As we approached the new decade, many analysts were taking a look at how we might expect the economy to perform over the coming year. With no real signs of major economic turmoil, analysts were looking forward to a fairly mild year. Recent events have put a damper on the economic outlook. Widespread panic over the coronavirus has affected the global stock market and created fears of a global economic downturn. Meanwhile, multiple reports show that the Austin is one of the most recession-proof cities and its economy is well-equipped to maintain stability throughout an economic downturn.
A recent ranking of the most recession-proof cities in the U.S. was conducted by the financial technology company SmartAsset. Based on their analysis, Austin ranked as the fifth-most recession-proof city in the U.S. Austin’s strong showing is supported by its strong job growth, low unemployment rate and an extremely low percentage of public relying on assistance programs.
“There really is no current sign that the Austin real estate market is slowing down,” said David Brodsky, broker/owner of the eponymous boutique Austin brokerage. “There are huge corporate expansions and relocations that will happen despite what’s going on worldwide and the employees that move with them still need a place to live,” he explained. “In addition to that, Austin has proven itself as a strong, stable market that can withstand major economic downturns.”
He went on to point out that our diverse economy has a lot to offer and has been a key to our long-term success. “Our economy isn’t reliant on any one major industry and we’ve been able to learn from mistakes we’ve made in the past – like during the downturn in the 80s. Those things have helped us to prepare for periods of economic decline. I think our state officials have done a very good job of growing our economy to a point where we can weather an economic storm.”
Most Recession-Proof Cities Ranking Methodology
In order to develop their ranking, SmartAsset analysts examined 264 of the largest U.S. cities based on nine metrics. The metrics spanned three major categories: employment, housing and social assistance. It then determined the final ranking by averaging each city’s score in the 3 categories. Those with the highest ranking (close to 100) are most recession-resistant, while those with the lowest average ranking (close to 0) are the least.
Here’s a breakdown of the three main categories:
- The employment category factored in the current unemployment rate, change in the unemployment rate during the Great Recession from 2007 through 2010 and the current labor force participation rate.
- In the housing category, SmartAsset factored in housing costs as a percentage of income, change in home value during the Great Recession from 2007 through 2010 and mortgage delinquency rate.
- As far as the social assistance category, the main factors considered were the percentage of the population relying on public assistance, the average annual amount of assistance per household and state rainy-day funds as a percentage of state expenditures.
Austin Ranks Highly in All Categories
In the ranking, Austin, Texas placed within the top 11% of the study in each of the main categories considered. The SmartAsset data ranked Austin as the 13th-best city for employment, 29th-best for housing and 26th-best for social assistance. According to SmartAsset, Austin also holds top-15 rates for individual metrics in each of the above categories.
In terms of employment, the Austin 2018 labor force participation rate was the 10th-highest in the study, at 74.0%. During the Great Recession, the average home value in Austin increased by almost 10%. As for the percentage of the population that relies on public assistance, Austin ties for the 15th-lowest with approximately 1% of the population in need of that service during the study period.
Texas Ranks Highly As a Recession-Proof State
An interesting – and unexpected – result of the ranking of most recession-proof cities was the performance of Texas cities overall. Texas had 5 out of the top 10 most recession-proof cities on the ranking. Three more cities ranked within the top 25 of the 264 cities considered.
According to their report released with the ranking, SmartAsset wrote “The five Texas cities in our top 10 – Frisco, Plano, Denton, Austin and Lubbock – rank in the better third of the study for four metrics: change in the unemployment rate during the Great Recession (from 2007 through 2010), change in home value during the Great Recession, percentage of the population relying on public assistance and state rainy-day funds.”
Austin Economic Outlook 2020
Earlier this year, The Milken Institute released its annual assessment of the best-performing cities. Known as the Best-Performing Cities Index, the list ranks the 200 large metros and 201 small cities in the U.S. based on economic vitality. Austin has appeared near the top of the ranking for multiple years in a row, with a strong performance in job and wage growth. In the current ranking, Austin took third place.
In a report about the index, Kevin Klowden, executive director of the Milken Institute Center for Regional Economics, told Yahoo Finance that many of the cities on the list have something in common. “The top-performing cities have cohesive strategies that allow them to weather economic storms and leverage their assets for sustained growth,” he said.
Klowden tells Yahoo Finance that cities that top this year’s list are primarily in the Sunbelt and have an eye on the future when it comes to its workforce. One way this is done is by creating jobs that are less likely to be phased out by technology.
“It’s this interesting case, where if you look at the places that have done well, with the exception Boise and Seattle, … are the places that have seen real growth in the of future-facing jobs,” he said.
Additionally, the cities that have performed well in the list are ones that have proven their long-term economic fortitude.
“Every major, thriving city that’s on this list that has been strong for quite a while,” he added. “They have to deal with growth problems, and it’s how you manage that growth that really becomes a significant issue. And if you can manage that growth, then it means that you’re going to be thriving for quite a long time.”