Phil Castle, The Business Times
Although Mesa County lags behind the more robust recovery that’s occurred on the Front Range, local labor and housing markets are slowly improving, according to an economist and executive with the Federal Reserve Bank.
Recovery initially was slow in the bust that followed a natural gas development boom. But growth since has accelerated, said Alison Felix, vice president and executive at the Denver branch of the Federal Reserve Bank of Kansas City. “You’ve got a ways to go to get back to 2008, but I think the conditions are ripe for that to occur.”
Felix detailed her outlook for Colorado and Mesa County during an economic forum the Federal Reserve Bank hosted in Grand Junction.
“Overall, Colorado’s economy has done quite well,” she said.
Colorado outpaces the United States for job growth with a 1.9 percent increase in employment over the past year, Felix said. The biggest gain has occurred in construction, although employment in the sector remains below pre-recession levels. Payrolls also have increased in the health care and leisure and hospitality sectors, with the weakest growth in the information sector.
The statewide seasonally adjusted unemployment rate has retreated to 4.2 percent, well below the historical average of 5.5 percent.
Most of the job growth has been concentrated on the Front Range, she said.
The seasonally unadjusted jobless rate fell to 5.4 percent in Mesa County for August, the lowest level so far this year. But the overall labor force remains 13 percent below its peak in November 2009, she said. “We still need to see a little more progress to get back to a healthy labor market.”
A number of indicators bolster the outlook for continued growth in Colorado, she said, including a net migration that’s resulted in 1 percent annual growth in the population. Since areas offering more employment opportunities have attracted most of the new residents, there’s been no growth in Mesa County, she added.
The tourism industry has fared well with increases in employment as well as higher hotel occupancy rates and prices, she said. Felix attributed the gains to increased leisure and business travel associated with improving economic conditions as well as several comparatively good ski seasons.
Export activity continues to increase. Employment has grown steadily in the manufacturing sector over the past few years, although there’s been a decline in recent months, Felix said.
While crop prices have retreated from the record levels of 2013, livestock prices have increased, she said.
As demand for housing has outpaced the available inventory, particularly on the Front Range, home prices have increased faster in Colorado than any other state, Felix said.
Appreciation has been less pronounced in the Grand Junction area, although home prices are up about 5.8 percent over the past year, she said.
Residential construction in Colorado has shifted away from multifamily housing to single-family housing. Residential construction activity also has increased in Mesa County, although permitting activity remains nearly 70 percent below peak levels before the recession, Felix said.
The biggest risk to continued growth in Colorado is the prospect for a prolonged downturn in the energy sector related to low oil and natural gas prices.
While the energy sector accounts for about 1.4 percent of employment in the state, the sector accounts for 4.6 percent of personal income and 6.2 percent of state gross domestic product, Felix said. The proportion of employment in the energy sector is higher in Mesa County at about 5 percent, she said.
While survey results indicate the price at which energy producers say they can break even in their operations has come down, so have expectations for higher prices. The price of a barrel of oil is expected to remain around $50 for the next 18 months, she said. “We expect the energy sector to be fairly weak for a considerable amount of time.”