Economic checkup: Prognosis says Grand Junction likely to lag behind in recovery
Ed Kashmarek draws a distinction in his latest economic prognosis between Grand Junction and the rest of Colorado. Grand Junction likely will lag behind other areas in what’s forecast as a recovery that ultimately will make the state a regional economic leader.
While the energy industry is expected to rebound, high unemployment levels are expected to continue in the Grand Valley even as the retail and housing markets struggle.
“Low incomes, tight credit and a lagging housing market will overshadow the rebound in the energy industry and keep the recovery restrained in Grand Junction,” says Kashmarek, an economist with the Wells Fargo Economics Group.
Kashmarek and Scott Anderson, a senior economist with the group, recently drafted an economic outlook for Colorado that’s generally upbeat. But in responding by e-mail to questions posed by the Grand Valley Business Times, Kashmarek says he expects Grand Junction to fare less well.
In their statewide assessment, Anderson and Kashmarek say Colorado has emerged from the recession in “relatively good shape.” The state unemployment rate remains below the national rate, home prices have fallen only slightly below their peaks and housing starts have increased after several years of declines.
While still Colorado faces challenges, including the risk of declining consumer spending and another downturn in housing, the state is poised to play a leading role in the regional economy. “Once the Great Recession is truly behind us, Colorado will be a shining star in the west,” the two write.
The high-tech sector, including bio technology and renewable energy, should prove a good source of high-paying jobs. Tourism should continue to contribute to the economy as well. In addition, the comparatively high educational attainment of the Colorado work force along with what’s projected as strong population growth bodes well for the state, Anderson and Kashmarek write.
The situation likely will be different in Grand Junction and other smaller cities in Colorado where residents tend to have lower educational attainment levels and household incomes, Kashmarek says.
For 2008, the proportion of Colorado residents age 25 and older with a bachelor’s degree or higher — a group considered “highly educated” — was
The share was higher in larger Colorado cities with universities, including Boulder, Fort Collins and Denver. In Grand Junction, that proportion was 23.4 percent.
The unemployment rate for those with college degrees tends to run much lower than for those without degrees, Kashmarek says.
Grand Junction also lags behind other, larger Colorado cities in terms of median household income — at $52,800 in 2008. The median household income in Colorado that year was $60,900, second only to Utah among 11 western states.
Grand Junction is more dependent than other metro areas in Colorado on the energy and retail sectors, both of which were hard hit by a sort of double whammy — a regional downturn in energy activity and a global recession.
While natural gas prices remain well below those seen earlier in the decade, they’ve risen above recent lows, Kashmarek says. Energy activity similarly has increased. “The energy sector has climbed back from the depths and this has helped bolster payrolls in the industry recently. This will help the economy.”
The retail sector hasn’t fared as well, though, he says. And as long as consumer spending remains weak, job growth in retail will remain weak as well.
The downturn in the housing market has affected construction payrolls, which in turn have affected the economy because Grand Junction has nearly twice the concentration in construction employment as that of the United States, Kashmarek says.
Lower educational attainment levels combined with downturns in the retail and construction sectors likely will keep unemployment rates higher in Mesa County than the statewide average, he says.
In June, the latest month for which estimates are available, the seasonally unadjusted jobless rate in Mesa County jumped eight-tenths to 9.7 percent.
The June gain erased what had been two months of declines, but isn’t unusual for the county even in times when labor demand remains strong.
By comparison, the seasonally adjusted unemployment rate for Colorado held steady at 8 percent for a third straight month.
Kashmarek attributed recent declines in the Mesa County unemployment rate to a shirking labor force. Over the past year, payrolls have dropped an estimated 3,237 as more unemployed people have become discouraged and stopped looking for work.
“As soon as things start looking better, these workers will return to the work force, preventing a meaningful decline in the unemployment rate,” he says.
The housing market in the Grand Valley peaked later than other areas of Colorado and subsequently has lagged behind other cities in rebounding, Kashmarek says. Housing sales and prices remain lower in the Grand Valley than other areas — as does residential construction activity, he says.
Kashmarek says he expects home prices to remain lower as lending standards remain tight and the labor market remains weak. Property foreclosures also will exert downward pressure on prices.
While homes are more affordable relative to incomes, it’s also more difficult for lower-income homebuyers to get a mortgage or refinance their homes, he says.