Grow or slow? Professor and real estate executive share outlooks

Grow or slow? Professor and real estate executive share outlooks
Nathan Perry, an economics professor at Colorado Mesa University, tracks regional indicators from his office on the CMU campus in Grand Junction. While the pace might slow, Perry expects growth to continue in 2019. (Business Times photo by Phil Castle)
Nathan Perry, an economics professor at Colorado Mesa University, tracks regional indicators from his office on the CMU campus in Grand Junction. While the pace might slow, Perry expects growth to continue in 2019. (Business Times photo by Phil Castle)

Phil Castle, The Business Times

The economic growth that’s occurred in Mesa County over the past two years might slow, but likely will continue, according to a college professor who tracks regional indicators.

And while the energy and construction industries remain volatile, those sectors and their high wages should still play a leading role in pushing trends upward, said Nathan Perry, an associate professor of economics at Colorado Mesa University in Grand Junction.

Speaking at an economic forecast forum at CMU, Perry offered what he called an overview of where the local economy has been, where’s it’s at and where it’s going.

There are various ways to compare current conditions in Mesa County, he said: to the last economic peak in 2008, to Denver, to other nearby counties and to the recent past.

Given what Perry said were “double bubbles” in natural gas and real estate development in 2008, that comparison isn’t suitable. Neither is a comparison with Denver.

In other ways, though, Mesa County fares well, he said.  “Compared to the recent past, Mesa County is doing very well.”

Gross domestic product, a measure of the total value of goods and services produced in an area, grew 4.2 percent in Mesa County in 2017. Perry expects GDP growth for 2018 to come in between 3 percent and 4 percent when that number is released. “We’ve had two very solid years of growth.”

By comparison, GDP growth in 2017 hit 2.8 percent for Pueblo, 3.3 percent for Colorado Springs and 6 percent for Denver, Perry says.

The seasonally unadjusted unemployment rate for Mesa County stood at 4.2 percent for the fourth quarter of 2018, up four-tenths of a point from the third quarter and a half point from the fourth quarter of 2017, he says.

The monthly jobless rate jumped nine-tenths of a point to 4.9 percent for December, the highest level in nearly two years. While that gain could be seen as “alarming,” Perry says monthly changes tend to be more volatile, and he’s waiting for the data for the first quarter of 2019 to offer additional information.

The Mesa County labor force has grown 1,821 over the past year and 2,155 over the past five years, but remains  6,102 lower than 10 years ago with the exodus of energy and construction workers in the bust that followed the boom.

Taking out the peak that occurred in 2008, employment in Mesa County remains just below the long-term trend line, Perry says. “It’s not as an amazing a story, but it’s more positive than some people think.”

Sales and use tax collections for the City of Grand Junction topped $14.4 million for the fourth quarter of 2018, up 6.12 percent from the fourth quarter of 2017, Perry says. Sales and use tax collections for Mesa County exceeded $9.1 million for the fourth quarter of 2018, up 5.54 percent for the same quarter in 2017.

Those numbers reflect increased consumer spending and confidence, he says.

The construction industry and vehicle sales accounted for a combined 32 percent of sales tax collections for the city in 2018. Restaurants and bars accounted for 13 percent.

A 6.26 percent gain in lodging tax collections on hotel and motel stays in Grand Junction between the fourth quarters of 2017 and 2018 constitutes a proxy for increasing tourism business, he says.

According to information from the U.S. Census Bureau, median household income in Mesa County rose to $52,623 in 2017, up 5.62 percent from 2016. Perry says he expects median household income to have increased further in 2018 to between $53,000 and $54,000.

A quarterly census of employment and wages conducted by the U.S. Bureau of Labor Statistics offers a look change in the  Mesa County labor market over the past 10 years and two years, Perry says.

With average employment of 10,736 in the second quarter of 2018, health care has grown into the largest single sector in serving a large geographic area and aging population, Perry says. That’s an increase of 2,338 jobs since the second quarter of 2008. “Health care is a bulwark  of Mesa County.”

During that same 10-year span, employment has dropped 1,415 in the energy sector and 1,385 in the construction sector.

Over the past two years, however, the energy sector has added 753 jobs and the construction sector another 476 jobs.

Moreover, those sectors have contributed substantially more in wages to the local economy, Perry says. The energy sector accounted for almost $51 million in wages during the second quarter of 2018, while the construction sector accounted for nearly $59 million. The almost $20 million increase in wages in the energy sector between the second quarters of 2016 and 2018 was nearly double the next largest gain in wages, he says.

The health care sector added 878 jobs during that span, while wages increased almost $3.9 million.

“Jobs are great, but wages are greater,” Perry says.

The question, Perry says, is whether or not the contributions of the energy and construction sectors are sustainable.

Energy development activity and in turn employment in Western Colorado varies with the price of natural gas, Perry says. The difference between $2 per million British thermal units and $4 per million Btus could result in a swing of hundreds or potentially even thousands of jobs in Mesa County.

The Energy Information Agency expects natural gas prices to average $2.89 per million Btus in 2019 at the Henry Hub, a natural gas pipeline in Louisiana that serves as the official delivery location for futures contracts on the  New York Mercantile Exchange. A surplus of natural gas production in the United States has kept prices low, Perry says.

If natural gas prices end up averaging close to $3, local employment levels in the energy sector are likely sustainable, he says.

The construction sector follows business cycles, peaking at the top of the cycle, then slowing along with the economy, Perry says. In Mesa County, the sector has become more diversified with not only new housing, but also commercial construction and utility work. “I think that’s very positive.”

The good news for Mesa County, he says, is there are no indications of natural gas or real estate development bubbles that would pop with an economic downturn. Even if the energy and construction sectors slow, the effects likely would be far more modest than what happened a decade ago.

Overall, Perry says he expects growth to continue in 2019, although there could be some slowing in consumer spending, energy development and construction.