Waco’s economy improved modestly in the fourth quarter and fared better overall in 2011 than in 2010, but housing construction and housing sales remain problem areas.

The city is riding a wave of job growth and improving unemployment numbers, with the 6.8 percent jobless rate in December the lowest since October 2009. It also is seeing more consumer spending and upticks in several categories, though figures remain below pre-recession levels, according to the Greater Waco Economic Index.

“Growth was slow in 2011, but it was growth nonetheless,” said Amarillo-based economist Karr Ingham. “The prospects are sound for a faster rate of growth in 2012.”

Ingham prepares his report monthly for the First National Bank of Central Texas and the Waco-Tribune-Herald. Index results are based at 100, a figure established in the year 2000. It has been as high as 111.7 in August 2007.

The index moved to 103.3 in December, up from 103.2 in November and 102.2 from December last year.

But problem areas remain. The number of new housing construction permits dropped to the lowest level since 2002. The 54 permits the city issued during the fourth quarter was unchanged from a year ago, but is down by more than 50 percent compared with the fourth-quarter totals in the peak building years in the middle of the last decade.

Meanwhile, existing home sales declined for the fifth straight year in 2011, falling by about 3 percent compared with the number of closed sales in 2010, Ingham reports.

“In Waco and most other metro areas, and the state as a whole, housing sales are down sharply compared with the peak in 2006; and the 2011 annual total is the lowest since 2000,” Ingham said.

“But, again, prices have not suffered, and that remained the case through year-end,” he added. “The average nominal price for 2011 was up 1 compared with 2010, which ranks as the highest on record in Waco.”

Building permits for all construction dropped 6.5 percent compared with 2010, which in turn was down by more than 50 percent compared with 2009, and is the lowest annual total since 2005. The decline is due in part to the completion or winding down of capital improvement projects that included the construction of a new University High School, a building boom at McLennan Community College and expansion of the Waco Convention Center.

It finally appears that Waco residents have enough confidence in the economy to open their purses and pocketbooks.

Inflation-adjusted taxable spending improved 2.7 percent in 2011 versus the previous year. The fourth quarter total, which includes the Christmas holidays, saw a 4.1 percent increase over last year.
City of Waco budget officer June Skerik appreciates the trend. She said sales tax rebates from the State Comptroller’s Office are running $342,000 ahead of the previous year for the fiscal year that began Oct. 1.

Still, spending in 2010 and for the fourth quarter was down from comparable periods in 2006-2008.
Cities for which sales tax is aggregated and analyzed for Ingham’s report include Waco, Bellmead, Beverly Hills, Hewitt, Lacy Lakeview, Lorena, McGregor, Robinson, West and Woodway.

Increased spending typically goes hand-in-hand with increased employment, and Waco is seeing improvement in that area. Ingham reports the city created an estimated 1,300 jobs over the course of the year, for a growth rate of 1.2 percent. Another report by the Texas Workforce Commission shows 1,800 more people were working in December of 2011 than in December of the previous year. Whatever the report, Ingham said, Waco is seeing job growth.

“Total payroll employment in Waco surpassed its 2008 pre-recession peak in 2011 and stands at true record levels, at least according to current estimates,” said Ingham, who offered a caveat that the TWC will provide revised employment data for 2011 and 2010 when it releases its next jobless report.

Fourth-quarter auto sales, adjusted for inflation, were up by 4.6 compared with the fourth quarter a year ago. For the year, auto spending was up 4 percent compared with the 2010 annual total.

“That marks the second straight year of modest increases in real auto spending,” Ingham said. “Again, however, auto spending remains down compared with each year from 2005 to 2008, reflecting the steep declines in the auto sector and the significant recovery time before returning to those levels.”

Summing up his report, Ingham said, “It seems as though it will be some time before some sectors of the greater Waco economy return to their pre-recession points ­— building activity, housing sales and so on. But a cyclical turnaround will be observed most notably in general real spending and employment, accompanied by a drop in the unemployment rate and the continued maintenance of residential housing values.”