Tesla, Samsung and a rebounding job market

American-Statesman staff
 |  Austin American-Statesman

If it seems like 2021 was a chaotic and history-making year for the Austin area’s economy, well, it’s because that’s exactly what it was.

Tesla and Samsung delivered huge economic development wins. The housing sector, despite cooling a bit, kept up its seemingly endless hot streak. The job market largely recovered from the gut punch delivered by the coronavirus pandemic. Oh, and Elon Musk seemingly became a part of everyday life for those of us who live in Central Texas.

Clearly, it wasn’t a typical year, even by Austin’s often unusual standards.

Here’s a deeper look at the biggest economic storylines from the past year in Central Texas:

More: Tesla officially moves headquarters to site of new Austin factory

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A Tesla takeover

It’s fair to say that for many of us, 2021 will be rememebered as the year when Tesla became Austin’s most-talked-about company.

In the past year, the electric automaker and Musk, its enigmatic billionaire leader, announced that the company’s corporate headquarters has officially moved to Austin, making it the region’s most valuable locally-based company. That news, of course, came as Tesla continues work on a $1.1 billion manufacturing facility in southeast Travis County.  

In July 2020, Musk announced Tesla would be building a $1.1 billion manufacturing facility in Central Texas. The company is expected to produce its Cybertruck, Semi, Model 3 compact sedan, model Y and batteries on the site. Delivery of any of those vehicles is likely to start in 2022, according to Tesla. The facility could eventually hire up to 10,000 workers. 

Amid the pandemic, Central Texas has increasingly become a center of activity for Musk and his various companies.

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His tunneling and infrastructure company, the Boring Co., has had a presence in the area since last year and purchased land in Bastrop County. His neurotechnology company, Neuralink, has had job postings in Austin in recent months. His private foundation, the Musk Foundation, moved to Austin in the summer of 2020, and his aerospace firm SpaceX may also be expanding into Austin.

Meanwhile, the question of whether Musk lives in  Austin has continued to be a topic of debate and speculation. Musk has never publicly confirmed that he has an Austin residence; he has said that his primary residence is a $50,000 modular house in Boca Chica, near SpaceX’s launch facility in South Texas.

Just before Christmas, the Wall Street Journal — citing unnamed sources — reported that the billionaire has been living for much of the past year in a mansion on Lake Austin owned by a longtime friend and also has been shopping for one of his own in the Austin area.  The newspaper reported that Musk has been staying in the waterfront estate of fellow billionaire Ken Howery.

But both Musk and Howery called the Wall Street Journal report inaccurate. “The WSJ article is false. I don’t live there and am not looking to buy a house anywhere,” Musk said in a statement to Insider.

Howery said in a text message to the Wall Street Journal after publication of its story that Musk “does not live at my house, he lives in South Texas.”

The newspaper also reported that Musk may be looking for his own property in the region and has had several real estate agents show him Austin-area houses for sale. The report said he has shown interest in several houses, including a custom mansion owned by Austin-based jewelry designer Kendra Scott, although Scott declined to comment to the Journal.

Musk announced publicly last year that he was selling almost all of his physical possessions to simplify his life and would own no property or houses, and he’s been selling properties since.

He is registered to vote in Cameron County, near Boca Chica beach, at a home built in 1971 that occupies one-fifth of an acre, the Journal reported. The house is owned by SpaceX, according to the newspaper.

Last December, Musk confirmed he had moved to Texas from California — without disclosing where — saying he wanted to be closer to the new Tesla factory on the outskirts of Austin and to SpaceX’s South Texas facilities.

As Austin continues to become ground zero for all things Musk, that leaves Austinites figuring out how to navigate the new landscape — good, bad and odd. 

“Musk is a modern-day Albert Einstein in the eyes of many, and the richest person in the world by a wide margin. He’s going to bring a lot more limelight and focus on Austin,” Dan Ives, an analyst with Wedbush Securities, recently told the American-Statesman.

Musk and Austin are likely to become inextricably linked in the coming years, Ives said. 

“When the average person in the world thinks Austin, Texas, they’re not going to the music festival or Dell or for the great city it is,” he said. “Tesla and Elon Musk are going to become synonymous with Austin.”

Samsung’s big decision

While Tesla was consistently in the headlines the entire year, 2021 saw another technology company delivering one of the biggest economic development wns in Central Texas history.

South Korea-based tech giant Samsung Electronics confirmed in November that it has picked a site in Williamson County, near Taylor, to be the home for a $17 billion, next-generation semiconductor factory.

The facility is the largest direct foreign investment in Texas history — and among the largest in U.S. history — and is expected to employ more than 2,000 people. In total, Samsung is expected to invest $6 billion in buildings and property improvements, and $11 billion in machinery and equipment for the facility.

More: Samsung confirms site near Taylor for $17 billion chip plant

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Construction is expected to start in the first half of 2022, with plans called for the facility to be operational by the first half of 2024.

The Taylor site was chosen over a competing site in Austin — where Samsung has its lone U.S. manufacturing plant — and locations in New York and Arizona.

Samsung’s search ultimately landed on Taylor in Williamson County, which has plentiful land for the project and where city, county and school district officials aggressively pursued it with incentives deals.

In fact, the combined incentive package for the Samsung plant will amount to nearly $1 billion, which would make it the largest in Texas history.

Samsung is set to receive property tax breaks from the city of Taylor, the Taylor school district and Williamson County totaling $954 million over the life of the agreements, according to an American-Statesman analysis.

Combined with a $27 million grant from a state incentive fund, the package adds up to $981 million and easily ranks No. 1 in a database compiled by public-interest group Good Jobs First of the biggest such corporate incentive deals in Texas history.

The project is expected to be transformational for Taylor, which is about 25 miles northeast of Austin, and for the largely rural area surrounding it. In addition to the estimated 2,000 direct jobs that Samsung has said it will create, the plant will spur a torrent of demand for new housing and services — creating even more jobs — and trigger investment in roads and other infrastructure, according to economists.

Ed Latson, executive director of the Austin Regional Manufacturers Association, said the selection of Taylor is a win for the entire region.

“A facility of this magnitude is a generational investment that will make a dramatic economic impact in the community and change lives by creating high-paying jobs for Texans at all education levels,” Latson said when Samsung announced Taylor as the pick for its new plant. “And the technology being produced will keep us at the leading edge of innovation in electronics.”

Austin initially was considered a frontrunner for the new plant because Samsung has room for expansion next to its existing manufacturing plant. The city has been home to Samsung’s largest operation outside of its South Korea headquarters and its only U.S. manufacturing facility since 1997. Samsung’s existing facility employs about 10,000 people, including 3,000 Samsung employees, and it also has an Austin-based research and development facility. 

Job market roaring again

Like most of the United States, the Austin area’s economy began 2021 still trying to bounce back from the pandemic-spawned downturn.

As the year progressed, the region’s economic outlook steadily improved, helped along by the wide diversity in Austin’s economy, which is buoyed by a booming technology sector, its tourism and entertainment industries, and by being the seat of state government.

Businesses in the Austin area added 11,800 non-farm jobs to payrolls in November, lifting the total number of people employed in the region to nearly 1.19 million — a record number that is the latest indication that, at least on a macro level, the local economy is fully recovered from the pandemic-induced downturn.

More: Amid hiring boom, Austin jobless rate dips to pandemic low of 3.2%

More: Amazon plans major expansion in Austin, to hire 2,000 workers

The unemployment rate in the Austin metro area fell to a pandemic-era low of  3.2% in November, thanks to local businesses continuing their scramble to hire workers. The jobless rate remains above the 2.5% level it was at in November 2019, before the pandemic. But it has improved significantly after shooting up to 11.8% in April 2020, when the shock of the coronavirus first slammed the economy.

The Austin metro area, which encompasses Travis, Williamson, Hays, Bastrop and Caldwell counties, has added more than 20,000 hospitality-related jobs over the past year, although local employment in the sector still remains about 7,000 short of the estimated 134,000 workers it had just before the pandemic.

Employment is well above pre-pandemic levels in a number of other sectors of the local economy. Jobs in professional and business services, which includes the high-tech industry, are up by nearly 30,000, for a total of 232,300 in the region, while retail trade — which generally tracks with population gains — has added nearly 8,000 jobs, for a total of 117,000.

“Right now, I would say the biggest problem (for companies) is hiring enough people — not the prospect of omicron slowing their business,” said Jason Schenker, president of Austin-based Prestige Economics. “The job market in Austin is very, very tight right now.”

It’s unclear whether concerns about the omicron variant of the coronavirus will disrupt the trend.

“Restaurants, tourism, travel (and) some service businesses — if (the omicron variant) becomes a big problem, it could hurt them” because people might become more hesitant again to mingle in crowds and public places, Schenker said. “But those are not the core parts of the economy in Austin.”

Housing frenzy calms a bit

While population growth and an influx of new employers has kept the Central Texas housing market among the hottest in the nation, the last few months of 2021 have shown some signs of calming.

The region’s latest housing data shows that in November, the trend from the previous three months continued, as fewer homes changed hands — but the prices of the homes that did sell continued to go higher.

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The median home sale price for the five-county Austin-Round Rock metro in November was $470,000, according to the latest figures from the Austin Board of Realtors. That’s a November record for the region and a 29.7% increase from the same month last year. Within Austin’s city limits the numbers were even higher, with the median sale price hitting $540,000.

Meanwhile, the number of home sales has slowed. Sales declined 4.9% across the region, and were down 4.3% within Austin’s city limits, according to the board’s data.

Wesley Steck, a broker associate with JB Goodwin Realtors, said the market might have found “a new floor,” and that the growth in home sales prices might return to a more typical level.

“There’s a sense the (pricing) wave has crested a bit for the first time all year,” Steck told the American-Statesman. “We might get back to healthy appreciation, compared to what we saw this past year, which was bonkers.”

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