Colorado Economic Outlook Spring 2010
Written by Jeff Thredgold, President, Thredgold Economic Associates
Road to Recovery
The Colorado economy’s continuing transition from a painful recession to modest growth should remain on target, with monthly employment gains likely to be reported by the summer months. Colorado, like many states, suffered one of its most severe recessions since the Great Depression during the recent past.
Colorado’s expected return to economic growth during 2010’s second half is directly impacted by two larger developments. The first of these is a return of U.S. economic growth, following the longest and most costly American recession since the 1930s.
Most forecasters suggest that the National Bureau of Economic Research (NBER), the official scorekeeper for the U.S. economy, will announce sometime in coming months that the U.S. recession ended between June and September 2009. The NBER had announced in late 2008 that the recession “officially” started in December 2007.
The second factor is a return of global economic growth in late 2009, led by Asia. The global economy had suffered its first overall downturn since just after World War II.
A vivid illustration of the impact of the severe U.S. and global recessions during much of 2008 and 2009 was the reality that all 50 states had fewer workers at yearend 2009 than at the prior yearend. In addition, all 50 states had higher unemployment rates at yearend 2009 than 12 months earlier.
The Colorado economy experienced a net loss of 84,000 jobs during the most recent 12-month period, a decline of 3.7%. This total, while exceedingly painful and disruptive to Colorado families, was nearly 40% less than the 12-month decline reported five months ago.
The state’s construction sector, like that in most states, has been hit extremely hard. Construction employment is down more than 30,000 jobs from a year ago, a decline of 20% in just 12 months. Better news could emerge in coming months as construction employment rose nationwide during March for the first time since the summer of 2007.
Manufacturing has seen 10,500 Colorado jobs lost during the most recent 12-month period. Again, employment gains in manufacturing could occur over the balance of the year, and especially during 2011, as U.S. manufacturing activity has begun to rebound. U.S. employment in manufacturing has risen for three consecutive months, while one primary index of U.S. manufacturing has risen for eight straight months.
The state’s mining and logging sector lost 4,300 jobs during the past 12 months. Potentially higher prices for oil and the Administration’s willingness to allow greater domestic activity regarding energy exploration and production could pay longer-term dividends.
Colorado ’s larger service-providing sector also experienced a loss of nearly 39,000 jobs during the most recent 12-month period. Losses were primarily found in trade, transportation & utilities (down 14,900 jobs); professional & business services (down 12,100 jobs); financial activities (down 7,800 jobs); leisure & hospitality (down 5,800 jobs); and information (down 3,700 jobs). Better news saw the education & health services sector add 4,000 jobs, while the government sector added 2,000 positions.
The state’s unemployment rate averaged 7.7% during the past 14 months, up dramatically from the 4.4% average during 2006-2008. The more recent 7.5% average compares favorably to the 9.7% U.S. average unemployment rate during 2010’s first quarter. The Colorado unemployment rate could move slightly higher in coming months as thousands of potential workers reenter the labor force.
One casualty of global recession was the sharp decline in world trade. Data from the Bureau for Economic Policy Analysis, a Dutch research institute, noted that during the three-month span between October 2008 and January 2009, global trade fell by around 20 percent, a faster decline than during the Great Depression.
However, global trade rebounded rapidly late last year, suggesting little permanent damage to trade totals. In fact, the sizable gain in global trade during the final month of 2009 was the largest monthly increase in 19 years (Financial Times).
Colorado’s exports to the world in 2009 declined in tandem with the overall U.S. export decline. Total Colorado exports of goods and commodities totaled $5.9 billion in 2009, down nearly 25% from the $7.7 billion total the prior year. More than 4,400 Colorado companies exported goods in the most recent data.
The state’s key export in 2009 was computers and electronic equipment (including integrated circuits), which accounted for 27% of the total, followed by chemicals, processed foods, and machinery. The state’s largest market was Canada, which received 29% of the total, followed by Mexico, China, Japan, and Germany.
Painful and extended U.S. and global recessions made exceedingly clear how strong the influence of outside economic and financial forces…both positive and negative…are upon Colorado’s companies, institutions, and residents. The direction of influence is now largely positive.
Better days are ahead as Colorado’s economy continues the transition to renewed growth later this year. More vibrant performance is expected in 2011 and 2012. It’s about time.