For business owners in Austin, it’s no surprise that their city is one of the most vibrant places in the country for growth and entrepreneurship. In 2023, it was among the top 10 cities for small and mid-sized business (SMB) job growth. But to keep that growth going, it’s important for business owners to have a pulse on what’s happening in the economy—including locally in the Austin metro area. 

Gusto serves hundreds of thousands of startups and SMBs nationwide by helping them take care of their employees. Our team of economists analyzes data and trends from these businesses to decode what’s happening in the economy and provide insights designed to help you make smarter, more informed decisions for your business. 

If you’re an entrepreneur or business owner in Austin, Texas, keep reading to find out what you can expect from the economy for the beginning of 2024 and how to position your business for success this year.  

The labor market is loosening (a little) in Austin, TX

At the end of 2023, we saw a downward trend in hiring and new hire pay. These signs point to a slight loosening of the labor market—but as financing and credit continue to be tight, some Austin business owners may want to continue hiring conservatively and prioritize holding on to their top talent.

Hiring in Austin

Small business job gains in Austin are trending flat from last year due to a slight hiring slowdown and a slight upward tick in dismissals and layoffs. The hire rate is down 16.4% over the last quarter and down 10.4% over the last year.

Austin talent is more expensive than neighboring cities

Austin talent is more expensive than talent in neighboring cities like Houston and Dallas, but pay is starting to fall faster for new hires. Median new hire pay in Austin is up 1.1% over the last quarter but down 16.9% over the last year. 

So, what should Austin founders do to prepare for 2024? 

1. Across the United States, we have a long-term overall labor shortage, and Austin is no exception. Focus on retaining your top employees by ensuring your compensation is competitive. New hire pay in Austin shows a continued slowdown in candidate expectations for compensation. However, the talent market is still tight, with 1.4 job openings for every unemployed worker—so knowing what to pay your employees is essential for long-term retention. Our Pay Insights by Gusto tracker can help you determine how to set competitive salaries for your team, and our hourly and salary payroll calculator can help you assess your hiring budget.

2. Remember, compensation is about more than just salary. Benefits can have a huge impact on your employee retention. On average, offering retirement benefits like a 401(k) plan can reduce an employee’s likelihood of quitting by 40% in their first year on the job. Similarly, providing health insurance can cut their chances of leaving by 25%. Offering these employee benefits can save your business hundreds of thousands of dollars in turnover costs, including attracting talent, onboarding, training, and lost productivity.

3. Workers also see flexibility as a major advantage—so if you can offer this, it can boost your employee retention. People want to work on their own terms. Gusto research found that 48% of workers accepted or rejected their last job offer based on reasons related primarily to flexibility. Offering remote work or hybrid work, plus the ability to choose working hours can encourage your talent to take the job and stay with the company.

4. Take your time with hiring and find great talent. Many companies are still at replacement hiring now, not expansion hiring. With companies slowing hiring, high-quality talent should be more available in the labor market. This is an ideal opportunity to find exceptional talent and make great long-term hires. 

5. Get your balance sheets in shape. Maximizing cash flow positivity is key to avoiding going to capital markets for financing and building up retained earnings to act as a cushion against unexpected expenses or cash-negative periods.

6. Consider diversifying your workforce. Independent contractors and freelancers are a fast-growing segment of the workforce. The ratio of contractors to employees at the average company has increased 63% since 2019. Consider adding talent and skills with contractors in the US and abroad. But do make sure you’re classifying your workers correctly. If you’re not sure whether you need an employee or a contractor, check out our guide on this topic.

For more insights, check out our economic insights for Austin, Texas (pdf).