Economic Dialysis

In the economic equivalent of shooting fish in barrel, local analyst Angelos Angelou has announced that Austin will continue to grow and prosper at a healthy clip in 2006. In his annual forecast, Austin’s most prominent economist forecasts almost 36,000 new jobs will be created over the next two years; not quite a return to the go-go 90’s, but still at a pace slightly ahead of the 16,300 estimated new jobs from 2005.

It’s become something of a truism that the Austin economy will rumble along like a perpetual motion machine, churning out happiness and prosperity in perpetuity. This reasoning doesn’t just guide business outlooks; it’s the same reasoning that underpinned the Envision Central Texas initiative, treating 1.25 million new Austinites as virtual residents-in-waiting long before anybody even dials up U-Haul.

But while Austin might seem to glide effortlessly on its way to Metropoliswealthville, there are some important things to consider. Too many, in fact, for a single post. For today, we’ll stick with this lesson … Like any good relief pitcher, an economic analyst needs a short memory.

If you set your Wayback Machine to six years ago, you and your talking dog would find Angelou predicting 66,000 new jobs by 2002. And lo and behold, the Austin area generated over 37,000 new jobs in 2000 alone. Holy shit! 66k wasn’t optimistic enough, we’re gonna hit … erm, a recession.

Undeterred, Angelou worked with the Real Estate Council (I think you can guess where this is going) in 2001 to predict “an annual 2.5 percent increase in new jobs during the next two years on top of the absorption of the estimated 17,000 Central Texans who lost their jobs during the first half of this year.” Because somebody’s gotta buy all those new houses, dammit!

Well, 2001 was a wash with only 1,400 net job growth, and the next year saw nearly 16,000 jobs disappear from the region. 5,400 more paychecks dried up in 2003. Without quibbling over decimal points, I’d say the experts were off by roughly 12 metric buttloads on those estimates.

And yet for all this wonkerly bluster, you (meaning “I”) can’t really cast aspersions on Angelou’s work. It’s the nature of his job to use past performance to predict the future, and Austin had one helluva trend working in the 90’s; between 1993 and 2000, the region averaged better than 30,000 new jobs each year, which ballparks out to a 6% growth clip a year. In the absence of other information, that serves as a better guidepost than a coin toss.

Or does it?

Yesterday’s employment report doesn’t tell you much about hurricanes, the dot.com implosion, terrorist attacks, oil spikes, or the other unexpected elements that end up defining our economic reality. Some economists make a nice career from predicting what others failed to expect, but mostly those things get chalked up to “stochastic variance” that sully a nice data curve. And if you had to get up in front of Austin’s business leaders, would you caution against tidal waves, giant spiders, or other unlikely disruptions? I think I’d just pick the average number and go with it.

In the end, Austin’s economy will probably grow respectably in the coming year, if all goes according to plan. The Angelou’s and the Hockenyos’s have a lot of information and insight guiding their predictions, which is why people listen to them. But that doesn’t mean they’ve cornered the market on reality. All too often TPTB take these estimates as written because they’re a convenient rationalization for a rose-colored vision rather than a data point to be interpreted with some skepticism.

So the next time somebody starts waving a 20-year plan around and talking about the inevitable, let’s just roll back the calendar a couple years to dash a dose of reality of the situation.

NOTE: Anyone, even non-economists, can access much of this data on the Texas Workforce Commission’s website.

2 Comments so far

  1. M1EK (unregistered) on January 28th, 2006 @ 1:39 pm

    But despite being incredibly wrong on individual years, he IS right in the long-term – i.e., tens of thousands of jobs being created here. That’s the piece that people need to focus on when deciding whether the “no-growth” or “smart-growth” or “dumb-growth” agenda can best handle reality (and I get the sense you’re one of the folks who thinks the first).


  2. wae (unregistered) on January 30th, 2006 @ 10:34 am

    I’m not a “no-growth” advocate … I just play one in a blog.

    Actually, there are some growth-related activities that I think are pretty cool, such as the Long Center and the Seaholm development. Not that I want to be the guinea pig to live in the first remediated power plant in the country, but the community / cultural / living opportunities there are exciting.

    You’re right, long-term growth is almost certainly Austin’s future, barring unforseen collapse in the tech market, natural disaster, etc. But the assumption of inevitable growth is a double-edged sword. To Robin Rather’s quote in the Chron link, it is beneficial to get people thinking and dealing with the issue now rather than trying to play catch-up later. But it also initiates certain behaviors (anybody remember the term “irrational exuberance”?) that favor the assumed wants and needs of future residents over those of current stakeholders.

    So if I had to put my growth mantra in quotes, it would be “slow and steady,” undergirded by the perspective that growth is the logical outcome of doing everything else right, but not an end unto itself.



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