Colorado Economic Outlook
Autumn 2006
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
50 MPH
The Colorado economy continues to grow at a solid pace. Current growth is not approaching the ?80 mile per hour? pace during 1994 to 2000, when the state?s economy added an average of 77,500 net new jobs annually. However, that period of boom was followed by a period of bust during 2001 to 2003, when the state suffered a net decline of 61,000 jobs.
Colorado added 48,800 net new jobs during the most recent 12-month period, a growth rate of 2.2%. This growth pace ranks 15th of the 50 states and is nearly twice the overall U.S. growth rate of the past year.
The Colorado goods production sector added 8,400 net new jobs during the past 12 months, accounting for one in seven new jobs. Construction led the way with 4,800 net new jobs, while the natural resources/mining and manufacturing sectors added 2,700 and 900 net new jobs, respectively.
The Colorado service providing sector added 40,400 net new jobs during the past year, led by 16,100 net new jobs in professional & business services. The trade, transportation & utilities sector added 6,400 net new jobs, while the government sector added 5,700 jobs.
Supply & Demand
Job gains in a state or community are primarily driven by the demand for new workers. However, the supply of available labor can influence overall employment gains. Colorado employers struggled with extremely tight labor availability during 1997-2000, when the state?s jobless rate averaged 3.1%, one of the lowest rates in the nation. A variety of employers at that time presumably questioned whether Colorado was a place to begin or expand operations.
Similarly tight labor markets are now found among
Colorado?s neighbors of Idaho, Utah, and Wyoming, with tight labor availability
expected to remain a major challenge. Employers of all shapes and sizes
in these states are frustrated in their inability to remain fully staffed.
Smaller employers are also fearful of losing their best workers to other
firms. The demand for workers remains high…an adequate supply is
simply not available. 
The Colorado unemployment rate has averaged 4.5% during 2006 to date, in line with the national average of 4.7%. A major decline is not anticipated during the next few years. Greater Colorado labor availability as compared to its neighbors can be one more arrow in Colorado?s economic development quiver in coming years as companies look for new or expanded opportunities in the Intermountain area.
Costs Of…
One reason new companies and workers are drawn to Colorado is the reasonable cost of doing business as well as a more affordable cost of living than found in many areas across the nation. The August 2006 Colorado ?cost of doing business? estimate of Economy.com was 97% of the U.S. average. Similar costs for Denver and Colorado Springs were 98% and 92%, respectively.
The ?cost of living? estimate of Economy.com for Denver was 103% of the U.S. average, with Colorado Springs at 95%. The widely followed ACCRA cost of living index for 2006?s second quarter was 104.7 for Denver-Aurora, with Colorado Springs at 94.7, Fort Collins at 103.3, Loveland at 101.9, and Grand Junction at 99.4.
Ski & Board
The Colorado winter sports industry is looking forward to another great season, following the record-setting performance last winter. More than 12.5 million ?skier days? were recorded, breaking the record set in 1997-1998.
Housing Strength
The Colorado home sales and residential construction sector remains solid, even as much of the U.S. housing sector struggles. The National Association of Realtors reported a modest 3.7% gain to $227,500 over the 12 months ending June 30, 2006 for the median (half cost more, half cost less) home, with considerable weakness on both coasts. The median Denver home value rose 2.7% to $255,200. Median home values in Boulder and Colorado Springs rose 7.8% (to $373,200) and 5.3% (to $218,300), respectively.
The Office of Federal Housing Enterprise Oversight (OFHEO) reported a 10.06% rise during the same 12-month period, with a miniscule 1.17% rise during the second quarter. The sharp slowing in quarterly growth rates was the most significant since the OFHEO data began in 1975. The average U.S. price gain during the most recent five-year period was 56.49%.
The average Colorado home value rose 4.20% during the 12-month period, ranking 45th of the 50 states. Colorado?s five-year increase was only 23.68%, suggesting additional upside potential in 2007.
Denver registered a modest 2.72% rise over the past 12 months, with a 19.33% five-year rise. Boulder saw prices rise 3.55% (19.64% over five years), while Colorado Springs saw average values rise 5.89% and 29.28%. Fort Collins-Loveland recorded appreciation rates of 1.22% and 20.02%, while Grand Junction had gains of 14.14% and 52.34%.
Colorado Outlook
The Colorado economy is likely to maintain its stable growth pace in 2007, with a rise of perhaps 35,000-45,000 net new jobs. Ski and snowboard enthusiasts anticipate another great season, following the record-setting performance last season.
The state?s residential real estate market should see average home price appreciation exceeding the average U.S. gain, as coastal markets continue to adjust to prior excesses. The state?s overall outlook remains favorable.