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Austin's Economy Gets Newsweek Props But Does Trouble Loom?

Newsweek "Greetings from Recoveryland" Graphic
Newsweek says Austin's economy is poised for recovery, but the analysis ignores the possibility of massive public sector job cuts.

Newsweek is the latest national publication to give Austin's economy high praise for being pretty awesome compared to everywhere else.

In its list of the 10 American cities best situated for the recovery, Newsweek repeats the familiar refrain of reasons why Austin's economy rules.

Austin boasted the strongest job growth in NEWSWEEK’s Top 10, both last year and over the decade. Home to the state capital and the ever-expanding University of Texas, the city is arguably the best-positioned of the nation’s emerging tech centers. It enjoys good private-sector growth, both from an expanding roster of homegrown firms and outside companies, including an increasing array of multinationals such as Samsung, Nokia, Siemens, and Fujitsu.

Newsweek goes on to say that Austin owes much of its promise to being in the heart of Texas, a state with seemingly boundless economic promise.

The Texas economy has benefited from widening diversification. Houston has a robust energy business and medical-services industry, and thriving international trade—all long-term growth areas. Dallas enjoys an expanding tech sector and well-developed business-service industries tied to a powerful corporate base. San Antonio has a strong military connection and an expanding manufacturing capacity, and it is a key locale for the growing Latino marketplace. What’s more, Texas offers pro-business policies and relatively low taxes, and the physical infrastructure in the cities is generally as good or better than in many East and West coast metropolitan areas.

But what Newsweek is not reporting is the looming possibility of massive public sector job cuts that could seriously affect Austin's economy. In a Capitol City with a large number of government jobs and a state budget gap that could surpass $25 billion, more than a few people are feeling the breeze of an axe swinging overhead.

A Statesman analysis of agency budget requests earlier this year estimated that 9,800 jobs are on the chopping block. Even if those 9,800 jobs were eliminated, it would still leave the state a long way from balancing the budget.

All told, the 10 percent cuts could reduce state spending by $3 billion if fully implemented, according to the Legislative Budget Board. Another $1.2 billion could be saved if the 5 percent cuts enacted in the current budget are continued. That leaves a long way to go to close a $21 billion gap, even with an $8 billion rainy day fund. In the end, certain agencies might be told to dig even deeper.

We won't know the real size of the estimated budget gap for the 2012-13 biennium until the state comptroller releases her report in January. But in a political environment that does not appear favorable to tax increases, it's at least possible that Travis County's much touted 6.6 percent unemployment rate could grow even higher in the months to come.

Nathan Bernier is the transportation reporter at KUT. He covers the big projects that are reshaping how we get around Austin, like the I-35 overhaul, the airport's rapid growth and the multibillion-dollar transit expansion Project Connect. He also focuses on the daily changes that affect how we walk, bike and drive around the city. Got a tip? Email him at Follow him on X @KUTnathan.