The State of the Central Texas Economy

Optimism and Confidence Prevail Among B2B Leaders
by Pete Monfre

Discussion: Comment below with your thoughts and analysis.


Click to download a copy of the survey report

If you’ve turned on your television or radio over the last six months or so, you’ve been the recipient of an almost unprecedented drumbeat of economic doom and gloom. It is no wonder that business owners and executives are concerned over the performance of the economy and its impact on the bottom line. From the time we wake up to the time we go to bed, we are bombarded with stories about rising unemployment, Wall Street histrionics and the credit and housing crisis.  However, it is difficult to glean any useful information from a medium where “if it bleeds, it leads” while presenting information about complex subjects in sound bites. Adding to the difficulty, the media is even less reliable during an election cycle.

There is little doubt that perception can become reality.  Most business owners acknowledge that their business is still growing but still have concerns whether this growth will continue – citing mostly media reports as the source of this concern. The reality is that, in Central Texas, businesses have experienced strong growth over the past few years so any slow down might be perceived as more dramatic, even though we are still doing better than the rest of the country.

In October of 2008, Clarity Marketing Support , SomersetGuild and Business District Publishing, set out to find out what is really happening on the street in Central Texas. We surveyed 239 business owners, leaders and executives to get a statistically accurate picture of how businesses are performing in our local area and gauge their outlook and confidence in the coming year.

The grass really is greener in Central Texas
Most people feel that Central Texas is somewhat insulated from the rest of the country. Indeed, Austin has seen amazing growth in terms of people moving to the city as well as business startups. According to the Texas Workforce Commission, The statewide seasonally adjusted unemployment rate as of April 2008 fell to 4.1 percent, down from 4.3 percent during the same time period in 2007. The unemployment rate in Texas remains far below the U.S. rate of 5.0 percent. Business in Texas continues to expand with an annual job growth rate of 2.5 percent.

86% of respondents thought the Central Texas economy was either average or above average. However, there was little expectation that the local economy would improve over the next six months with only 4% indicating they expected improvement. Only 24% expected the economy to turn substantially worse. 44% had a great deal of confidence in the local economy.

While people toss around terms like “recession” and “economic meltdown”, the reality in Central Texas is that there won’t be any soup lines in the near future. Business leaders here seem to understand economies are cyclical.  Any steep decline in economic activity will likely be offset by future surges in the economy’s growth. In the long term, the highs and lows average out to form the trend, or average, economic growth rate. This trend growth rate is subject to change, but it has remained relatively steady in the past, indicating the general rate of growth that we can expect to see in the future.

Since the late 1940s the United States has suffered 10 recessions. On average, they’ve lasted 10 months. The worst recessions of 1973-75 and 1981-82 lasted 16 months with peak unemployment reaching 9.0 percent and 10.8 percent respectively. With the current national unemployment rate at about 6.5%, this indicator would have to rise dramatically to match post World War II levels. The duration of recessions has steadily decreased over the years – a testament to the ever increasing strength of the American economy. In fact, Austin has experienced a decline in unemployment dropping from 3.8% to 3.6% in recent months.

The most serious issues facing Central Texas businesses

When asked to think about their own organizations, respondents said the most pressing issue facing their company concerned some aspect of the economy with 20% mentioning availability of credit and 10% citing some aspect of consumer confidence. Outside of the economy the issue that received the most frequent mention was finding and keeping talented, trained employees (6%).  A common theme throughout the survey was anger at the negative tone with which the economic crisis had been covered by the news media.

It is interesting to note that the issues cited by leaders are not particularly new issues. Growing businesses struggle with obtaining adequate credit, the whims of customer confidence and the difficulty of recruiting and retainment as a matter of course. While these issues may seem more acute in the short term most of the concern is about the future – not focused on what is happening today.

“There’s a bombardment of negative news about the economy…people here are feeling scared and withdrawn even though their lives have not been affected directly as of yet.” says Dena Roberts, an Austin-based psychotherapist. “We seem to lose distinction as to what’s happening in the local market as opposed to the national market – What do I see actually happening around me as opposed to what I’m afraid might happen to me. ”

When it comes to financial performance compared to expectations, about a third of respondents indicated that their company was performing better than expected with 34% responding that performance was about what they expected and about a third stating they were not meeting expectations. There was some concern about possible future reductions in customer spending.

Job Growth Evens Out
The majority of respondents indicated that they will remain at their current levels of staffing with only 21% planning to add staff. The last figures available (July 2008) from the Texas Workforce commission,  show an unemployment rate of 4.7 percent in Texas overall, a figure much lower than the national rate of 6.5 percent. A rate of 4.5 percent is considered “full employment” by the U.S. government. This jump in unemployment shows that Texas is beginning to feel the effects of the national economic slowdown and our survey, while optimistic, confirms this.

Texas has always shown a healthy propensity for job creation. In fact, Texas accounted for 60% of all job growth over the past year according to a new report from Toronto-Dominion Bank. The rest of the nation has experienced six consecutive months of job losses.

“If there is any reason that we are more insulated from the rest of the country, it’s probably because we have more companies that aren’t revenue driven, they are driven by investors.” says Peter Strople, CEO of Zero2 Holdings. “And now we are starting to evolve, we’re starting seeing bigger businesses, were starting to see later stage early businesses that are becoming successful. And those things are being affected by the market. As Austin grows and we  get less investment and more revenue, we’ll probably be more effected by the national economy.”

How are Central Texas Businesses adapting?
When asked how respondents were adapting to changing market conditions, the majority (44%) anticipated no change in marketing budgets or plans. However, a surprising number (34%) were planning on increasing budget and activity. This is an interesting finding given the level of concern expressed about possible reductions in client spending. Not surprisingly, when asked to evaluate their organizations marketing efforts, the numbers break down similarly with 44% indicating their marketing efforts were better than average and about a 25% indicating efforts were below average.

There is little doubt that improving customer acquisition processes and programs can help offset changes in demand. Even when rating efforts as “better than average” most business leaders feel that there is always room for improvement.

In terms of business development, about half of respondents felt that their efforts were above average. When asked about sales performance, answers were equally optimistic, with 48% giving a rating of above average and only 19% rating sales activities as below average.

According to Will Guild, principal of SomersetGuild Research, “It is important to note that (when it comes to rating respondent’s own marketing and sales abilities) these are very optimistic answers statistically. In some respect, this data might reflect a tendency for people to overestimate their own position and ability. Only about 25% thought their marketing efforts were poor.   That says that the majority believe they are above average. It just can’t be true.”

Matching a national trend, about a third of companies were shifting marketing resources toward social media to a substantial degree including more emphasis on the web, blogs, on-line communities and other tools. Another 24% indicated they had shifted in this direction to a moderate degree.

According to a new study by Forrester Research, marketers are likely to decrease spending in traditional media geared to building simple brand awareness. However, direct response advertising is still a strong performer. The study forecasts online direct response vehicles like search and email marketing will gain market share because companies can tie them to sales. Interest in social media continues to grow but businesses struggle with how to measure it.

No one knows for sure what lies ahead for Central Texas businesses in the coming year. But one thing seems clear: Texas is uniquely situated to prosper and grow regardless of national economic trends. With a GDP ranked 12th in the world(higher than India, South Korea and Australia), Texas’ economic engine is resilient. Perhaps this is due to a low cost of  living, effective business incentives and a robust, highly skilled workforce. Or maybe it’s just the hard work ethic and the pro-business Texan attitude that keeps the wheels of commerce turning. While we may not see the levels of growth we’ve become accustomed to, it seems clear that Central Texas will weather this storm just like it has before.

For a copy of the report from this study, visit

Pete Monfre is the founder of Clarity Marketing Support and is known for his common sense approach to marketing and sales development. A prolific writer, producer, raconteur and consultant, he draws from two decades of working with B2B companies ranging from start-ups to the Fortune 100.  Contact him at 512-868-8460 or by email: [email protected]

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