If the Economy is Doing so Well, Why Doesn’t it Feel More Robust?

The Great Recession has been over for five years, but in many ways the economy still feels like we are still in the recovery stages.

In 2001 the business cycle was coming to an end when 9/11 exacerbated the situation. Workers in most sectors were touched by the recession. Fortunately, we could blame the downturn on the terrorists.

The country rallied, and with fiscal policies such as zero percent financing we recovered – some would say it was a false recovery because we stole sales from the future. By 2007 we were confident that all would be well, but that didn’t turn out to be the case.

In both recessions many families were hit hard, regardless of race, job title, or income level. In some cases one or both spouses lost their job, establishments went out of business, people had their houses foreclosed on, and there was no place to hide. Both recessions touched nearly everyone and the fact they were back-to-back doubled the pain.

In 2007 most economists did not see the 2007 recession coming and when they realized something was wrong, they failed to acknowledge that it was for real. In fact some of the state’s leading economists were in denial. (It is almost funny to re-read newspaper articles and emails from that era talking about the economy.)

In retrospect there were some small signs pointing to the 2007 recession, such as declines in financial employment. These signs weren’t sufficient to make anyone believe a major downturn was impending. For the most part, the public did not have access to the data and information that caused the problem. Many of those who had access to the information may not have understood the ramifications of what was actually happening. In some cases those who had access to the information conveniently ignored it. As business leaders and the public learned about the cause of the recession some felt betrayed by what happened. They had a right to be upset because the 2007 recession was not part of a normal business cycle. It was self-inflicted.

Psychologically the “back-to-back” recessions changed the structure of the way companies do business. Companies had to find ways to be successful with fewer employees. As a result they became more efficient and hired fewer workers during the recovery.

It was difficult for some of the laid off workers to come to terms with the realization they wouldn’t have a job waiting for them when things got better. It was tough for older workers to be ungraciously kicked off the payrolls. At the same time, several graduating classes of college students, with hefty student loans, were passed over because there were no jobs for them.

Many of the workers who held onto their jobs felt both blessed and cursed. They were fortunate to have a job, yet at times they were taken advantage of (minimal or no pay increases, reduced benefits, longer hours, more responsibilities). Work became a necessary burden for many.

As a result of the “back-to-back” recessions consumers changed spending patterns, particularly in retail. Many people have been more discrete with their spending, they may not spent as much they once spent, and they tend to wait for items to be on sale before they purchase them. Adults with family members who had experienced the Great Depression may have benefitted from their experiences. As the Rolling Stones said, “You can’t always get what you want, but if you try sometime you find you get what you need.”

Economists are partially to blame for the feeling the economy does not feel more robust. They continually refer back to the recession in their charts and their discussions. By continuing to refer to the recession, economists are continually reminding people how bad the economy was just a few years ago. It is difficult to feel the economy is robust when you are always looking over your shoulder.

Employment Numbers Drive DJIA up by 217 Points

On August 3rd the Bureau of Labor Statistics reported that the U.S. added 163,000 jobs for the month of July. Employment for May was revised upwards for the second consecutive month to 87,000; however, June was lowered from 80,000 to 64,000. The news drove the Dow Jones Industrial Average up by 217 points.

Through the first seven months of this year, the nation added about 151,000 jobs a month. This compares to a monthly average of 153,000 jobs for the first seven months of 2011. Since the end of the recession the U.S. has added net jobs in 25 months and lost net jobs in 12 months. Employment growth is consistently weak, but since October 2010 it has been consistently positive. About 3.1 million jobs have been added since the end of the recession.

About one-third of the monthly sector employment gains were in the Professional and Business Services, lead by the Temporary Help Services and Computer Systems Design sectors. Jobs were also added in health care, leisure and hospitality, manufacturing, and wholesale trade. Other major sectors were relatively flat.

On an upbeat note, the Conference Board is projecting stronger growth in the second half of 2012. Annual real output growth for the year will be about 1.9%.

Likewise, the USA TODAY/IHS Global Insight Economic Outlook Index calls for Real GDP growth to reach 2% in the latter part of the second half of the year. This index tracks 11 leading and financial indicators. The following four indicators increased – hours worked, real capital goods orders, the real money supply and light-vehicle sales.

On average, Colorado nonfarm employment is about 1.72% of the U.S. total. If Colorado grows at the same pace as the U.S. the upcoming August press release will reflect a gain of about 2,900 jobs.

©Copyright 2011 by CBER.

Construction Finally on the Uptick

Construction was hit harder than most employment sectors during the Great Recession. For a number of years Colorado has had an oversupply of construction workers, relative to other industries. That has significantly lengthened the time of recovery.

Nationally, seasonally adjusted employment peaked in April 2006 at 7,726,000 workers. The number of workers declined with the Great Recession and appears to have bottomed out in January 2011 at 5,456,000. A total of 2,270,000 workers lost their jobs over that 57 month period. Since bottoming out, only 95,000 construction jobs have been added in 14 months.

There was a similar pattern for Colorado, but not as severe. Construction employment peaked in July 2007 at 170,100. It declined with the recession and appears to have bottomed out at 110,400. A total of 59,700 construction jobs were lost over this 47 month period. Since reaching bottom, 6,500 construction jobs have been added in nine months.

To put this in perspective, national tourism employment moved from peak-to-trough-to-peak in 50 months, while it took Colorado tourism employment 44 months to make the same journey. It has taken the Construction sector longer to go from peak-to-trough than it took the tourism industry to lose jobs and regain them.

On April 24, 2012 Aldo Svaldi of the Denver Post reported that the number of homebuilders in the state declined by 80%, a decrease of 2,903 to 616 builders.

Holy Moly Batman!

For additional information on the overall economy go to the cber.co website.

For additional information on the construction industry check out the cber.co report,Colorado’s Construction Industry – Impact Beyond the Hammers and Nails .

 

©Copyright 2011 by CBER.

Colorado’s Recovery is Broad Based and Includes Primary Jobs

Within the past month, there have been several reports citing how Colorado has one of the faster growing economies in the country. This is good news, but it must be remembered that for several years local economists were saying, “Thank God for Nevada, if it weren’t for them Colorado would have the worst economy in the country.” Part of the reason for the comparatively “strong growth” is about 150,000 jobs were lost in the Great Recession and our current tepid growth looks great compared to job losses.

Case in point…  Job losses in Colorado’s Construction sector have been so severe that employment is at mid-1990s levels. The Manufacturing sector declined for 12 years. It is just now beginning to add jobs again. Despite the build out in the Retail Trade sector, employment has been volatile over the past decade. Today it is similar to the late 1990s and retail Trade jobs are up 4,600.

With increased population in the state growth is inevitable in these sectors.

The real story is that the Colorado recovery is broad-based and it is includes primary jobs (jobs that create wealth).

The recovery has been led by the Tourism and Health Care sectors. They are sectors that add jobs in all areas of the state. There are very few primary jobs in either sector. They account for 19,000 of the 47,300 jobs added when comparing Q1 2012 to Q1 2011.

The Manufacturing and Professional Scientific sectors have added a combined total of 7,700 jobs. Many of these are primary jobs.

Colorado has added 3,900 jobs in the Employment Services sector – The addition of temporary jobs is considered a harbinger that the economy is improving.

Only two sectors recorded significant job losses during this period. Combined, the Information and Local Government, excluding schools, sectors declined by 5,700 jobs.

For additional information go to https://cber.co.

©Copyright 2011 by CBER.