Colorado Economic Outlook Autumn 2010
Written by Jeff Thredgold, President, Thredgold Economic Associates
Better Days Ahead
The Colorado economy’s transition from one of its most severe recessions since the Great Depression back to modest economic growth has continued in recent months. The state’s job losses have declined sharply, with a return to net monthly job gains expected before the end of the year.
A number of Colorado’s neighboring states have already returned to growth, while other states continue to struggle. What we now call the Great Recession led every state in the nation to suffer recession at some point in recent years. Every state had fewer workers at the end of 2009 than it did 12 months before. Every state had a higher unemployment rate at yearend 2009 versus yearend 2008.
Even as Colorado economic growth is about to return, the near-term prospects are limited. U.S. economic performance is sluggish, while global economic growth is somewhat better.
The Colorado economy during 2011 is clearly expected to outperform that of 2010, but be muted when compared to various prior periods of robust performance. More vibrant Colorado growth is currently anticipated during 2012 and 2013.
Total Colorado employment declined by roughly 25,000 net jobs during the most recent 12-month period, a drop of 1.1%. By comparison, similar data as recently as September 2009 indicated a loss of more than 130,000 jobs during the prior 12-month period.
Modest Colorado job gains have been recorded in education & health services; mining & logging; government; and “other” services during the past year. Job losses have been recorded in manufacturing; professional & business services; financial activities; leisure & hospitality; and the trade, transportation & utilities sector. Construction continues to be hit hard, with a loss of 15,000 jobs during the past year and a combined loss of roughly 60,000 jobs since the peak in 2007.
The state’s unemployment rate has averaged 7.9% during 2010 to date. This level sharply exceeds the 4.9% average during 2008 and is twice the 3.9% average in 2007. The unemployment rate could stay uncomfortably high in coming months as better job availability draws more people back into the labor force.
The painful hit absorbed by the Colorado economy during 2009 had a detrimental impact on Colorado household income. After adjusting for inflation, average household income in the state declined by 2.8%, to $55,430. This total ranked 14th of the 50 states.
Only North Dakota and Washington DC (no surprise) experienced net income gains. Maryland, New Jersey, and Connecticut ranked as the top three, with an average household income of $68,216.
Colorado, like many other Western states, will continue to benefit from the economic and financial challenges found across California. The Golden State continues in recession, with massive state and local budget shortfalls providing more incentive for talented people and their businesses to set up shop—or expand—elsewhere. Such decisions could bring tens of thousands of new jobs to Colorado and other neighboring states.
As noted above, Colorado will continue to do well in attracting new employers and retaining existing companies in coming years because of the reasonable cost of doing business, as well as a more affordable cost of living than found in many areas across the U.S. The latest Colorado “cost of doing business” estimate of Moody’s Economy.com was 101% of the U.S. average. Similar costs for Denver and Colorado Springs were 95% and 90%, respectively.
The “cost of living” estimate of Moody’s Economy.com for Denver was 100% of the U.S. average, with Colorado Springs at 96%. The August 2010 data from the ACCRA cost of living index registered 103.4 for Denver-Aurora, with Colorado Springs at 91.9.
Grand Junction was at 98.8, with Pueblo at 86.4, Glenwood Springs at 122.7, and Gunnison at 108.7 (only cities measured in the recent survey). The prior quarterly survey had Fort Collins-Loveland at 90.5. By comparison, recent estimates for Los Angeles and San Diego exceeded 130% of the U.S. average, with San Francisco exceeding 160%.
The Colorado Outlook
Colorado’s transition from one of its most painful economic downturns since the Great Depression to modest growth is most welcome. Even so, numerous challenges remain. Colorado real estate values remain somewhat soft, with weak levels of new home construction.
Rates of individual bankruptcies and home foreclosures remain high. Too many Coloradoans are without jobs. Confidence levels are fragile, especially in regard to the massive expansion of the federal government—all financed with enormous amounts of borrowed money.
At the same time, Colorado is well positioned to return to solid economic growth in coming years. The state’s mix of affordable living, four distinct seasons, outstanding recreational opportunities, top quality colleges and universities, a strong business sector, and solid work ethic ranks with any in the nation.
Better days are ahead!