Happy new year? Economists say outlook good
Ernie Goss surprises even himself with his optimistic forecast for the Colorado economy in 2011. Goss expects conditions to improve and job growth to accelerate, especially during the second half of the year.
“I’m much more upbeat today than I was six months ago,” says Goss, the eponymous director of the Goss Institute for Economic Research in Denver.
Goss isn’t alone in his assessment, either. Two other economists who closely monitor the Colorado economy expect growth — albeit slower than most would like and with persistently high jobless rates.
Jeff Thredgold, an economist with Vectra Bank Colorado, expects the slow transition from recession to recovery to take place in 2011.
And Richard Wobbekind, director of the Business Research Division of the Leeds School of Business at the University of Colorado in Boulder, agrees. “I think the overall economic picture for Colorado in 2011 is slow, steady growth — much like the national economy.
We would all like a more rapid recovery, especially in term of jobs. But we’re just not going to see that yet.”
After enjoying some of the fastest growth of any area of the United States, Mesa County has endured what Wobbekind terms “a rough couple of years” with higher unemployment and foreclosure rates and slowing real estate activity. Nonetheless, growth in the energy and retail sectors bode well for recovery.
Goss and Thredgold discussed their outlooks in telephone interviews with the Grand Valley Business Times. Wobbekind presented his forecast at a breakfast meeting of the Grand Junction Area Chamber of Commerce.
Goss calculates a monthly Business Conditions Index for Colorado as well as Utah and Wyoming. For November, the latest month available, the index for Colorado edged up four-tenths to 53.7 on higher component readings for new orders, production or sales and employment. Goss bases the index on the results of monthly surveys of supply managers. Readings above 50 forecast economic growth over the next three to six months.
Goss also conducts surveys of rural bankers in Colorado and says the results of both surveys tell the same story of an expanding economy.
While job growth likely will remain weak in the first quarter of 2011, Goss says he expects a 1 percent to 1.5 percent increase in payrolls for 2011 and slightly higher growth in 2012.
A weak dollar compared to other currencies should continue to bolster U.S. exports in 2011, Goss says. That in turn will help Colorado companies, especially those selling computer and electronic components and agricultural products in foreign markets.
Telecommunication companies likely will fare less well, he says.
It’s more difficult to predict a turnaround in the housing market, Goss says. “Housing remains a mystery.” While higher unemployment rates and more stringent lending standards have slowed home sales, so has uncertainty.
Given the pervasive effects of the recession in Colorado over the past two years, Goss considers any promise of growth, however slow, good news. “It’s just a big hole that we dug, and climbing out is going to be pretty tough.”
Thredgold calculates the Vectra Bank Colorado Small Business Index, a monthly measure of economic conditions from the perspective of small business owners and managers. For November, again the latest month available, the index rose more than two points to 105.8.
With gains in each of the last 14 months, the index has climbed to its highest level since hitting 106 in February 2006.
Including the latest estimates for November, year-over-year measurements of job losses in Colorado have declined for 11 straight months, Thredgold says. That’s an indication the transition from recession to recovery should take place during the first quarter of 2011, he says.
Thredgold expects a 1.5 percent increase in Colorado payrolls in 2011 followed by a 3 percent increase in 2012. The leisure and hospitality and manufacturing sectors should fare better and add to payrolls in 2011, he says.
Thredgold attributes his outlook in large part to the influences of global and national economic growth on Colorado.
The recent decisions in Congress to extend Bush-era tax cuts should help to reduce uncertainty and bolster confidence, he adds.
Wobbekind offered a detailed review of national, state and local economic trends during his presentation in Grand Junction. That same information is available from the latest edition of an annual economic outlook report for Colorado.
The report forecasts a gain of 10,100 jobs in Colorado in 2011. That compares with a loss of more than 140,000 jobs in the state over the past two years.
While most sectors of the economy will return to growth in 2011, the construction, government, information and manufacturing sectors likely will continue to shed jobs, Wobbekind says.
The strongest sector for projected job growth in Colorado in 2011 is in the professional and business services sector, which is expected to add 7,000 jobs.
Other leading growth sectors for 2011 are likely to include trade, transportation and utilities with 3,500 jobs added; education and health services with 3,300 jobs added; and leisure and hospitality with 3,000 jobs added.
Unfortunately, job growth in these major sectors won’t make much of a dent in the employment problem, Wobbekind. says. The statewide seasonally adjusted unemployment rate likely will remain high and even increase. “It will not be enough to bring down the unemployment rate in any meaningful way or to create great momentum in the state economy. But at least it is moving in the right direction. It is just moving at a slower pace than we would like.”
The two sectors expected to lose the most jobs in 2011 are construction and government. The construction sector will lose 7,000 jobs in 2011. The government sector will lose 1,800 jobs – the first loss in 20 years of detailed sector statistics.
Wobbekind attributes the situation in part to the structural nature of a recession and recovery. Businesses do more with less until profits increase and balance sheets improve. Productivity surges. Until productivity drops and more workers are needed, businesses remain reluctant to hire, he says. Moreover, Colorado continues to lag behind the nation in recovery.
In Mesa County, a big buildup in the economy, payrolls and housing prices was followed by a big dip in the aftermath of downturns in the regional natural gas industry and general economy, Wobbekind says.
The hardest hit industry sectors in the county — including construction, mining, trade and leisure and hospitality — were also the sectors with the most jobs and income.
For November 2010, the unadjusted jobless rate jumped to 9.8 percent in Mesa County as estimated payrolls decreased and the number of people unsuccessfully looking for work increased.
Through November, there were 2,282 real estate transactions in Mesa County. At that pace, the total for 2011 will be among the lowest levels in 20 years.
Wobbekind sees some signs of recovery, though, in increased natural gas exploration and production activity in the region as well as rising sales tax collections, a reflection of more stability in retail sales.
As for Colorado as a whole, Wobbekind says there’s a strong foundation upon which to build a better economy in 2011. “We’re strong believers in Colorado having a strong foundation.”