cber.co Colorado Economic Forecast – Diverse Growth

The primary focus of most state economic forecasts is to project total state employment.

Over the years cber.co has worked on various Colorado economic forecasts – some were multi-year projections, others were one-year annual totals, and some projected sector totals that were added to derive the state total. The latter approach introduced numerous variables for error.

cber.co feels the most accurate forecast is achieved by projecting total employment based on projections for three categories of sectors. Sectors are grouped into three categories based on their past performance.

Projections for the categories and overall employment are based on trends, feedback from business leaders, economic developers, and other economists. The sum of these categories is then used to estimate overall total employment.

Minor adjustments are made and final forecasts are produced for three scenarios. The most likely scenario is used as the final cber.co forecast. This final step helps create a better understanding of upside and downside risk associated with the forecast.

This portfolio approach has made it easy to see that some sectors consistently create jobs at a higher rate of growth, some show solid growth, and others are more volatile. Ultimately, the volatile category tends to have a greater influence on the change in total job growth than the sectors with steady growth.

The most difficult challenge in producing the 2016 forecast was to estimate the 2015 data. The methodology used by BLS to produce the preliminary nonfarm data was flawed. Having said that, the growth of the Strong, Solid, and Volatile Growth Categories will be similar to 2015; however, the total will be slightly less.

The Strong Growth Category of sectors (green) has performed consistently over time. The category added jobs as expected in 2015. Sectors in this category include:
• Professional, Scientific, and Technical Services
• Management of Companies and Enterprises
• Administrative – Business to Business (Not Employment Services)
• Private Education
• Health Care
• Arts, Entertainment, and Recreation
• Other Services.

Recent and projected employment changes for the Strong Growth Category follow:
• 2012 24,000
• 2013 20,100
• 2014 26,900
• 2015 26,700
• 2016 24,000 to 26,000
The 2016 projected rate of growth will be 2.9% to 3.2%, similar to the last two years.

Over time, the Solid Growth Category of sectors (yellow) has been more volatile than the Strong Growth Category and it has grown at a slower pace. In 2015, this category performed as expected. Sectors in this category include:
• Wholesale Trade
• Retail Trade
• State (Not Higher Education)
• Higher Education
• Local (Not K-12 Education)
• K-12 Education
• Accommodations and Food Services

Recent and projected employment changes for the Solid Growth Category follow:
• 2012 15,600
• 2013 26,600
• 2014 24,500
• 2015 24,700
• 2016 23,000 to 25,000
The 2016 projected rate of growth will be 2.3% to 2.5%, similar to the past two years.

Finally, the Volatile Category of sectors (red) was a significant source of growth in 2013 and 2014, but the number of jobs added in 2015 fell off significantly. Sectors in this category include:
• Natural Resources and Mining
• Construction
• Manufacturing
• Transportation, Warehousing, and Utilities
• Employment Services
• Financial Activities
• Information
• Federal Government

Recent and projected employment changes for the Volatile Category follow:
• 2012 15,100
• 2013 22,300
• 2014 30,400
• 2015 21,000
• 2016 20,000 to 22,000.
The 2016 projected rate of growth will be 2.7% to 3.0%, similar to 2015.

The 2016 cber.co Colorado economic forecast portends the state will add 67,000 to 73,000 workers and job growth will be 2.7% to 2.9%.

For additional information about the 2016 cber.co Colorado Economic Forecast click here.

Colorado Economic Forecast

cber.co 2016 Colorado Economic Forecast – Solid Growth

Last week, cber.co released its Colorado economic forecast for 2016. As is the case with most forecasts, the primary focus of the Colorado forecast is employment. As economic developers say, “it all starts with a job.”

Each year the forecast provides an optimistic, pessimistic, and most likely scenario.

The 2016 optimistic scenario calls for:
• U.S. Real GDP growth will be greater than 2.6%.
• Colorado will add more than 73,000 workers, the rate of job growth will be greater than 2.9%.

The projected likelihood of this scenario is 18%. The Colorado economy has experienced solid job growth since 2012; however, given the slowdown in the global economy and the lower price of oil, it is unlikely the state will experience accelerated growth.

The pessimistic scenario calls for:
• U.S. Real GDP growth will be less than 2.3%.
• Less that 67,000 Colorado workers. Job growth will be less than 2.7%.
The projected likelihood of this scenario is 22%. While the global and U.S. economies are expected to see slight growth in output, the Colorado economy could be derailed if the price of oil stays low and the global economy slows further.

The most likely scenario calls for:
• U.S. Real GDP will be 2.3% to 2.7%.
• The U.S. will add at least 2.7 million workers.
• Colorado will add 1.8% of total U.S. jobs added.
• Colorado will add 67,000 to 73,000 workers, job growth will be 2.7% to 2.9%.

Despite downside risks there is a 55% likelihood this forecast will occur. Since 2012 growth has been steady and broad-based. Much of the growth has been in sectors such as tourism, which have an indirect link to the extractive industries.

The bottom line – look for continued job growth in Colorado, but at a slower rate than 2015.

For additional information about the 2016 cber.co Colorado Economic Forecast click here.

colorado economic forecast

Q3 2015 Real GDP Records 2.0% Gain

On December 22nd, the Bureau of Economic Analysis released the “third estimate” of the Q3 2015 Real GDP for the United States. It increased at an annualized rate of 2.0% compared to 3.9% for Q2.

The nominal or current-dollar GDP (chained on 2009) for Q3 increased by $146.5 billion to $18,060.2 billion, a gain of 3.3%. The Q2 current-dollar GDP rose by 6.1% or $264.4 billion.

2015 Real GDP, Chained Dollars (2009 Billions)

 

Q1

Q2

Q3

        Gross domestic product

$16,177

$16,334

$16,414

Personal consumption expenditures

$11,081

$11,179

$11,262

    Goods

$3,804

$3,855

$3,902

    Services

$7,277

$7,325

$7,363

Gross private domestic investment

$2,830

$2,865

$2,860

    Fixed investment

$2,701

$2,736

$2,761

        Nonresidential

$2,189

$2,211

$2,225

        Residential

$512

$524

$534

    Change in private inventories

$113

$114

$86

Net exports of goods and services

$(541)

$(535)

$(546)

    Exports

$2,091

$2,118

$2,121

        Goods

$1,429

$1,452

$1,449

        Services

$661

$664

$671

    Imports

$2,633

$2,652

$2,667

        Goods

$2,161

$2,178

$2,186

        Services

$470

$472

$480

Government consumption expenditures

$2,839

$2,857

$2,870

    Federal

$1,111

$1,111

$1,112

        National defense

$680

$681

$678

        Nondefense

$431

$430

$433

    State and local

$1,726

$1,744

$1,756

Residual

$(41)

$(45)

$(49)

The 2015 Q3 Real GDP posted gains in the following areas:
• Personal consumption expenditures, the largest category, were up by 3.0% compared to 3.6% in the previous quarter. Goods were up 5.0% and Services were up 2.1%.
• Fixed investments posted a gain of 3.7% in Q3, down from 5.2% in Q2. Nonresidential investments for Q3 were up 2.6% and residential investments rose 8.2%. Both had lower levels of growth than Q2.
• Exports posted a gain of 0.7% for Q3 compared to 5.1% in Q2. Goods actually declined by -0.9% while services increased by 3.9%.
• Imports recorded an increase of 2.3% in Q3 compared to 3.0% in Q2. Goods increased by 2.3% while services posted a 6.4% increase. (Note: Imports are subtracted from the value of the GDP).
• Government consumption increased by 1.8% in Q3 compared to 2.6% in Q2. Federal spending was flat with a decrease in national defense spending and an increase in Nondefense spending. State and local government spending posted a 2.8% gain, down from 4.3% in the prior quarter.

Percent Change From Preceding Period in Real GDP – Seasonally Adjusted at Annualized Rates

Q1 Q2 Q3
        Gross domestic product 0.6 3.9 2.0
Personal consumption expenditures 1.8 3.6 3.0
    Goods 1.1 5.5 5.0
    Services 2.1 2.7 2.1
Gross private domestic investment 8.6 5.0 -0.7
    Fixed investment 3.3 5.2 3.7
        Nonresidential 1.6 4.1 2.6
            Structures -7.4 6.2 -7.2
            Equipment 2.3 0.3 9.9
            Intellectual property products 7.4 8.3 -0.8
        Residential 10.1 9.3 8.2
    Change in private inventories
Net exports of goods and services
    Exports -6.0 5.1 0.7
        Goods -11.7 6.5 -0.9
        Services 7.3 2.3 3.9
    Imports 7.1 3.0 2.3
        Goods 7.2 3.2 1.4
        Services 6.7 2.0 6.4
Government consumption expenditures -0.1 2.6 1.8
    Federal 1.1 0.0 0.2
        National defense 1.0 0.3 -1.4
        Nondefense 1.2 -0.5 2.8
    State and local -0.8 4.3 2.8
Addendum:
    Gross domestic product, current dollars 0.8 6.1 3.3

Q4 2015 Real GDP is expected to be stronger than Q3 and the rate of growth for 2015 will be in the range of 2.3% to 2.5%.

Which has the Top Economy – Colorado, Utah, Washington?

There are frequent references in the local media about how Colorado is one of the top state economies in the country. And it is!

There are many metrics that can be used to compare state economies. The two best metrics are the growth rates for Real GDP and employment. In this post we look at these metrics from 2005 to the present for Colorado, Utah, Washington and the U.S.

Employment
• Washington has the greatest number of employees, followed by Colorado.
• Utah had the highest rate of employment growth of the three states. Colorado and Washington have grown at similar rates; however, Washington’s rate of growth has been off a larger base of employment.
• Employment for all three states has grown at a faster rate than the U.S. That rate of growth has accelerated since 2010 for all three states.

Colorado Utah Washington

Real GDP
• Washington has the largest GDP, followed by Colorado.
• The Real GDP for all three states has grown at a higher rate than the U.S.
• Utah had the fastest rate of Real GDP growth from 2005 to present followed by Washington. Colorado is third.
• Since the end of the recession the GDP for all three states has grown at a faster rate than the United States. Colorado had the fastest rate of Real GDP growth from 2013 to present because of the rapid growth in the extractive industries. That rate of growth is likely to decrease in 2015 and beyond as a result of challenges facing the oil and gas industry caused by lower oil prices.

Colorado Utah Washington

Based on these metrics Washington has the largest economy and Utah is growing at a faster rate than the other two states. The strengths of the economies in Utah, Washington, and Colorado make them great places to live, work, and play. Here’s to a prosperous year for all three states in 2016.

State Agencies Release 2016 Economic Forecasts

On December 21st, the Colorado Legislative Council (CLC) and the Governor’s Office of State Planning and Budgeting (OSPB) released their quarterly 2016 economic forecast . (https://www.colorado.gov/cga-legislativecouncil and https://sites.google.com/a/state.co.us/ospb-live/). The two reports provide slightly different estimates for 2015 and forecasts for 2016, both of which are supported by rational explanations. A comparison of the 2015 estimates for key indicators follows.

2015 Estimates

At the national level, the major difference is that OSPB expects U.S. unemployment to be slightly higher.

At the state level there are several items to make note of:
• Both organizations have indicated stronger than anticipated population growth.
• CLC projected employment to be near the current levels published by the Bureau of Labor Statistics. OSPB projected employment to be near the estimated benchmark revisions that will be made in March.
• Inflations in Colorado is much higher than the U.S. OSPB’s projection for employment is slightly higher than the CLC projection.
• OSPB is more optimistic than CLC about the number of construction permits issued in 2015.

U.S. Economy December 2015 Estimate for 2015
Category CLC OSPB
Real GDP % Change 2.5% 2.4%
Employment   Change % 2.9 million

2.1%

2.8 million

2.0%

Unemployment Rate 5.0% 5.3%
Inflation (CPI) 0.1% 0.1%
Colorado Economy December 2015 Estimate for 2015
Category CLC OSPB
Population Change /% +101,200

1.9%

+98,000

1.8%

Employment Change/% +57,600

2.3%

+69,000

2.8%

Unemployment Rate 4.0% 4.1%
Retail Trade Sales (Millions)/% $93,191

2.8%

$94,200

4.3%

Home Permits (000s) 28.6 31.0
Denver-Boulder Inflation Rate 1.1% 1.5%

2016 Forecasts

At the national level, the two groups have similar forecasts. OSPB forecasted slightly higher U.S. inflation than CLC.

At the state level there are several items to make note of:
• Both groups are projecting population growth similar to 2015.
• Both groups are forecasting continued job growth; however, it will be at a slower level. There are drastic differences in the projected employment levels.
• OSPB is much more optimistic that CLC about construction growth.
• Inflation will be about one percentage point greater than the U.S. level.

December 2015 U.S. – 2016 Economic Forecast 
Category CLC OSPB
Real GDP % Change 2.3% 2.3%
Employment Change/% 2.6 million

1.8%

2.4 million

1.7%

Unemployment Rate 4.8% 4.8%
Inflation (CPI) 1.6% 1.8%
December 2015 Colorado – 2016 Economic Forecast
Category CLC OSPB
Population Change /% +95,200

1.7%

+97,300

1.8%

Employment Change/% +47,300

1.9%

+66,800

2.6%

Unemployment Rate 3.8% 3.8%
Retail Trade Sales (Millions)/% $98,037

5.2%

$99,400

5.5%

Home Permits (000s) 32.0 37.9
Denver-Boulder Inflation Rate 2.4% 2.5%

The bottom line is that the state is expected to show continued job growth. The question is whether or not it will be at a level that is weak to average or will be average to modest growth.

Employment Data for November Shows Continued Deterioration in Colorado Job Growth

The Bureau of Labor Statistics released wage and salary employment data for November that shows the level of Colorado job growth continued to deteriorate. In October, the jobs data reported there were 49,000 more jobs than 2014 and the difference for November was 43,600 jobs.

On a quarterly basis employment gains for 2015 are as follows:
• Q1 75,000
• Q2 60,200
• Q3 46,400
• Q4 46,300 (estimated).

The current employment data shows the state is on track to add 57,000 jobs in 2015. Henry Sobanet, Director of the Governor’s Office of State Planning and Budgeting recently stated the slowdown in the rate of job growth could be attributed to two things – the lower price of oil and the slower growth in the Chinese economy. In other words, the slowdown is a “bump in the road” and not a major recession.

Through the first eleven months of the year:
• About 78.8% of the total jobs added were in the top five sectors: Health Care; Accommodations and Food Services; Construction; Professional, Scientific, and Technical Services; and Financial Activities.
• Approximately 24.8% of all jobs added were in Leisure and Hospitality (Accommodations and Food Services plus Arts, Entertainment, and Recreation).
• About 10.9% of total jobs added were in the PST, Manufacturing, and Information Sectors. These sectors are the source of primary and advanced technology jobs.

Projected revisions, which will be made in March 2016, are estimated to bring Colorado job growth closer to the lower limit of the 2015 cber.co forecast, a forecasted increase of 73,000 to 79,000 jobs.

The total number of unemployed workers at the end of November 2015 was 102,035.

The total number of unemployed is 8,306 greater than the trough in May 2007 and 138,542 less than the peak in October 2010.

Lower unemployment rates have brought about shortages of trained workers in key sectors and occupations. The November 2015 unemployment rate of 3.6% is down from 4.3% in November 2014. In addition there are 19,567 fewer unemployed workers compared to a year ago.

The lower unemployment rates across the state are a mixed blessing. On the positive side, workers who are on the sideline will have more and better opportunities to find a job if their skills match the current openings. It is also likely that upward wage pressures my make it possible for them to be paid higher wages. On the downside there will be greater turnover at companies as people jump to “better” jobs, which may reduce productivity and drive up operational costs.

Looking ahead, 2016 stands to be a solid year if the unemployment rate will stabilize and job increases will be stronger than they were in the second half of 2015.

colorado jobs data

 

Colorado Unemployment Rate Drops to 3.6%

Earlier today the Bureau of Labor Statistics released employment and unemployment data  Colorado. It was a mixed blessing.

Unemployment

The Colorado unemployment rate for November dropped to 3.6%, down from 3.8% in October and 4.3% a year ago.

Nationally, the unemployment rate declined in 45 states compared to a year ago. By contrast only 27 states have rates lower than October. Colorado’s seasonally adjusted unemployment rate has been at or below 4.2% since December 2014 and there is little room for it to drop much further.

For job hunters this is good news as long as their skills match the available jobs. In addition, there will be upward wage pressure for occupations facing a shortage of qualified workers, such a construction, machining, and technicians.

On the other hand, the lower rate may be bad news for some companies. They may have greater difficulty finding qualified and clean workers. As a result they may have to pay higher wages for skilled positions. In addition, there is greater employee turnover during times of lower unemployment. This may decrease productivity and increase recruitment, hiring, and training costs. These increased costs will lead to lower profit margins and increased prices.

At the end of November there were 102,035 unemployed workers in Colorado. This is only 8,306 greater than the trough in May 2007 and 138,542 less than the peak in October 2010.

unemployment rate

Employment

Despite the lower unemployment rate, November wage and salary job growth was lackluster, only 43,600 greater than a year ago. During the first half of 2015 Colorado employment increased at an average monthly rate of about 5,600 jobs. That average has dropped to 3,900 jobs during the second half of the year.

Even with the declining rate of job growth Colorado will add 55,000 to 60,000 jobs this year – prior to BLS benchmark revisions that will be released in March 2016. Those revisions may push 2015 average employment to 70,000+. The leading sectors for job growth are Health Care, Accommodations and Food Services, and Construction.

As the level of job growth has tapered off there has been an increase in the number of discussions about a recession; however; the Fed’s recent decision to hike interest rates suggests the economy is on solid footing and a recession will not occur in the short-term.

Tracking the Colorado economy is like skiing. At times the skiing is good. Other times it is tenuous or too fast. Sometimes you crash or go backwards. In time you get headed in the right direction again.