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February 3rd, 2008
» Chamber of Commerce Blog | Are we really headed into recession (here)?

By PHYLLIS SNODGRASS

Call me an optimist, but I really don’t think things are as bleak along the I-35 corridor as we are hearing each evening on the nightly news. While our economy is linked nationally and globally – there are also local dynamics going on that are not reflected in the worrisome reports we are hearing.

What are we hearing? A weak housing market is scaring even locals away from putting their homes on the market. Some of this was driven by subprime lending but all reports indicate that the subprime market has not had nearly the impact on our regional markets as it has across the rest of the country. Rising home values due to strong economic growth in this region means that even investors that bought beyond their means locally were often able to turn around and sell where necessary, and due to rising values, not lose their shirt in the process.

Economies do cycle. We all know this. Right now the housing market is in the process of absorbing some excess inventory. When demand outpaces supply the market will drive builders to production once again. Stock markets correct themselves. In a short term world, many investors panic when these cyclical downturns occur. But stock investing is not for the weak of stomach. It takes some faith in the system to stay the course and let the markets do what they do best – adjust. Investment analysts are mixed right now in their opinions of how equity markets will react and adjust during the coming months. Fuel prices are certainly impacting everyone, but in Texas, we still see an upside to rising fuel prices as domestic production increases when overseas oil prices makes domestic drilling economically feasible.

And locally – don’t forget that a large part of our local economy is driven by Texas State University. And universities are virtually recession-proof. Student growth has continued on a steady pace through the years (in good years and in not so good years) and those students always need food, fuel, shelter and clothing along with books and other purchases that stimulate and drive our local economy. The Austin-San Antonio corridor is probably the hottest growth market in the entire United States in the next 20 years. Our local hospital is expanding, our schools now have a huge facelift and we have a new convention center and major shopping facility being built. Despite the growth of outlet malls across the state of Texas, we continue to have one of the most popular outlet mall destinations anywhere. Our major manufacturers are also undergoing expansion and healthy growth and the biggest problem they seem to be facing is finding enough qualified help to satisfy their needs.

Remember the oil bust in Texas in the 80’s? It impacted Texas significantly but did not have the same impact on the nation as a whole. And Texas learned from that bust the importance of a diversified economy. Now the tables are turned and we see the rest of the nation seemingly headed towards a recession. But in this region, optimism abounds as investors see the long term growth anticipated and continue to drive capital investment into our region.

It is easy to watch the nightly news and get a little down about our nation’s economy. It is also easy to look at our stock portfolios and sigh as we re-evaluate our investment strategies to determine if indeed, they are recession proof. But here in San Marcos, Texas we have a lot to be thankful for. So pull out that wallet and go visit a local restaurant this weekend. We are blessed to be living in this town, at this time. The future is so bright in San Marcos – you gotta wear shades.

PHYLLIS SNODGRASS is the San Marcos Area Chamber of Commerce president and chief executive officer.

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0 thoughts on “» Chamber of Commerce Blog | Are we really headed into recession (here)?

  1. In Thursday evening’s public input meeting on the City Manager selection, Scott Reilly (from Arcus, the search firm that just finished the Austin search and is now going to help us find the best person for the job) said the entire corridor from Austin to San Antonio will be -the- fastest growing area of the entire USA for the next 20-25 years. Wow, and we’re right in the middle of it all!

  2. Those readers who don’t have their heads in the sand realize that neither Central Texas nor Hays County is insulated from serious problems occurring in the national and international economies. The impact of a credit crunch, slump in housing starts, slowing employment and decling real wages in the face of an increasing rate of price inflation is already having its effect on the Austin economy. And Hays County is beginning to feel the effects too.

    Housing demand from folks who sold their California homes and moved here, helping to drive up local home prices, has all but dried up.

    New office building starts in Austin have dropped substantially and new job creation in Central Texas has already began its decline according to the latest U.S. Labor Dept. statistics. The official statistics are lagging behind reality and by this August the local labor market will be under severe pressure.

    Lagging U.S. Department of Labor statistics reveal that two major elements of wage and salary employment in our area are already declining, i.e., trade, transportation and utilities category, and government spending.

    To believe that our local county economy is insulated from the worldwide economic problems confronting us defies common sense and flies in the face of economic reality. We should be preparing to tighten our belts for the economic recession that is upon us and not taking a Polly Anna attitude about public spending.

    Lower property taxes will only come with declining property valuations, and appraisal districts will be a lot slower to lower appraisal values than they were to raise them.

    Charles O’Dell, Ph.D.
    Economist

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