Economic outlook for 2012: slow, but steady, growth
Having experienced the full effects of the recession later than other areas of Colorado, Mesa County has been late in regaining ground lost during the downturn.
But growth in wages and expanding energy exploration and production bode well for a slow, but steady, recovery in 2012, according to an annual economic forecast prepared at the University of Colorado.
The statewide outlook is much the same with continued recovery in most sectors of the economy as well as some job growth, said Richard Wobbekind, executive director of the Business Research Division at the CU Leeds School of Business.
“In 2012 we’re predicting slow, but steady, growth for Colorado, much like the U.S. economy,” Wobbekind said. “We’ll continue to add jobs in a wide array of sectors, but not at the dramatic rate that is necessary to significantly lower the unemployment rate.”
With the anticipated addition of 23,000 net new jobs next year, the statewide unemployment rate is expected to slip three-tenths to 8.4 percent, Wobbekind said. Compared to other states, Colorado will fare much better.
“The broader story here is Colorado entered the recession later, came out of the recession later and now appears to be accelerating past the rest of the county in terms of job growth and recovery,” he said.
In Mesa County, a number of trends signal improving conditions.
While the labor force in the county has dropped about 10 percent since 2009, the seasonally unadjusted unemployment rate has retreated in recent months to
8.5 percent — the lowest level since November 2009.
Average wages in Mesa County fell 1.2 percent from 2009 to 2010, but increased 3.4 percent on a year-over-year basis during the first quarter of 2011.
Sales tax collections during 2011, a key indicator of retail activity, continue to outpace 2010. For reports covering the first 10 months of 2011, county tax collections were up 8.5 percent and city tax collections were up 8.4 percent over the same span in 2010. The opening of several new retail businesses, including an American Furniture Warehouse outlet, should further boost sales tax collections.
The energy sector, an important component of the Mesa County economy, continues to expand, brining new jobs and capital investment to the area. According to the Colorado Oil & Gas Association, oil and gas companies paid nearly $1.7 million in severance taxes to Mesa County in 2011, almost double the level of 2010.
While home prices remain well below levels of 2008, real estate sales so far in 2011 already have exceeded those in each of the past two years. Moreover, property foreclosure activity has slowed with a nearly 28 percent decrease in year-to-date foreclosure filings between 2010 and 2011.
The tourism sector hasn’t fared quite as well. For reports covering the first 10 months of 2011, lodging tax collections in Grand Junction came in at 2.2 percent less than the same span last year. Hotel and motel occupancy and room rates also have declined.
Statewide, economic growth has built up some momentum heading into 2012, Wobbekind said. “We went into the year a little bit slow and then built up momentum for pretty much the entire year. And the last couple of months we’ve passed the national growth rate for jobs, and we’ll end the year above the national growth rate for jobs,” he said. “2011 was a decent year in which we added jobs in a fairly wide variety of sectors.”
For 2012, the strongest sector for projected job growth in Colorado likely will be the educational and health services sector with the addition of 7,500 new jobs next year.
Other leading growth sectors for 2012 will include the professional and business services sector with 6,800 jobs added and leisure and hospitality with 3,800 added.
Construction employment is expected to increase 2,900 in 2012, marking the first job growth for that sector in four years.
In the agricultural sector, Colorado farmers and ranchers are coming off what is expected to be a record-setting year for net farm income. Producers benefited from unexpectedly strong market prices for livestock and crops in 2011, leading to an estimated record net farm income in the state of $1.7 billion. Historic drought in Texas, Oklahoma and Kansas spared much of Colorado in 2011, leading to increased market prices for Colorado agricultural products.
“Mother Nature played a major part in this, and this year it played in our favor,” Wobbekind said, adding that Colorado producers are expected to do well in 2012.
After adding jobs in 2011 for the first time since 2003, the manufacturing sector will return to a long-term downward trend and is forecast to lose 1,900 jobs. Two other sectors expected to lose jobs are information, forecast to shed 500 jobs, and financial activities, losing 1,000 jobs.
In 2011, Colorado consumers spent more on goods and services, with retail sales increasing 6.5 percent for the year. In 2012, retail sales are forecast to remain relatively strong with a gain of 4 percent.
“We view the consumer as coming back to the table,” Wobbekind said. “Consumers have deferred a lot, including what we would call more necessary expenditures such as automobiles and other essential products that have been wearing out and need to be replaced.”
Colorado’s population is projected to grow 1.5 percent, or 75,900 people, in 2012.
Even with positive job growth predicted for Colorado, Wobbekind said uncertainty at numerous levels still clouds the economic picture in the state and nation.
“The theme of almost every national forecast is uncertainty,” he said. “Every day there is a new event in Europe or a new event in Washington. So you continue to have all of these elements of uncertainty and they impact consumer confidence and household spending. That is something that is very hard to forecast or predict.”