Colorado Economic Outlook Summer 2010

Written by Jeff Thredgold, President, Thredgold Economic Associates

Imminent Growth
The long–awaited return of the Colorado economy to growth mode seems about to get underway, following one of its most painful and most costly recessions since the Great Depression. Further evidence of the return of Colorado growth should be available in coming months.

The return of Colorado economic growth is consistent with improving performance in a majority of states. The longest and most pervasive U.S. recession in more than 70 years, combined with the first global recession since just after World War II, ultimately pulled all 50 states down to recession.

The same connection has applied on the upside. A return of U.S. and global economic growth during 2009’s final half provided the opportunity for most states to slow their precipitous declines, while also providing the impetus for a return to eventual growth. A number of Colorado’s neighbors are also in transition to renewed economic growth.

Employment
The latest Colorado employment data, while still extremely painful, is a shadow of a more serious decline 6–12 months ago. The Colorado Department of Labor and Employment estimates total Colorado employment to be down 43,200 jobs (-1.9%) from a year ago. In comparison, employment data as recently as last August was more than three times worse, with a 12-month loss of more than 134,000 jobs.

Colorado employment totals are soon likely to rise when compared to the month before (excluding temporary Census jobs). The year–over–year employment measure is expected to turn positive as autumn approaches.

Colorado’s goods producing sector remains the state’s weakest employment area. Goods producing employment is down 27,900 jobs from a year ago (down 9.7%), with an additional 19,200 jobs lost in construction. Manufacturing is down 6,900 jobs from a year ago, while mining & logging employment has fallen by 1,800 jobs.

Service providing employment has fared better, although total sector employment is down by an estimated 15,300 jobs during the past year. Job losses have occurred in trade, transportation & utilities; information; financial activities; professional & business services; and leisure & hospitality. Job gains have occurred in education & health services and government sectors.

The state’s unemployment rate has averaged 7.8% during 2010, largely matching the 7.7% average during 2009. The rate could stay uncomfortably high over the balance of the year as thousands of formerly discouraged workers return to the labor force.

Colorado Accolades
An imminent return of Colorado economic growth coincides with numerous recent testaments to the state's attractive business climate:

Colorado Real Estate
Improving Colorado economic performance can’t come quickly enough for Colorado homeowners. Home values have continued to decline modestly in numerous communities, despite extremely attractive mortgage interest rates and rising sales. The state’s home values should show more signs of stabilization over the balance of the year, with minimal gains in 2011 and more solid appreciation expected during 2012.

Regional Comps
A recent study by Brookings Mountain West–a partnership of the Brookings Institution and the University of Nevada at Las Vegas–ranked overall economic performance of the region’s 10 largest metropolitan areas. The study primarily covered the past three years in regard to the decline in employment, the change in gross metro product, the rise in the jobless rate, and the estimated decline in home values.

Colorado Springs and Denver–Aurora ranked second and third best, respectively, of the 10 metro areas. A similar measure of 21 smaller metro areas in the region found Boulder ranking first, Fort Collins–Loveland ranking second, and Pueblo ranking fourth.

Colorado View
Most of the pain in the Colorado economy is now behind us. The modest, but consistent recovery in Colorado employment expected over the balance of the year will pay dividends in regard to rising incomes, stronger retail spending, and stronger revenue flows to the state and local governments.

A Colorado economic recovery will be consistent with similar recoveries among many states in the U.S. Barring additional and unexpected negative global economic developments, Colorado economic performance is expected to strengthen throughout 2011, with significantly stronger growth in 2012.

It’s about time!