2009 – A year of economic recession in Abilene

By virtually any measure, the Abilene metro area general economy suffered a significant contraction in 2009, a contraction which actually began in late 2008, and will likely continue at least partway into 2010. From the onset of the recession through year-end 2009, the Abilene Economic Index has declined by over 8%, and the December 2009 AEI was down by 6.8% compared to the December 2008 index.

The Abilene Economic Index is structured to measure growth (or decline) in the city’s economy, and to chart the nature, timing and duration of local economic cycles. Through December, the Abilene economy as a whole has been in a general state of decline for 14 months, and the Abilene Economic Index has posted month-to-month declines in 13 of those 14 months.

Every major sector of the local economy has been affected to one degree or another during that 14-month (and counting) downturn, or in the period of time leading up to it. The 2009 numbers largely bear that out, though the housing sector posted some positive numbers at year-end. There are a few pieces of data, not yet released, that could tweak the numbers a tiny bit.

The consumer sector has been among the hardest hit by the downturn, and those numbers were only worsening at year-end. The November and December retail figures (per sales tax receipts, adjusted for inflation) reflected the largest monthly declines of the year, and the 4th quarter decline of nearly 14% was the largest margin of decline for any quarter of ’09. For the year as a whole, real spending declined by 7.7% compared to 2008.

The difficulties in the automobile industry have been well-documented, and were certainly a part of the economic landscape in Abilene in 2009, with inflation-adjusted spending on new and used automobiles down by about 23% compared to 2008. Sales began to pick up late in the year, however, and even though 4th quarter sales were still down, the December sales figure actually outpaced the December ’08 total by some 6%.

The city’s construction sector received a welcome shot in the arm in October with the issuance of a $47 million permit for Project 2010, the expansion of the Hendrick Health System, and that single month was enough to pull the annual total very close to the 2008 building permit valuation total. However, the sector has still largely been in a state of decline for the last three years on the heels of a record total in 2006.

The home building sector actually finished the year ahead of 2008, with the number of new single-family residence permits issued by the city up nearly 12% compared to the 2008 annual total. However, the 4th quarter and annual 2009 increases were more the result of very low totals for 2008. Only 17 permits were issued in the entire 4th quarter of ’08, by far the lowest quarterly total dating back at least 15 years or more, and the 2008 annual total was the lowest since 2003.

Existing home sales exhibited similar trends in 2009 – higher at year-end, but compared to very low year-end 2008 totals, and down about 10% in terms of the annual total number of homes sold compared to the ’08 annual total. The 1,680 closed sales in 2009 represents the lowest number of closed sales since 2003, and marks the second consecutive year of double-digit percentage declines.

Housing prices, however, are a different – and much more encouraging – story. The average sale price of those 1,680 homes actually increased by about 4.5% in 2009, a fairly remarkable accomplishment in the face of a dramatically slowing economy and diminished housing demand. The 2009 annual average of nearly $126,000 is an Abilene record, and marks the 7th consecutive year of increase.

The city’s employment situation certainly reflected recessionary conditions over the course of the year, with employment losses widening in the 2nd half of 2009, ending the year down about 2.5% (an estimated 1,700 jobs) compared to year-end 2008. The unemployment rate, which had been a low 3.2% back in December of 2006, ballooned to over 6% for much of 2009, and finished the year at 6.0%. Again, new figures will be released for the previous year or two, and the new estimates will be interpreted upon release, and factored into the affected months for the Abilene Economic Index.

And the new employment information, along with the completed retail picture for 2009 will provide the basis for a look ahead to the 2010 Abilene economy. But it is safe to say that in Abilene, in Texas (and most Texas metro areas), and the US as a whole, 2009 is an economic year that most will be glad to see in the rearview mirror.

Karr Ingham is an Amarillo-based economist who created the Abilene Economic Index.

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