Population Austin Sees Firming Labor Market Housing · Austin MSA is a Comerica Economics...

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factual information.

Austin Sees Firming Labor Market At a time when many Texas areas are facing increasing headwinds from falling energy prices, Austin remains

among the top in terms of job growth. However, recent labor market data show that the unemployment rate in the last three months of 2015 increased despite the area’s year-over-year nonfarm payroll job growth of over 3.5 percent as of December. This is because of a significant upswing in labor force growth in 2015Q4. We expect job growth to moderate in 2016-17 as the spillover effects of unfavorable energy prices and the strengthening dollar weigh on the local economy.

The Austin area’s real estate market has been very conducive to homeowners and sellers in 2015 with elevat-ed home prices. Tighter occupancy rates fueled by a rapidly growing population made apartment rents climb as high as 40 percent over the past five years. As a result, Austin residents are paying as much as 30 percent of their income in apartment rentals. House price appreciation in the area has more to do with tighter supply than the speculative demand found in some California and Florida markets. The area may soon face afforda-bility problems if home prices continue to appreciate more than income growth, as seen in recent quarters.

Attracted by the favorable business climate, many transportation and real estate businesses are competing to expand and add new services. Some airlines such as Denver-based Frontier Airlines and Fort-Worth based American Airlines are adding more nonstop flights from Austin. The increasing concentration of companies from around the globe has spurred the Class A office space rental rate to climb by as much as 13 percent year-over-year in 2015Q4. Oracle Corp. is planning to build a massive 560,000 square foot campus in East Austin and has acquired a 295-unit apartment building as a part of its plan to upgrade workforce by 50 percent in the area. We expect Austin’s office space market to remain tight in 2016.

February 18, 2016

4Q'15a 1Q'16f 2Q'16f 3Q'16f 4Q'16f 1Q'17f 2Q'17f 3Q'17f 2015a 2016f 2017f

Labor and Demographics

Payroll Jobs (Thousands) 958 964 969 975 980 986 992 997 945 972 994

Percent Change Annualized 3.7 2.7 2.2 2.2 2.3 2.4 2.3 2.0 3.3 2.9 2.3

Unemployment Rate (Percent) 3.3 3.3 3.2 3.2 3.2 3.1 3.0 2.9 3.3 3.2 3.0

Population (Thousands) 2024 2036 2049 2061 2074 2086 2099 2111 2005 2055 2105


Net Migration (Thousands) 8.9 8.7 8.8 8.8 8.8 8.8 8.9 8.9 37.4 35.0 35.5

Personal Income

Total Personal Income (Nom., Millions $) 97944 99415 100722 102074 103593 105098 106619 108088 96329 101451 107345


Housing

Housing Starts (Total, Ann. Rate) 18779 18561 18877 19134 19349 19611 19887 20131 19429 18980 19996

Percent Change Annualized -41.1 -4.6 7.0 5.6 4.6 5.5 5.8 5.0 0.4 -2.3 5.4

SF Housing Starts (# of Units, Ann Rate) 11847 11762 11956 12108 12220 12360 12521 12641 11714 12012 12567

MF Housing Starts (# of Units, Ann Rate) 6932 6799 6920 7026 7128 7251 7366 7490 7715 6968 7429

House Prices, FHFA (1995 Q1=100, NSA) 392 396 402 407 413 419 425 431 380 405 428

Year/Year Percent Change 10.0 7.8 6.8 6.5 5.5 5.8 5.9 5.9 10.5 6.6 5.9

Bankruptcies

Total Business (12 Months Ending) 161 153 146 143 145 146 147 148 162 147 148

Total Personal (12 Months Ending) 1420 1422 1436 1536 1579 1561 1547 1534 1483 1493 1549

Austin MSA Economic Outlook

a = actual f = forecast

Austin MSA is a Comerica Economics designation of the Austin-Round Rock metropolitan statistical area (MSA), as defined by the Office of Management and Budget

(OMB). The 2010 OMB definition of the Austin-Round Rock MSA consists of Bastrop, Caldwell, Hays, Travis and Williamson counties.








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Austin Job Growth Still Strong

Austin

U.S.

Nonfarm Payrolls,

Year/Year Percent Change

Source: BLS, Comerica Bank

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Home Price Growth to Cool Off

Austin

U.S.

Source: FHFA, Comerica Bank

FHFA Home Price Index,


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Austin Income Growth Eases

Austin

U.S.

Source: BEA, Comerica Bank

Personal Income,


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Austin Bankruptcies Levelling Off

Business (L)

Personal (R)

Business Bankruptcies,

Total 12-Mos. Ending

Source: U.S. District Courts, Comerica Bank

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Austin Housing Starts Moderate

Austin

U.S., ths (R)

Source: U.S. Census Bureau, Comerica Bank

Total Housing Starts,

Annual Rate

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Unemployment Rate Ticking Up

U.S.

Austin


Unemployment Rate,

Percent








Austin’s Economy Still Strong After creating nearly 40,000 jobs in 2013, Austin’s job growth is downshifting a bit. But compared to Texas as

a whole, the area is still doing very well. The area is showing strong job growth even though some Texas re-gions such as Houston are facing headwinds from falling energy prices. The metro area added more than 7,200 nonfarm payroll jobs, about 15 percent of Texas jobs, in the third quarter of 2015. As a result, the un-employment rate fell to 3.0 percent in September 2015. That is about half of what was prevailing in Decem-ber 2011. We expect job growth to be around 3.0 percent for 2015 and 2016.

The Austin area real estate market is ranked among the top in U.S. metro areas. Home prices grew by 10.6 percent year-over-year in 2015Q2. According to the Austin Board of Realtors, median home prices rose eight percent year-over-year to $258,000 and single-family home sales skyrocketed by seven percent year-over-years to 2,603 in September 2015. As housing demand increased steeply, housing starts also grew. After four quarters of strong growth, single-family housing starts declined in 2015Q3 while multifamily housing starts grew by 5.7 percent year-over-year in the interval. We expect Austin’s housing market to remain tight in 2016 albeit with an easing home price appreciation rate.

The Austin area still remains one of the top tech and business friendly metro areas in the country. Small Busi-ness Trends recently ranked Austin as one of the top metro areas among seven most business startup-friendly areas for 2016 because of its collaborative and supportive environment. According to Spectrum Loca-tions Solutions, Austin was among the top investment destinations in Texas for about 9,000 businesses that left the State of California in the past seven years. We expect Austin to continue to attract businesses from around the country as the economic and demographic fundamentals remain favorable.

November 20, 2015


Labor and Demographics

Payroll Jobs (Thousands) 949 955 962 968 975 984 993 1001 915 944 972






Personal Income

Total Personal Income (Nom., Millions $) 94598 95522 96618 97715 99091 100637 102183 103748 89697 94107 98515


Housing

Housing Starts (Total, Ann. Rate) 20933 20055 20598 21062 21491 21915 22384 22862 19344 19552 21267

Percent Change Annualized 83.9 -15.8 11.3 9.3 8.4 8.1 8.8 8.8 1.1 1.1 8.8





Bankruptcies

Total Business (12 Months Ending) 146 138 139 140 139 135 132 130 198 154 138













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Austin Job Growth Steady

Austin

U.S.

Nonfarm Payrolls,



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Home Price Growth to Cool Off

Austin

U.S.


FHFA Home Price Index,


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Austin Income Growth Eases Off

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U.S.


Personal Income,


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Austin Bankruptcies Falling

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Business Bankruptcies,

Total 12-Mos. Ending


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Austin Housing Starts Are Growing

Austin

U.S., ths (R)


Total Housing Starts,

Annual Rate

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Unemployment Rate to Stabilize

U.S.

Austin


Unemployment Rate,

Percent








Austin Supporting Texas Economic Growth The Austin metropolitan area has been consistently outperforming the state of Texas in terms of private sec-

tor job growth after the Great Recession of 2008/2009. So far Austin’s year-over-year nonfarm payroll job growth has been above 3.0 percent for most of 2015. As energy prices declined and many energy-dependent Texas regions continued to struggle, Austin added more than 12,230 jobs in the second quarter of 2015, which is more than 80 percent of nonfarm jobs created in the entire state of Texas in the period. As a result the unemployment rate fell to 3.1 percent by July 2015. This indicates Austin’s economic climate is still strong, diverse and vibrant, mostly driven by the services sector. We expect Austin’s job growth to remain in the range of three to four percent in 2016 and 2017.

Consistent with strong job growth, personal income in the Austin area has grown faster than the overall state of Texas since 2008. After a robust increase in 2011 and 2012, year-over-year growth in income trended downward throughout 2013 before rebounding again in 2014. As the U.S. labor market approaches towards full employment (which in the Austin area has largely already been achieved), we expect wage growth to up-trend thereby providing a needed boost for income growth in the area going forward in 2016.

The Austin area housing market is extremely tight, with home prices growing above 10.6 percent year-over-year in 2015Q2. According to the Austin Board of Realtors, home sales in the Austin area are approaching an all time high (about 3,149) in July 2015 with a year-over-year growth of 12 percent. Tighter housing supply, a lower mortgage rate environment and favorable income growth are contributing to overheated housing mar-kets in the area. As home inventories build up with increased home construction and home affordability de-creases, we expect home prices to appreciate at a slower pace in 2016 and 2017.

September 25, 2015


Labor and DemographicsPayroll Jobs (Thousands) 942 949 956 964 972 980 987 994 915 944 976






Personal IncomeTotal Personal Income (Nom., Millions $) 93070 94413 95928 97628 99149 100788 102401 104016 89187 93793 99991


Housing Housing Starts (Total, Ann. Rate) 17657 18405 19269 20099 20576 21075 21547 22001 19344 18606 20824

Percent Change Annualized -26.8 18.0 20.1 18.4 9.8 10.1 9.3 8.7 1.1 -3.8 11.9





BankruptciesTotal Business (12 Months Ending) 177 176 173 170 170 169 167 166 198 176 169













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Austin Job Growth Rebounding

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U.S.

Nonfarm Payrolls, Year/Year Percent Change


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Home Price Gains to Moderate

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FHFA Home Price Index,Year/Year Percent Change

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Austin Income Lags Job Growth

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Austin Bankruptcies Falling

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Business Bankruptcies, Total 12-Mos. Ending


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Total Housing Starts to Climb

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Unemployment Rate to Stabilize

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Austin


Unemployment Rate,Percent








Austin’s Growth To Moderate The Austin metropolitan area has added more than 162,700 jobs since the end of Great Recession that ended

in June 2009. As a result, the unemployment rate declined to 3.3 percent by March 2015. Austin had an ex-traordinary job creation rate of roughly 27,000 jobs per year, fueled by its business-friendly economic environ-ment and healthy mix of skilled high-tech and less-skilled labor force growth. In recent months, the pace ofjob growth in the region has eased off slightly as the metropolitan area’s labor market tightened up. In March2015, Austin lost a net of 400 non-farm payroll jobs month-over-month while the area still created an addi-tional 22,800 jobs compared to March 2014. Most of the jobs came from education and health services(around 5,200) followed by trade, transportation and utilities (4,500), and then the leisure and hospitality in-dustry (3,200). We expect Austin’s job growth to moderate this year before rebounding in 2016.

Although the labor market is tightening in the area, overall wage pressure is less than expected. As per therecent data from U.S. Bureau of Labor Statistics, average hourly earnings in the Austin area are around $23.2,with dentists getting the highest rate ($82.8) and fast food cooks getting the lowest ($8.7). The wage rate isabout 0.52 percent higher than a year ago. Austin is one of the top-paying metro areas for high-skilled jobs,but not so for lower skilled jobs, thereby reducing overall wage gains.

Fueled by strong job and population growth, the area’s income growth has consistently outpaced the nationalaverage since 2009. Consequently, the housing market in Austin has gained significant momentum with homeprices increasing by about 12 percent year-over-year in 2014. We expect home prices to appreciate at a slow-er pace moving forward with moderate job growth and increasing supply.

May 21, 2015


Labor and DemographicsPayroll Jobs (Thousands) 929 934 939 945 951 957 963 968 915 937 960






Personal IncomeTotal Personal Income (Nom., Millions $) 92268 93320 94404 95573 96769 97984 99290 100614 89090 93891 98664


Housing Housing Starts (Total, Ann. Rate) 19502 20012 20519 21066 21593 22086 22562 23000 19044 20275 22310

Percent Change Annualized -7.4 10.9 10.5 11.1 10.4 9.4 8.9 8.0 -1.2 6.5 10.0



House Prices, FHFA (1995 Q1=100, NSA) 253.50 256.62 261.14 265.34 269.44 273.21 276.98 281.08 242.17 259.15 275.18


BankruptciesTotal Business (12 Months Ending) 190 186 177 174 172 171 170 169 198 182 170













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Austin's Job Growth Eases

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Nonfarm Payrolls,Year/Year Percent Change


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Income Growth Ticks Up in 2014Q4

Personal Income,Year/Year Percent Change

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U.S.


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Austin Housing Starts Moderate

U.S., Ths (R)

Austin (L)

Housing Starts Total, Annual Rate

Source: Census Bureau , Comerica Bank

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Home Prices Grow at a Slower Pace

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Credit Quality Still Improving

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Bankruptcies, Total 12-Mos. Ending

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Austin Unemployment Rate Declining

Austin

U.S. Unemployment Rate, Percent


Population Austin Sees Firming Labor Market Housing · Austin MSA is a Comerica Economics...

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