Colorado Economic Outlook
Winter 2007
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
Steady
The Colorado economy has completed its third consecutive year of steady economic growth. By comparison, the growth pace during 2004 to 2006 trailed the more powerful growth pace of 1993 to 2000. However, performance of the past three years was a dramatic improvement versus the economic contraction during 2002-2003, when the state suffered a net loss of more than 75,000 jobs.
Colorado?s economy added an estimated 46,000 net new jobs during 2006, nearly identical to job growth in 2005. The relative growth pace of 2.1% in both years would rank in the ?high teens? of the 50 states. Rocky Mountain neighbors Arizona, Idaho, Nevada, Utah, and Wyoming have typically ranked as the five strongest job growth states (as measured by % gain) during the past two years.
Where the Jobs Are
Employment gains during 2006 were primarily found in the state?s service
providing sector, with a rise of an estimated 39,000 net new jobs. A majority
of the new jobs were added in professional & business services, government, leisure & hospitality, and education & health
care.
The Colorado goods producing sector added an estimated 7,000 net new jobs in 2006, led by double-digit growth in the natural resources & mining sector. As opposed to strong employment gains in the construction sector among neighboring states, Colorado added only about 2,000 net additional construction jobs.
Consistent job gains have ?soaked up? more Colorado workers who were previously unemployed. The Colorado jobless rate averaged an estimated 4.4% in 2006, down from the 5.0% average of 2005 and the 5.8% average during 2002 to 2004. By comparison, the state?s jobless rate averaged a low 3.2% during 2000-2001 and averaged 4.4% during the decade of the 1990s.
Good & Bad
The National Association of Realtors noted the median home value (half cost less, half cost more) in the U.S. declined by 1.2% to $224,900 during the 12-month period ending September 30, 2006. Such a sideways move was in line with similar performance in Colorado.
The Office of Federal Housing Enterprise Oversight (OFHEO) noted the average Colorado home price rose 3.72% in the 12-month period ending September 30, 2006, ranking 43rd of the 50 states. By comparison, the average home value across the nation rose 7.73% during the 12-month period, but rose at a much lesser rate during the third quarter.
Legitimate concerns about a housing bubble are valid on both coasts and in the nation?s Southwest. However, such concerns are not necessarily the case in Colorado, with the five-year home price appreciation data telling a ?comforting? story.
The average American home price rose 55.53% during the five-year period ending September 30, 2006. Bubble? The average Florida home price rose 110.62% over five years, with California homes spiking 109.60%. The average Nevada home price jumped 102.70% over five years, with Arizona homes up 95.91%.
In contrast, the average Colorado home rose only 22.65% over five years, ranking in the bottom five states. Modest appreciation was perhaps bad news for Colorado homeowners over the past five years. However, it is good news in terms of weathering significant price weakness in various markets around the nation which saw excessive price gains. The modest 22.65% Colorado gain is also good news when one views potential appreciation over the next few years, versus other highflying markets where additional price softness is likely.
New "Old" Folks
The ?retirement? of 78 million Baby Boomers over the next 20-25 years will have a major impact on Colorado and its neighbors. More options will be available for Boomers and older retirees to live close to downtown areas in larger cities as a means of having close access to museums, shopping, the theater, and restaurants. Boomers will take advantage of such close proximity, while leaving the yard work (and snow shoveling!) to someone else.
Universities, community colleges, and other sources will offer a wider array of classes and learning experiences than ever before, with many Boomers exploring interests and passions formerly displaced by the needs of generating incomes and raising families. Boomers will discover and develop talents never before considered.
Community Interest
More communities will entice retiring Boomers to live in their locales, recognizing the value they can bring to a community. The Boomer or Boomer parent in or approaching retirement age typically buys a local residence, shifts their financial resources to a local financial institution, supports local retailers and restaurateurs, and creates little in the way of headaches for law enforcement personnel. One other major positive? They don?t bring children that need to be educated.
Boomers will follow a path formerly explored by many of their parents. A rising share of senior housing and assisted living centers for older people will have a wider array of recreational and learning opportunities than ever before. Limited medical care will also routinely be on site or close by.
Colorado in 2007
The Colorado economy is likely to continue its solid growth pace in 2007. Tighter labor availability in Colorado will become more of an issue for employers. The Colorado real estate sector should record positive price appreciation in 2007 even as coastal and Southwestern markets struggle.