Recession Ending in 2009Q4?

We got the latest economic forecast for the Austin-Round Rock economy from IHS Global Insight today. According to one set of experts (we also use data from Moody's Economy.com and a few other sources), the Austin-Round Rock economy may turn the corner as early as 2009Q4.

IHS Global Insight predicts a slight increase in gross metro product in 2009Q4, ending a string of four consecutive quarters of decline (not adjusted for inflation). The company also expects 2009Q4 to mark the end of declining total employment in Austin-Round Rock.

Here's a table showing expected change in employment by industry between 2009Q2 and 2010Q2. Click on the image for a larger version.



We may see these numbers improve in the next update from IHS Global Insight, because the company estimates our current unemployment rate at 6.9%. According to the Texas Workforce Commission, that figure may be more like 5.8%.

Brian Kelsey

April Unemployment

For the second month in a row the unemployment rate improved in the Capital Area, according to data released today by the Texas Workforce Commission. The unemployment rate fell to 5.7% in April (not seasonally-adjusted), compared to 6.1% in March, while Texas held steady at 6.7%. Unemployment in the five-county Austin-Round Rock metropolitan area was 5.8%.

These figures indicate the Capital Area has weathered the recession relatively well compared to other regions in the U.S. The highest unemployment rate during this recession so far was 6.2% in February 2009. By contrast, regions such as Raleigh and Denver experienced unemployment rates between 8% and 9% in March (U.S. Bureau of Labor Statistics).

While today’s announcement is a positive sign, there are still 51,500 unemployed people in the Capital Area accounted for in April, which is roughly 20,000 more than one year ago.

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Chris Ramser

Measuring Innovation: Patents

The ability to generate new ideas and move them into the market as products and services is the foundation of an innovation-based economy. For people focused on economic development, this is a two-part equation: idea generation and commercialization. Ideas without the market can be inherently valuable for improving our understanding of the world, but you need both parts of the equation to drive economic outcomes: new companies, more sales, and higher incomes.

Tracking registered patents is one way to measure your region's capacity for generating new ideas that could potentially move into the marketplace. Economic developers can use patents to accomplish several goals:

1. Identify competitive advantage - understand which industries in your region are driving the generation of new ideas. It should come as little surprise that the vast majority of patents in Austin-Round Rock are in the field of information technology:

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2. Benchmarking - track your region's performance against other regions. Benchmarking is an easy way to quickly identify what makes your region unique, which can be helpful for marketing, strategic planning, and a variety of other purposes. You can also use benchmarking to identify learning opportunities--i.e. which regions are getting this right, and what can we learn from their approaches to economic development? Staying with our example of information technology, here's how Austin-Round Rock measures up to a few peer regions. Remember to normalize this data--patents per 10,000 employees is popular--if you want a level scale for comparison.

Source: Decision Data Resources

3. Identify key assets - the first rule of economic development is to know the companies doing business in your region. Figure out who is driving innovation in your region and get their take on the opportunities and challenges facing local companies. For example, is your region providing the human capital needed to generate new ideas and drive innovation? In Austin-Round Rock, more than 200 companies registered a total of approximately 2,700 information technology patents in 2006. Five companies accounted for nearly 60% of those patents: IBM, Freescale, AMD, Dell, and National Instruments. IBM led the way with more than 900.

Next up in our measuring innovation series: federal funding.

Brian Kelsey

Green Jobs

EMSI (one of the data providers we use) has published a helpful guide to understanding green jobs for the economic and workforce development worlds.

There is, of course, some disagreement about whether or not "green" jobs are really all that different from existing jobs (i.e. Does a HVAC technician go from a non-green job to a green job if he or she learns how to do an energy audit?). But the important point here is that, if you are interested in understanding and measuring the Capital Area's green workforce assets, then there is information available to help you.

Here's a list of occupations ranked by full-time jobs in the Capital Area that EMSI has identified as part of a solar power cluster:

Construction laborers
Operating engineers and other construction equipment operators
Electrical and electronic equipment assemblers
Electricians
Electrical engineers
Construction managers
Electrical and electronic engineering technicians
Welders, cutters, solderers, and brazers
Electromechanical equipment assemblers
Helpers--Installation, maintenance, and repair workers
Helpers, electricians
Electrical and electronics repairers, commercial and industrial equipment
Structural metal fabricators and fitters
Installation, maintenance, and repair workers, all other
Helpers, construction trades, all other

These occupations represent approximately 31,000 full-time jobs in the Capital Area, and there are expected to be more than 7,000 openings for workers in the next five years. Wages range from an average of $10.88 for entry-level to $24.07 for experienced workers. Education and training requirements for these jobs in the Capital Area are as follows:

20% require short-term on-the-job training
45% require moderate-term on-the-job training
14% require long-term on-the-job training
21% require postsecondary education

Finally, here's a map showing where these jobs are located by zip code in the Capital Area. The darker shades of green indicate where jobs are concentrated.

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Source: EMSI

If you'd like more information about green jobs in your community, let us know, and we'd be happy to help you identify data available for your work.

Brian Kelsey

Retail Sales Improving?

With sales tax revenue down approximately 12% in the Capital Area’s two largest cities, Austin and Round Rock, some may wonder how the smaller cities are faring. The short answer: a few cities are actually showing an increase in sales revenue, while others are slightly down when compared to the same time last year. The graph below represents the net change in sales tax payments from January 2009 to May 2009, compared to the same time last year for each city in the Capital Area with a population of more than 5,000 residents.

Note: Because of a lag in the data, this information may not correspond exactly to the time when actual sales occurred.

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Several cities posted double-digit increases in sales tax revenue, including Lakeway, Pflugerville, and Kyle, which likely benefited from new retail establishments and population growth. However, midsized cities of 20,000 to 99,999 were, on average, 2.4% off pace from last year’s sales revenue, while small cities, those with population of 5,000 to 19,999, were down 3.6% (not adjusted for inflation).

Tracking sales tax data is important as it represents a critical component of a local government’s budget, including a portion of the city’s general fund, and sometimes other programs like economic development, street maintenance and repair, and to pay for debt service on special community venues. In addition, other entities, such as Special Purpose Districts, Transit Agencies, and the State of Texas, also rely on this revenue stream for their operations.

Sales data is also an indicator of economic vitality. There is some evidence to suggest that sales nationwide may be stabilizing as the consumer confidence index recently posted a slight increase in March and a significant increase in April, meaning many retailers may see better days ahead. And workers will get a small boost this year and may decide to spend the extra $400.00 that most will receive from the “making work pay tax credit”, a part of the economic stimulus package.

The last piece of what I will call not great but better news is that with the May sales tax revenue, the net payments to Austin and Round Rock were still down, but not by as large of a margin as previous months this year: -9.5% in Austin and -4.0% in Round Rock for May. Both are still roughly 12% off last year’s figures.

Here's a table showing sales tax revenue for selected cities in the Capital Area, comparing January 2009-May 2009 to one year ago. More data can be found on the Texas Comptroller's website.

(Click on image for a larger version)



Chris Ramser

Joel Kotkin: Austin's Competitive Advantage

In his latest New Geographer column in Forbes, Joel Kotkin describes why he recently ranked Austin as the best big city in the U.S. for jobs.

What do you think of his arguments?

Measuring Innovation: Venture Capital

Innovation is a tricky topic for economic development. Understanding why innovation is critical for economic development can be challenging, and figuring out how to communicate your region's competitive advantage can be even more daunting. So we're going to devote the next few blog entries here to the topic of measuring innovation. First up: venture capital.

With the possible exception of Silicon Valley, nearly every region in the U.S. when surveyed about business conditions will report access to capital as a challenge for economic development. While venture capital is, of course, not the only source of funding available to entrepreneurs, it's the one that seems to capture the lion's share of public awareness. This is important to economic developers for two main reasons: (1) venture capital activity is tracked by media in most major markets and serves as an indicator of a region's economic performance; and (2) many analysts use venture capital as a proxy for assessing a region's capacity for innovation. In other words, money flows to regions where interesting things are happening.

Knowing whether venture capital activity is increasing or decreasing in your region is a good start, but there is much more data available to economic developers who are interested in digging deeper. For example, the chart below shows recent venture capital investment in some of Austin-Round Rock's major industry sectors. Data is also available on which VC firms are investing in your region and which companies in your region are attracting funding. Funding by stage (Series A, B, etc.) is also available.

(Click on the chart for a larger version)


Source: Decision Data Resources

Economic developers can use this data in a variety of ways:

1. Evaluate whether or not access to capital is a potential barrier to economic development in your region. (But remember that VC is not the entire ballgame)
2. Identify emerging industries in your region. Venture capital firms will likely find emerging opportunities before you will. Continually revisit your targeted industries--are you adapting your strategy to account for tomorrow's economy?
3. Identify and reach out to companies attracting venture capital investment. Understand why they've been successful. Make them part of your story about why your region is a leading place for innovation-based economic development.
4. Identify which venture capital firms have invested in your region. Are they local, based somewhere else in the U.S., or abroad? Which industries are they targeting? Where are the financing gaps? Don't overlook VC firms in your marketing efforts.
5. Measure, benchmark, and take action. Venture capital data is available for most regions in the U.S. Compare VC activity in your region to VC activity in peer regions for a look at how you stack up to your competitors.

Next up: patents.

Brian Kelsey