percent in May. That’s far lower than the 10.7 percent business-cycle expansion seen in January 2015, the highest point of the index since the Austin region emerged from the Great Recession.

But a more troubling indicator is the fact that the business cycle index has dropped consistently since that point. At 7.1 percent, Austin is still above its average long-term growth rate of 6 percent. The last time Austin dipped below the long-term growth average was in 2007, as the Great Recession began to set in. By mid-2008, the slide had continued and Austin’s business-cycle index dropped into the negative — economic contraction — for more than a year. It wasn’t until late 2009 that Austin’s economy began to grow again, according to the index.

Other metrics from the same report show positive trends, but with some caveats. For instance, annualized job growth was 2.5 percent in May, well above the 0.4 percent job growth seen in Texas and the 0.3 percent job growth seen across the U.S. The largest share of that growth came in the trade, transportation and utilities industry, which makes up 17.5 percent of Austin’s employers. That industry grew by 6.5 percent in May. But manufacturing, which makes up 5.8 percent of Austin’s economy, saw employment shrink by 6.4 percent in May. Also of note: the leisure and hospitality industries saw employment shrink in Austin by 0.9 percent, a surprising contraction after that industry’s employment had been in expansion mode since January.

Meanwhile, year-over-year change in real wages paid increased 10.5 percent in Austin compared to 2.6 percent in Texas and 4.3 percent nationwide. Further, Austin’s unemployment rate continues to hover around 3 percent, compared to 4.4 percent in Texas and 4.7 percent in the U.S. Average hourly earnings in Austin rose to $26.55 per hour, more than a dollar above the national average and more than two dollars above the statewide average, which has been hurt by a sluggish oil and gas economy.

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