Half full or half empty? Economists forecast modest growth for second half

Ernie Goss
Jeff Thredgold
Jeff Thredgold
Rich Wobbekind

Ernie Goss offers something of a mixed message in his second-half forecast for the Colorado economy. “Our numbers say it’s going to be good, but not as good as we’d like.”

Goss, director of the Denver-based economic research institute that bears his name, tracks the Colorado economy for a monthly business index. And like other economists who do the same thing, Goss expects modest, but not substantial, improvement for the remainder of 2011.

Jeff Thredgold, a corporate economist who calculates the Vectra Bank Colorado Small Business Index, puts it this way:

“You can make a case Colorado is a little better, but nothing gangbusters.”

Richard Wobbekind, an economist at the University of Colorado Leeds School of Business, says the initial business and economic forecast he reported in December remains mostly accurate halfway through the year with growth in some industry sectors, but not enough to speed the pace of hiring. “I’d rather be wrong,” Wobbekind says. “But the truth is, we’re right.”

The prospects appear a bit better for Western Colorado and Mesa County with strength in the agricultural, energy and tourism sectors.

But downturns in the housing market and construction sector constitute an economic drag in Mesa County as well as in many other parts of the state.

Moreover, uncertainty persists over what Thredgold describes as his “anxiety list,” including an impending deadline on raising the national debt ceiling in the United States, the potential effects of defaults in Greece and other European countries and ongoing wars in Libya and the Middle East.

Goss calculates the Business Conditions Index for Colorado as well as Utah and Wyoming based on the results of monthly surveys of supply managers in the three states.

For June, the latest month available, the index dropped more than eight points, but at 54.4 continues to forecast expanding conditions for the next three to six months.

Goss expects Colorado payrolls to increase more than 18,000 for the remainder of 2011.

The Vectra Bank Small Business Index, which tracks economic conditions from the perspective of the small business owner or manager, dropped for a third straight month in June to 116.8 as slowing global and national growth affects prospects in Colorado.

Thredgold says the Colorado economy is better now than the recessionary conditions of two to three years ago, but hasn’t yet rebounded to the prerecession levels of four to five years ago.

Wobbekind works with his own researchers and a committee representing major economic sectors to develop an annual business and economic forecast for Colorado. The initial forecast called for modest growth in 2011, but only payroll gains of about 10,100.

Halfway through the year, the forecast remains pretty close, Wobbekind says.

Colorado businesses will continue to experience revenue and profit growth, but won’t increase hiring enough to substantially lower the unemployment rate.

The agricultural sector has outpaced the forecast with increases in exports, Wobbekind says.

A strong ski season helped bolster the tourism sector during the winter and spring, while higher gasoline prices could prompt more people to vacation closer to home this summer, he says. Tourists likely will cut back on spending, though.

The energy industry, a part of the natural resources and logging sector, has performed better in 2011 with higher prices. Still, energy firms haven’t significantly bolster payrolls, he says.

Meanwhile, the construction sector continues to shed jobs in the aftermath of the housing downturn. Government employment, which typically increases along with population, has contracted because of shrinking tax revenues, he says.

Goss says he doesn’t expect the housing market to recover until property foreclosure activity slows and the inventory of foreclosed homes shrinks. “Housing is the real drag going forward.”

Nonetheless, Goss, Thredgold and Wobbekind all expect the Colorado to grow during the second half of 2011, just not very fast.

“It’s a pretty slow pace,” Wobbekind adds.