Colorado
Economic Outlook
Spring 2005
Written
by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
Impressive Rebound
Colorado's pace of new job creation rose sharply during the latest 12-month
period. More importantly, we expect this more robust pace to continue over
the next 18-24 months.
Stronger
Colorado employment gains are a welcome departure from the economic decline
of recent years. The Colorado economy suffered a sharp and painful recession
during 2002 and 2003, with a net loss of nearly 75,000 jobs in those
two years. The solid economic rebound now unfolding is great news for
the state's residents and employers.
Colorado saw the addition of roughly 57,000 net new jobs over the most recent 12-month period, a growth rate of 2.7%. One would have to reach back to 2000 to find a job growth rate as impressive.
Colorado employment gains have occurred in most major sectors, led by gains in professional and business services, construction, leisure and hospitality, education and health care, and local government. Financial activities, natural resources and mining, and manufacturing employment also rose. Roughly one new job in five was found in the goods production sector, with the balance found in service-providing occupations.
As
the Colorado economy added jobs at a vigorous pace, the level of unemployment
declined. The state's jobless rate averaged 5.0% during the past few
months, versus the 5.9% average of 2002-2004. A somewhat tighter Colorado
labor market seems likely during the next 18 months, although stronger
labor force growth should largely fill the need for additional workers.
Economic Development
I have traveled more than one million miles during the past 15 years as a professional
speaker, with hundreds of presentations across all states and in many parts
of the world. Such extensive travel has solidified three views regarding
economic development.
The first view is that ALL states are desirous of attracting high-quality employers from other states and countries that will bring high-paying jobs. This is a goal of Colorado's governor…as well as a goal of 49 other governors across the land.
Economic development and job quality enrichment finds the attraction of new jobs from outside the state as only one part of a three-legged foundation. This leg is clearly the most glamorous.
However, the other two legs of economic development…retention of current high-quality employers and expansion of the same…are equally important. Public and private sector leaders must view all three legs as critical in the economic development game. Providing a solid business environment, a reasonable tax structure, quality students emerging from schools, and a viable infrastructure are critical components of all three legs.
The second view is that ALL states see themselves as the next Silicon Valley and ALL states see their high quality of life as a major selling point. However, there are only so many opportunities to develop technology centers with enough critical mass to be viable. Colorado has that opportunity.
In addition, quality of life is in the eye of the beholder, with many companies and workers shying away from colder Northern climates. Such a reality helps explain the sizable shift of the American population from the Northeast to the South and the West during recent decades.
The third view is that seemingly all major metropolitan areas are expanding their convention centers so as to be more appealing to major events in coming years. The reality is that expansion of convention space is simply a necessity to merely "run in place" with the rest of the herd.
Rising Real Estate Values
Colorado real estate values have appreciated modestly in recent months,
a trend expected to pick up speed in 2005 and 2006. The reasons
include more impressive economic growth and the fact that Colorado
real estate is again "bargain
priced" when compared to prices on both coasts.
The latest comparative data from the Office of Federal Housing Enterprise Oversight (OFHEO) calculates values of existing homes where more than one mortgage transaction has occurred. The data base exceeds 20 million homes and goes back to the 1970s.
Data for the period ending December 31, 2004 notes that average Colorado real estate rose 4.18% in 2004, ranking 47th of the 50 states. The state should approach the middle of the pack during the next year.
Denver-Aurora prices rose 3.53% last year, while Boulder prices rose 2.87%. Colorado Springs saw prices rise 5.56%, while Fort Collins-Loveland prices rose 2.93%. Grand Junction prices rose 6.71%, while prices in Pueblo rose 5.34%. The average U.S. gain during 2004 was 11.17%, led by Nevada, Hawaii, and California.
Colorado Outlook
The state's economy is growing at a solid pace, with respectable growth likely
to continue. Economic development is a three-part game, with each critical
to long-term success. Stronger home price appreciation is coming, tied in
part to the imbalance between home prices on both coasts and within Colorado.
The state's return to solid growth is largely complete and expected to remain
on track.
Wouldn't It Be Nice If…
…health care costs would moderate
…stock prices would keep rising (more than 50% of American families now own stocks)
…the Congress would approve one final minimum wage increase and then tie annual increases to the CPI…and leave politics out of the issue
…the Ozbournes were never heard from again
…we could strike a reasonable balance between energy conservation and the need for new sources of energy
…America's silent majority (our parents and grandparents) received greater respect for the enormous wartime sacrifices they made to help protect the freedoms we all enjoy today
…politicians were elected based on experience and ability, not on who can spend the most money and sling the most mud
…teachers received more respect and admiration from students and their parents
…the problems in schools today were still spit wads, gum chewing, and truancy, as opposed to violence, drug use, and pregnancy
…we didn't have a $7,700,000,000,000 gross national debt, and we weren't spending more than $750,000,000 EVERY DAY just to pay the INTEREST on that debt
…the Iraqi people would take full responsibility for dealing with terrorists, allowing U.S. military personnel to return home
…basic communication between women and men was just a little bit easier
…American military personnel could see their families more often
…your garbage disposal didn't eat better than two-thirds of the world's population
…America's Vietnam War veterans would finally get credit for serving their country
…we could benefit more from years of practical business experience of millions of retirees, rather than simply "putting them out to pasture"
…the nation's tobacco companies would leave our kids alone
…the Middle East was less of a powder keg that could explode into war at any moment
…"old fashioned" common courtesy between people made a big comeback
…we could also find Osama Bin Laden hiding in a dark hole
…drive-by shootings were replaced by drive-by moonings
…there was a stronger collective effort to improve opportunities in America's inner cities
…"far left" liberals and "far right" conservatives would back off a bit
…the role of "peacekeeper" wasn't associated with so much violence
…"government" would recognize that it is there to serve the people, and not the other way around
…Paris Hilton's 15 minutes of fame were finished
…airlines that lack serious competition in various markets didn't gouge the public
…European governments would take more responsibility for serious problems close to home
…more working people would save seriously for their Golden Years (an estimated one-third of the U.S. population saves zero for retirement)
…the Administration and the Congress would stop bickering and take the small steps required now to "fix" Social Security and Medicare for the future
…corporate leaders who commit serious crimes could spend some serious time behind bars
…F.I.C.A. (Social Security/Medicare) taxes were less painful…four out of five American workers now pay more F.I.C.A. taxes than they do federal income taxes
…the violence and language in today's popular movies could be toned down a bit
…Fidel would bite the dust and be replaced with a move towards democracy
…we could see our grandchildren more often (in most cases)
…the game of politics in Washington D.C. involved a little more cooperation and a little less confrontation
…we would all get more involved in enriching the lives of those less fortunate than ourselves
…each long-term member of Congress was required to take a year off, start a new business with limited funding, and then deal with the complexities and hassles THEY have created
…"ethnic cleansing" was ancient history
…U.S. firefighters, police officers, and military personnel received our respect ALL of the time
…the outcome of many lawsuits was determined more by the facts and less by who has the deepest pockets
…there were less irritating ways to bring buyers and sellers together than junk mail, spam, pop-up ads, telemarketing, and endless TV commercials
…we heard more of the "good news" from Iraq, not just the "bad news"
…our primary and secondary schools had competition for teachers, students, and funding—just like our colleges and universities
…Johnny Carson was still king of late night TV
…more people would make donating blood a regular quarterly event
…many spoiled and pampered athletes in Major League Baseball, the National Football League, the National Basketball Association, and the National Hockey League had to get regular jobs at regular wages (at least for awhile)
…"reality" TV would die a quick death
…we would all keep in mind that despite the problems and challenges we face in the U.S., this is still the greatest country in the world