Federal Reserve economists: Mesa County lags behind state and national recovery
Phil Castle,The Business Times
Even as the state and national economies recover at a modest pace, Mesa County lags behind with higher jobless rates, slower home construction activity and lower housing prices, according to two economists and executives with the Federal Reserve.
“It probably doesn’t feel like a recovery has taken hold yet,” said Alison Felix, an assistance vice president and executive with the Denver branch of the Federal Reserve Bank of Kansas City.
While a resurgent housing market and increasing auto sales help drive national economic growth, the latest recovery has been weaker than past recoveries. And risks remain that could slow that growth, said Troy Davig, senior vice president and director of research of the Federal Reserve Bank of Kansas City.
Felix and Davig discussed their outlooks during an economic forum in Grand Junction, one of four the Federal Reserve Bank of Kansas City hosted in Colorado.
Felix said the Colorado economy has recovered at a faster pace than the U.S. in many respects, including job growth.
Nonfarm payrolls in the state have rebounded to pre-recession levels with year-over-year gains in the construction, leisure and hospitality and business and professional services sectors, she said.
Although the statewide seasonally adjusted unemployment rate has dropped a full point over the last year to 7 percent, the jobless rate remains higher than before the recession.
The unemployment rate also has dropped in Mesa County over the past year, but remains higher than the state rate. “Grand Junction has seen some recovery,” Felix said.
But employment peaked higher during a natural gas development boom and then fell further as regional energy activity and the overall economy slowed, she said.
Unemployment rates have dropped in Colorado and Mesa County as more people find jobs, but also because more people have dropped out of the workforce in giving up on job searches or moving away, Felix said. “Here in Grand Junction, we’ve seen a little bit of both.”
Felix attributed the Colorado recovery in large part to an improving housing market. Residential building activity in Denver has surpassed its pre-recession peak with a surge in multi-family housing construction. Single family home prices in Denver also have rebounded past previous peak levels.
While residential construction and home prices have increased in Mesa County, they remain well below pre-recession levels, she said.
Even as oil drilling and production activity have increased sharply in Colorado on higher prices, natural gas development has slowed as ample supplies keep prices low, Felix said.
Manufacturing has expanded after a six- to nine-month period of weakness. The agricultural sector has slowed somewhat, but remains stable, she said.
Davig said the national economy continues to recover at a moderate pace with 2 percent annual growth in gross domestic product, the broad measure of goods and services produced in the country. “This year is going to look like many of the past years.”
That level of growth has been “disappointing,” however, he said, compared to past recoveries in which annual GDP growth bounced back at 4 percent to 5 percent.
The U.S. unemployment rate has dropped nearly three points from its recession peak even as payrolls have increased an average of 184,000 a month over the past year.
Still, many businesses remain wary of hiring even more people in the face of weak demand for products and services, Davig said. Moreover, mismatches in the labor market between different industries and geographic areas have slowed job growth. And technological advances in the workplace have displaced human labor.
The decrease in jobless rate also is attributable in part to a decrease in labor force participation as more people stop looking for jobs.
A rebound in housing construction and home prices has bolstered the U.S. economy, as have auto sales that have returned to pre-recession levels, he said.
Concerns that rising mortgage and car loan interest rates could slow those sectors played a role in a recent decision by the Federal Reserve to not scale back purchases of Treasury and mortgage-backed securities intended to stimulate the economy.
Risks remain that could slow U.S. economic growth, Davig said, among them slower growth in emerging markets internationally, another financial crisis in Europe and rising commodity prices. And the full effects of government spending cuts under sequestration have yet to be felt.
That’s not to mention the potential for additional problems related to an impasse over raising the federal debt ceiling, Davig said. “It’s really a very dangerous game to play.”