COVID-19 cases per 100,000 – U.S. vs Colorado

The Opportunity Insights project is tracking the recovery of the U.S. economy from COVID-19-19. The following data is through January 12, 2021.

There were 44.4 COVID-19 cases per 100,000 in Colorado and 75.9 cases per 100,000.

The Colorado rate is trending down while the U.S. rate is trending up. The light grey lines in the background represent other states. The rate for Colorado is appears to be lower than most states.

Colorado has paid a steep price economically for having lower COVID-19 rates per 100,000. The state was ranked 48th in December for the worst unemployment rate in the nation.

States with the lowest rates (per 100,000 people) include Hawaii, 13.8, and Vermont, 25.2 States with the highest rates include Arizona, 130.0, and California, 110.0.

COVID-19 Colorado vs. U.S.

Expect Solid Job Growth in Upcoming BLS State Release

On Friday November 20th, the BLS will release the state wage and salary employment data through October. In light of the release of U.S. employment earlier this month, the state data is likely to show solid job growth in most cases. This brief overview of the national economy sets the tone for the upcoming release of the Colorado data.

The U.S. Economy
In a nutshell, some of the top reasons to feel upbeat about the U.S. economy are:
• U.S. Consumer Sentiment is up as measured by the University of Michigan Consumer Sentiment Survey.
• There was strong U.S. job growth for October – 271,000 jobs were added.
• The U.S. unemployment rate continues to decline. Theoretically, the U.S. is at or near full employment and the economy is operating efficiently.
• The ISM Non-Manufacturing Purchasing Managers Index is strong.
• Construction spending continues to be strong.
• Many companies are cash rich and they are strategically expanding through mergers and acquisitions.
• Inflation remains low.

Turbulence – Concerns That we Have Come to Grips With
There are always reasons for people to feel jittery about the economy.
• Since 2010 there have been concerns that the Greek debt crisis would unravel the EU. Those concerns reappeared earlier this year, but have subsided.
• There are worries that the slowdown in the growth rate for the Chinese economy and the impact it will have on their immediate trading partners will cause a downturn in the global economy. This is less of an issue than it was several months ago
• The summer volatility in the equity markets has subsided. The VIX has dropped from almost 41 in late August to about 17 on November 19th. Much of the lost ground has been regained. For example, the S&P 500 closed at 2,081 on November 19th, up from 1,868 in late August.
• The inaction of the Fed to raise interest rates is reminiscent of a shy high school boy who is smitten with his first girl friend. He keeps thinking, “Is now the right time for me to kiss her.” And she is thinking, “He must not like me because he won’t kiss me.” While many agree that a rate increase is long overdue, the issue is the timing of that increase – just like that first kiss. Now is the time.

Turbulence – Areas that Continue to Make us Uneasy
Terrorism and the price of oil are areas that cause everyone to toss and turn at night.
• It is unlikely we will ever get used to the “sick-in-your-stomach feeling” caused by ISIS and other terrorist groups. Their direct impact is psychological. Indirectly, consumers will be more cautious and businesses will be obligated to spend more on security.
• For over a year now, the price of oil has disrupted the economies in Tier I oil producing states. In some states such as Colorado, production has remained strong; however, it will likely drop off as there is a glut of oil and a lack of storage facilities. Problems in the industry could be exacerbated by further declines in the price for a barrel of oil caused by the glut. Some industry experts project oil could drop to $20 per barrel.

Other National Concerns
Holiday retail sales are projected to increase by 3.5% to 4.0% compared to last year and online sales will be double that amount. This is solid growth, but is an issue only in the sense that it is not stronger.

The major concern about the U.S. economy is the manufacturing sector. The ISM manufacturing index has trended downward since August 2014 and has been near 50 for the past two months. Purchasing managers are ambivalent about the level of growth in their companies. At the moment the industry appears to be on the verge of a downturn.

Concluding Thought
With this as a background, Coloradans should expect the upcoming BLS report to say that job growth will be much stronger than recent months.

Gas Prices – Lower Costs at the Pump

About a year ago, the price for a barrel of oil dropped like a rock. Consumers salivated because they knew lower gas prices were on the horizon. In the 2015 cber.co Colorado Economic Forecast it was projected that consumers would save an average of one dollar a gallon from lower prices at the pump, or a total of $780.

The following calculations were made to determine the difference in cost to purchase gasoline for the periods July to June (2013-14 and 2014-15). The annual cost assumes that a person fills a car with 15 gallons of gas per week, or 780 gallons per year.

The costs and the savings for the United States are listed below.
2013-14
• 780 gallons, average price per gallon $3.51
• Total cost = $2,774.69
2014-15
• 780 gallons, average price per gallon $2.88
• Total cost = $2,281.63
• The 2014-15 costs were $493.05 less than 2013-14.

gas prices

The costs and the savings for Colorado are listed below.
2013-14
• 780 gallons, average price per gallon $3.41
• Total cost = $2,692.02
• The costs in Colorado were $82.67 less than the U.S.
2014-15
• 780 gallons, average price per gallon $2.80
• Total cost = $2,213.51
• The costs in Colorado were $68.12 less than the U.S.
• The 2014-15 costs were $478.51 less than 2013-14.

Check back in six months to see if gas prices remained low and how much lower they were than last year.

Source: EIA.gov – All Formulations and All Grades.

Lower Gasoline Prices Have Minimal Impact

Since the second quarter of 2012, the price of gasoline has slowly declined in the U.S. and Colorado.

At this point, the impact in total gasoline prices for the year is primarily psychological even though prices have dropped below $3.00 per gallon in some locations. The difference in total prices paid for 2014 compared to last year are negligible.

The Good News – At some point lower gas prices may increase discretionary income for consumers. At the moment that is not likely because inflation has driven other costs higher, especially housing costs.

The Not So Good News – Typically, the impact of lower oil and gasoline prices on the state is negative. In other words, consumers will benefit; however, state coffers will not be as full because tax collections will be lower.
gasoline prices

 

U.S. and Colorado Unemployment Rates Continue to Decline

Nationally, the unemployment rate has dropped below 6.0%, to 5.9% and the number of unemployed is now below 9.3 million. While this decline is a positive sign, the number of unemployed remains about 2.5 million above the low point in the second half of 2006.

The BLS tracks the unemployment rate in 22 occupations. Ten of those occupations have unemployment rates below the natural rate of unemployment (5.0%).

Most likely there is upward pressure on wages in these occupations at a national level, as well as in Colorado.

Occupation Unemployment Rate
Legal occupations 2.2%
Management occupations 2.3%
Architecture and engineering occupations 2.4%
Healthcare practitioner and technical occupations 2.4%
Business and financial operations occupations 2.7%
Computer and mathematical occupations 2.8%
Life, physical, and social science occupations 2.8%
Community and social service occupations 3.3%
Education, training, and library occupations, 3.3%
Installation, maintenance, and repair occupations 3.4%
Healthcare support occupations 4.9%

Of the above occupations, the ones most critical to Colorado are:
• Architecture and engineering occupations
• Healthcare practitioner and technical occupations
• Computer and mathematical occupations
• Healthcare support occupations

Although the U.S. unemployment rate is approaching the natural rate of unemployment (5.0%), there is limited upward pressure on wages across the nation. This is reflected in the National Association of Business Economists October Survey, which indicated that in Q3 2014, 24% of the respondent firms raised their wages and salaries, about half the percentage that raised their wages in Q2. If there was a potential for upwards wage pressures earlier in the year, those pressures have eased significantly.

The Colorado unemployment rate, 4.7%, and the number of unemployed, 131,348, continues to decline.

Even though the unemployment rate is near the natural rate of unemployment there appears to be minimal upward pressure on wages, except in a few categories of occupations such as specialized high -tech jobs, computer related occupations, and healthcare. In addition, wage pressures may be felt in geographic areas, such as Weld County, where the extractive industries are booming.

In 2009 the average annual wages for all occupations in Colorado, as measure by the QCEW data, was $46,861. By 2013, average annual wages had increased to $50,873, an annualized rate of growth of 2.1%.

Unfortunately, during that same period, the Consumer Price Index for the Denver-Boulder-Greeley area increased at an annualized rate of 2.6%. In other words pay increases did not keep up with increases in the cost of living. This year inflation is projected to increase at a higher rate than the gain in total wages.

On average, Colorado employment is 65,200 greater for the first 9 months of 2014 than the same period in 2013. That total will likely be revised upwards when the BLS benchmarks the CES data series in March 2015.

Looking ahead for the remainder of the year, the tourism; construction; health care; and professional, scientific, and technical services sectors will continue to be the primary sources of growth. Although, the extractive industries are small they are the source of greater indirect job growth and significant output growth.

Holiday Retail Sales will be Strong – Grinch to Visit Elsewhere

noGrinchnoThe outlook for holiday retail sales is upbeat. It is doubtful the Grinch will be visiting Colorado this Christmas season. Most likely he will be in parts of Europe, Japan, and Mexico where the economy is not as strong.

The National Retail Federation expects holiday sales to increase by 4.1% this November and December compared to a 3.1% increase last year. Over the past 10 years, average holiday growth has been about 2.9%. In other words, lower unemployment rates and an improved economy means retail trade sales this holiday season will be above average.

Sales in November and December (excluding autos, gasoline, and restaurant sales) represent about 19.2% of the annual total. Nationally, up to 800,000 workers will be hired on a seasonal basis for November and December.  Online sales will increase by 8% to 11%.

The optimistic expectations for national retail sales bode well for Colorado. The Colorado Legislative Council and the Office of State Planning and Budgeting expect Colorado’s 2014 annual retail sales to be 6.0% greater than last year. Given the strength of the state economy, holiday sales should easily exceed the national projected growth rate of 4.1% and may exceed the 6.0% projection for the year.

Colorado average retail trade employment in November and December is about 10,000 workers greater than the average for the other 10 months of the year. A similar increase in retail employment should be expected in 2014.

Over the past decade consumers have become accustomed to deep discounting during the holiday season. Despite an outlook for a brisk holiday season, there will likely be a sufficient number of markdowns and bargain basement deals. As the t-shirts on consumers in the local mall say, “Stay Calm and Shop On” or is it “Stay Calm and Shop Online.”

Happy shopping!