Fed economist: Colorado recovery steady but moderate
Mark Snead’s outlook for the Colorado economy has changed over the past two years.
An economist and lead officer of the Denver branch of the Federal Reserve Bank of Kansas City, Snead presented a forecast in Grand Junction in 2009 in which he predicted an economic rebound in Colorado would lag behind the rest of the nation. Returning to Grand Junction two years later, Snead described an economic cycle in Colorado that’s very much like the nation with a steady and broad-based recovery. “The world just looks a whole lot different,” he said.
Nonetheless, that recovery remains moderate, Snead said. The energy, agriculture and tourism sectors constitute areas of strength for the Colorado economy. But the housing market and construction and finance sectors remain a drag. Although labor conditions have improved, unemployment remains high. “In general, the adjustment continues,” he said.
The job cycle in Colorado has closely followed that of the United States with nonfarm payrolls peaking in early 2008, bottoming out in late 2009 and slowly recovering since then. The state lost about 150,000 jobs during the recession and subsequently regained about 30,000 jobs, Snead said. The construction, manufacturing and financial services sectors accounted for about two-thirds of all jobs lost in the state, he added.
Changes in the job cycle were far more pronounced in Mesa County than in other Colorado metropolitan areas, with job gains well above the other areas in 2008, but far more job losses since then, he said. After bottoming out earlier this year, the Mesa County labor market has improved over the past few months.
Unemployment remains “very sticky,” in Colorado, Snead said, with rates higher than in all but one of the seven states served by the Federal Reserve Bank of Kansas City. In September, the latest month for which estimates are available, the statewide seasonally adjusted jobless rate stood at 8.3 percent in Colorado.
Still, payrolls have grown in some sectors, Snead said. In the mining sector, which includes oil and natural gas exploration and production, payrolls in Colorado grew 12 percent between August 2010 and 2011. Tourism employment grew with a 4.3 percent increase in leisure and hospitality payrolls. Education and health care payrolls grew 3.6 percent.
During the same time, though, construction payrolls in Colorado retreated 4.6 percent and employment in the information sector fell 5.1 percent, he said.
The housing market remains a drag on the Colorado economy, Snead said. Sales of existing homes have trended downward over the past five years and have only recently increased. That’s left a large housing inventory that could take years to clear, he said.
Over the past 10 years, Colorado has experienced the smallest gain in home prices among the seven states in the district, but also has the highest median home price of nearly $218,000, Snead said.
The value of residential construction in Colorado and the U.S. has declined about 75 percent over the past five years and continues to “bounce along the bottom,” Snead said.
Meanwhile, though, a number of industry sectors show improvement, especially energy, Snead said.
Oil and natural gas exploration has accelerated across the United States with rig counts exceeding pre-recession levels. Activity is “white hot” in Louisiana, Oklahoma, Texas and North Dakota, he said
The oil boom in North Dakota has been particularly dramatic, Snead said. “It is a sight we haven’t seen in quite a while.”
In Colorado, the rig count has more than doubled after bottoming out in 2009, but activity focuses mostly on natural gas, Snead said. In fact, Colorado remains on pass to pass Oklahoma for gas production.
The agriculture sector also has performed well thanks to rising cattle, wheat and corn prices that are projected to continue to trend upward, Snead said. The value of farm land in Colorado, New Mexico and Wyoming increased more than 12 percent during the third quarter, he said.
Within the tourism sector, hotel occupancy rates in Colorado continue to fluctuate by region, although rates in the Denver area have rebounded to pre-recession levels, Snead said. Airport passenger traffic at Denver International Airport has climbed to record heights, he said, but trended downward in Colorado Springs and other outlying areas.