New economic data is backing up what the reappearance of traffic jams and ubiquitous help-wanted signs already have made clear — the Austin area economy is in the midst of a robust recovery from its pandemic-induced crash last year.
A barometer of local business activity devised by the Federal Reserve Bank of Dallas, called the Austin business-cycle index, expanded by 10.6% in April on an annualized basis, maintaining a 10%-plus pace it clocked through the first quarter.
Prior to the coronavirus pandemic, yearly increases of about 6% were considered solid.
The recent gains are in stark contrast to the performance of the index in 2020. It plummeted at a record annualized rate of 77% last April, the first full month of the pandemic, before finishing the year down about 1.8% as the recovery took hold.
“Austin (had) a very strong economy” before the pandemic, said Judy Teng, a Dallas Fed research analyst. “So (the pace of the region’s recovery) is not too surprising. It was in a position to rebound quicker compared to other metros in the U.S., and to other cities in Texas as well.”
Strong hiring by local companies has been a big factor driving the local rebound. Consumer demand for goods and services has been soaring as the pandemic fades, prompting businesses to add to their workforces in attempts to keep up.
Through April, the Austin metro area, which includes Travis, Williamson, Hays, Bastrop and Caldwell counties, had recouped about 90% of its pandemic-related job losses, according to the Dallas Fed’s latest report on the region’s business activity. Local businesses shed about 133,000 jobs during the first two months of the pandemic, meaning they’ve added back nearly 120,000 since then.
Amid the renewed hiring, the local unemployment rate declined to 4.8% in April — its lowest level since March 2020 and well below the statewide rate of 6.7%. The unemployment rate in the Austin area hit 12.7% on a seasonally adjusted basis in April last year, when the initial shock of the pandemic first sent the national economy into deep freeze.
As things stand, Austin’s economic recovery from the pandemic is far exceeding the pace of its rebound in the aftermath of another high-profile downturn — the dot-com bust that began in 2000. The Austin business-cycle index finished 2001 down 3.3%, and it gained less than 1% in 2002.
Ray Perryman, president of the Perryman Group, a Waco-based economic research and analysis firm, said the difference is that the recent downturn wasn’t caused by fundamental problems in the economy, such as the overvalued technology stocks that plagued the dot-com era.
“There were no big speculative bubbles or structural issues that you see in a normal downturn — it was a massive health crisis,” Perryman said. “Thus, from the outset, it was apparent that once the health crisis was resolved, the economy could comeback relatively rapidly.”
He said Austin is experiencing a quick recovery in particular because it’s a hub for high-tech investment and employment. Demand for tech products and services remained solid throughout the pandemic and appears poised to grow, he said.
In addition, Perryman said the inability to travel amid the pandemic and the widespread shutdowns that it triggered last year have prompted many people to reassess where they want to live and work, a trend he thinks is benefitting places like Austin.
“The pandemic really brought home the value of livable communities with amenities, quality of life and the capacity to facilitate remote learning, health care and business operations,” he said.
“All of these things added to Austin’s attractiveness and ability to both recover quickly and sustain long-term growth.”