Economist: Energetic resurgence under way
Phil Castle, The Business Times
Colorado has not only fully recovered from the recession, but is also among a small group of states expected to continue to outpace the more modest growth forecast for the national economy.
Increasing energy production that’s positioned the United States to become self-reliant for natural gas and oil plays a major role in the rebound, said Anirban Basu, a consultant and chief economist of a national construction trade association.
“Colorado will be very much part of that story,” Basu said during a presentation in Grand Junction arranged by the Rocky Mountain Chapter of the Associated Builders and Contractors and Grand Junction Area Chamber of Commerce.
Basu is chief executive officer and chairman of Sage Policy Group, an economic and policy consulting firm based in Baltimore. Basu also serves as chief economist of the ABC, a trade association for the construction industry with 22,000 members, about 200 of them in Colorado.
Basu covered global, national and state economic trends in a 90-minute talk that was as far-reaching as it was fast-paced.
Basu described the global economy has “somewhat disappointing” with the fastest growth in developing countries in Africa and Asia and the slowest growth in Europe.
The United States was among the fastest-growing advanced countries. The U.S. economy expanded 1.9 percent in 2013 and is expected to grow 2.8 percent in 2014, still below the long-term average of 3.5 percent, Basu said. “It’s not fabulous, but it’s better.”
Despite slow economic growth, U.S. stock markets have surged, Basu said. The Dow Jones industrial average increased more than 26 percent in 2013, while the Nasdaq composite index rose more than 38 percent. “The performance has been breathtaking.”
Basu attributed the increase in part to “quantitative easing” — efforts by the Federal Reserve to stimulate the economy by purchasing Treasury and mortgage-backed securities. At the same time, though, corporate profits have climbed to record levels.
As the national economy has recovered, so have state economies, Basu said. In May 2009, all 50 states were in recession. Today, all 50 state economies are growing again.
Colorado is among a group of 11 states that have not only fully recovered, but expanded beyond pre-recession highs, Basu said. Increased oil and natural gas production made possible by hydraulic fracturing and horizontal drilling has driven growth in those states. The United States soon could be exporting natural gas even as the country moves closer toward self-reliance on oil.
While industrial and energy production have increased, so has consumer spending, Basu said. Americans are taking on more debt to do so.
The U.S. labor market has improved as well, Basu said, with the addition of more than 2.2 million jobs over the past year. “Job growth has been pretty decent, respectable.”
But there’s a distinction between the quantity of new jobs and quality, he added. Many of the new jobs pay low wages, and more positions are for part-time, rather than full-time, work.
Newly implemented federal health care reforms could encourage employers to relegate more of their employees to part-time work to reduce costs. And more people could be willing to work part time now that they can obtain health care insurance through the Affordable Care act, Basu said.
With an increase in nonfarm payrolls of more than 65,000, Colorado tied with Florida and Texas for the third-fastest job growth at 2.8 percent, Basu said. North Dakota ranked first with 4.1 percent job growth, followed by Nevada at 3.6 percent.
The construction sector continues to recover, Basu said. But a number of factors could slow single-family home construction, including higher interest rates and the lingering effects of an especially severe winter in many parts of the country. There’s more momentum in apartment construction, he added.
As for nonresidential construction, Basu said there was an 8.3-month backlog of work under contract, but not yet completed, during the fourth quarter. That’s the longest average backlog since the Associated Builders and Contractors began calculating the indicator in the first quarter of 2009. “Contractors are getting busy.”
Spending on nonresidential construction over the past year has been concentrated in hotels, casinos and other lodging properties as well as data centers for the communications sector, Basu said. There’s been additional spending on roadways and commercial projects.
What have been slim margins for construction contractors have widened somewhat as the price of materials has remained “well behaved,” Basu said. But contractors could face another challenge in an emerging shortage of skilled workers, he added.
Taking everything into consideration, Basu said he believes gross domestic product, the broad measure of goods and services produced in the United States, will grow at an annual rate of between 2.4 percent and 2.6 percent this year.
And Colorado will be among the states that continue to outperform the national economy, he added.