Even as Colorado lags behind other areas of the nation in economic recovery, Grand Junction lags behind other cities in the state.

The situation is likely to persist until the housing market and construction employment improves. But increased activity in the energy sector could help. Moreover, the health care and education sectors remain strong economic drivers, said Ed Kashmarek, an economist with the Wells Fargo Securities Economics Group.

Kashmarek and Scott Anderson, a senior economist with the group, drafted an economic outlook for Colorado that included a short section on Grand Junction. Kashmarek offered additional details about Grand Junction in responding by e-mail to questions posed by the Business Times.

In their statewide assessment, Kashmarek and Anderson said the Colorado economy is recovering, but continues to lag behind the United States in some measures.

While the labor market has improved, Colorado has yet to enjoy payroll gains on a year-over-year basis. And home prices are falling at a faster pace than the national average, they said. However, Colorado is poised to perform much stronger in the long term because of a work force with a comparatively  higher educational as well as higher household income levels. Increasing demand for energy also should help.
Kashmarek said he expects modest job growth in Colorado in 2011 in a range between 1 percent and 2 percent.

Employment demand should remain strong in the health care and education sectors, while increased consumer spending will gradually lead to more hiring in the retail and leisure and hospitality sectors, he said. Employment in professional and business services has improved in some areas, but mostly because of increases in temporary help services. Meanwhile, employment likely will continue to lag in financial services and manufacturing.

Rising consumer spending, tourism and innovation all will lead to improving economic conditions in Colorado, Kashmarek said. “But in the long run, what is needed most is job growth, which will lead to greater tax revenues, which will be necessary to finance ever greater needs for social services and entitlements as the population grows and ages.”

“There’s no telling when the labor or housing markets will catch up to the nation,” Kashmarek added. “However,  in the long run Colorado is poised to be a strong performer in the West due to its highly educated work force and high household incomes. Strong demand for energy resources would certainly help.”

As some regions of the state fare better than others, Grand Junction continues to suffer from the effects of the recession, Kashmarek said.
Grand Junction experienced the largest employment decline among major metro areas in Colorado, home prices have dropped further and residential construction activity has yet to bottom out.

“The construction industry took a big hit during the housing bust. Since prices and starts rose in Grand Junction more than in any other Colorado metro during the boom, Grand Junction’s bust was among the worst in the state,” Kashmarek said. “In addition, the energy industry has not come close to regaining the jobs lost when energy prices collapsed during the recession.”

“Housing will remain weak for some time to come, so construction jobs will be scarce,” he added. “However, recent increases in oil and natural gas prices should benefit Grand Junction. But job gains will be mild at best.”

A number of what Kashmarek termed as structural factors also hampers the Grand Junction economy, including lower educational attainment levels and lower household income levels.

“The city needs to better diversify its economy,” he said. “It is overly dependent on construction, leisure/hospitality and retail. Construction won’t see strong job growth for quite some time and retail and leisure/hospitality jobs are low-paying. In addition, professional business service employment, which tend to be higher-paying jobs, is much lower than the state as a share of overall employment.”

Increased consumer spending will help the retail as well as the leisure and hospitality sectors.

Growth in the energy sector in Western Colorado could help, too, Kashmarek said. “There are more people calling for use of natural gas to help alleviate our nation’s dependence on foreign oil. If that comes to pass and more investment is aimed at natural gas extraction and production, Colorado and Grand Junction will benefit handsomely. Continued emerging market development will also spur more demand for energy resources.”

Meanwhile, the health care and education sectors remain important components of the economy in Colorado and Grand Junction, he said.

“These jobs are high-paying, recession-resistant and will be in more demand as the population ages.”