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Will Colorado Output Continue to Expand as Slower Rate than U.S.?

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Between 1997 and 2012, the Private Sector Real GDP and job growth for Colorado outpaced the nation.  For this period, data released by the Bureau of Economic Analysis and the Bureau of Labor Statistics shows:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and private sector wage and salary employment expanded at a rate of 0.5%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1% and private sector nonfarm jobs grew at a rate of 0.9%.

More recently, the data tells a different story.  Colorado did not fare as well as the nation between 2009 and 2012.  While the rate of job growth was similar, U.S. output expanded at a faster rate.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and private sector wage and salary employment expanded at a rate of 1.1%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2% and private sector nonfarm jobs grew at a rate of 1.1%.

Time will tell whether the Colorado output will continue to grow at a slower rate than the U.S. or if this is a short-term variance that will reverse itself in 2013 or 2014.

Private Sector Real GDP
©Copyright 2011 by CBER.

State Per Capita Real GDP Increased by 1.1% Since 1997

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There are many data sets that can be used to evaluate the performance of the state and national economy. One of those metrics is Per Capita Real GDP. This measure is derived by dividing real output by the population.

For the period 1997 to 2012, Per Capita Real GDP for Colorado and the U.S. grew at essentially the same rate, 1.11% and 1.13% respectively.

Within that period there were some differences:

  •  Between 1997 and 2001 the Per Capita Real GDP for Colorado increased at an annualized rate of  3.88% compared to 2.49% for the U.S.
  •  Between 2001 and 2012 the Per Capita Real GDP for Colorado increased at an annualized rate of  0.13% compared to 0.64% for the U.S.
  • Between 2009 and 2012 the Per Capita Real GDP for Colorado grew at an annualized rate of 0.58% compared to 1.39% for the U.S.

During the final years of the go-go 90s, Per Capita Real GDP for the state increased at a faster rate than the nation.  Since the 2001 recession, the nation has outpaced the state.

©Copyright 2011 by CBER.

Tepid Job Growth Continues

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When the Bureau of Labor Statistics announced (June 7th) that 175,000 jobs were added in May the stock market rose by 200+ points.  While the number of jobs added in May exceeded expectations, a significant downward revision in April offset those gains.

Said differently, the number of jobs added in May was comparable to the monthly average for 2011.  It is difficult to explain how that level of job growth could drive the market up.

The good news is that jobs are being added at a steady, albeit tepid pace.

On average, the U.S. has added 189,200 jobs per month in 2013. This compares to +185,000 workers in 2012 and +175,000 workers in 2011.  In other words, job growth continues to be lackluster, but well above the average for 2010 (+85,000) and 2009 (-421,000).

At this rate, U.S. employment will return to the 2008 peak some time in 2014.

©Copyright 2011 by CBER.

Large Establishments Have Added More Workers than Small Establishments Since End of Recession

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The latest ADP data shows that large companies (500+ workers) have added more private sector jobs than small companies (fewer than 20 workers) since the end of the recession.  More specifically,

  • Employment at establishments with fewer than 20 workers is 25.9% of total private sector employment. These establishments have accounted for 18.7% of total jobs added, or 1.0 million jobs.
  • Employment at establishments with 20 to 499 workers is 51.6% of total employment. These establishments have accounted for 53.6% of total jobs added, or 3.0 million jobs.
  • Employment at establishments with 500+ workers is 22.5% of total employment. These establishments have accounted for 27.7% of total jobs added, or 1.5 million jobs.

Since the end of the recession, 5.5 million private sector jobs have been added.

Since the series began in 2005, the small companies have added more workers than the large companies. More specifically,

  • Employment at establishments with fewer than 20 workers has increased by 1.9 million workers.
  • Employment at establishments with 20 to 499 workers has increased by 1.8 million.
  • Employment at establishments with 500+ workers has decreased by 1.1 million.

Private sectors jobs have increased by 2.6 million since the beginning of 2005.

Over the past 8 years, the small, medium, and large establishments have contributed to the economy in different ways.

©Copyright 2011 by CBER.

Colorado’s Smaller Firms Pay Lower Wages

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As discussed in the blog post Most Colorado Firms have Fewer than Twenty Workers, BLS data shows that Colorado has about 171,000 private sector firms.  Only 238 of those firms, or 0.1%, have 500 or more workers.  There are just under 19,000 firms, or 11.0%, with 20 to 499 workers. The majority of firms have fewer than 20 workers. Almost 152,000 firms, or 89%, are in this category.

In Q3 2012, Colorado’s private sector firms paid about $23.1 billion in payroll. About $13.0 billion, or 56.4%, is paid to workers at firms with 20 to 299 employees.  About $6.2 billion, or 26.8%, is paid to companies with fewer than 20 workers. Finally, total wages at the firms with 500 or more workers is 3.9 billion, or 16.8% of total wages.

In other words, about 17% of total wages are paid at 0.1% of the state’s firms (the largest). Meanwhile, about 27% of the state’s wages are paid at 89% of the firms.  Higher wages are paid at firms with more employees.

Average annual wages for firms with less than 20 workers is $43,304, firms with 20 to 499 workers have average annual wages of $47,423 and firms with 500 or more workers have average annual wages of $65,048.

Clearly, large and small firms are important to the economy for different reasons.

©Copyright 2011 by CBER.

Lack of Primary Job Creation May Slow Future Employment Growth

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The Bureau of Labor Statistics recently released data showing that, on average, Colorado added almost 62,000 jobs for the first four months of the year compared to the same period last year.

As has been the case in the past, the tourism and healthcare industries led the continued expansion.  The top five sectors for growth were:

  • Accommodations and Food Services
  • Healthcare
  • B-to-B (excluding Employment Services)
  • Retail
  • Construction

About 64% of the jobs added can be attributed to these sectors.

While it is good news that jobs are being added in most sectors, the expansion may be slowed by the lack of primary/high-tech jobs – jobs that create other jobs or bring in investment from the outside. The following sectors serve as a proxy for “primary job creation.”

  • Professional, Scientific, and Technical
  • Corporate Headquarters (MCE)
  • Manufacturing
  • Information

So far this year, these sectors are responsible for adding about 10% of the jobs.

All jobs are important and interrelated, but not all jobs are equal in terms of their ability to create other jobs.

A review of the Colorado economy after four months can be found by clicking here.

©Copyright 2011 by CBER.

Most Colorado Firms have Fewer than Twenty Workers

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2012 Q3 data from the Bureau of Labor Statistics shows that Colorado has about 171,000 private sector firms.  Only 238 of those firms, or 0.1%, have 500 or more workers.  There are just under 19,000 firms, or 11.0%, with 20 to 499 workers. The majority of firms have fewer than 20 workers. Almost 152,000 firms, or 89%, are in this category.

About 1.9 million workers are employed at these private sector firms. About 238,000 workers, or 12.5%, are employed at these firms. Almost 1.1 million workers, or about 58%, are employed at firms with 20 to 499 workers. Finally, the firms with fewer than 20 workers employ about 572,000.

While the bulk of Colorado’s firms are small (<20), the majority of workers are employed at firms with 20 to 299 workers.

Note:  A similar comparison for the number of firms and total wages can be found by clicking here.

©Copyright 2011 by CBER.

Colorado Manufacturing Wages Higher than State Average

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Manufacturing is a source of primary jobs, or jobs that create other jobs, for about 130,000 Coloradans. As well, some manufacturing jobs pay higher than average wages.

In 2011, the year that data is most currently available, the average annual wages per three-digit NAICS manufacturing sector was $61,668 (Colorado). By contrast, the average for the state was $49,245.

Of the 21 sectors, 5 have average annual wages above the Manufacturing average:

  • NAICS 324 (nondurable goods) Petroleum $106,413.
  • NAICS 334 (durable goods) Computers $94,452
  • NAICS 336 (durable goods) Transportation equipment $91,340
  • NAICS 325 (nondurable goods) Chemicals $75,217
  • NAICS 312 (nondurable goods) Beverage $62,099

The following two sectors have wages similar to the Manufacturing average:

  • NAICS 333 (durable goods) Machinery  $61,252
  • NAICS 335 (durable goods) Electrical equipment  $61,257

Of the 21 sectors, 14 have average annual wages below the sector average.

Overall, Colorado average manufacturing wages are higher than the state average.

For additional information on the state’s manufacturing sector check out Colorado Manufacturing Update Analysis of Employment Data Through 2012. It is available in the Special Reports section at https://cber.co.

©Copyright 2011 by CBER.

Recovery from Recession Led by Large Companies

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Large and small companies have had different employment patterns over the past 7-8 years.

According to employment data produced by ADP, about 17.6% of total private sector workers were employed at small companies, those with 1 to 19 workers, in January 2005. Companies with 500+ workers accounted for 17.1% of private sector employment.

Between 2005 and April 2013 the small companies expanded at a faster rate. The most recent ADP data shows the smaller companies currently account for 18.3% of private sector workers and the larger companies account for 15.9%.

The small companies had the least number of workers in January 2005. Jobs were added until July 2008, when they peaked. Employment tapered off slowly until December 2010. The number of jobs has been on the rise since.

Employment at larger companies increased slowly from January 2005 until March 2006. At that time employment began to taper off and declined for six years. Steady increases have occurred since March 2010.

The Great Recession officially ended in June 2009. Since then the small companies have added about 1.03 million workers and the large companies have added about 1.58 million.  In other words, large companies have played a greater role in the recovery than the small companies.

©Copyright 2011 by CBER.

Colorado’s Dwindling Concentration of Manufacturers a Concern for the State

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Manufacturing is a critical part of Colorado’s economy.  Between 1998 and 2010 manufacturing employment decreased significantly in the state and the nation. Despite a slight rebound in jobs, Colorado’s concentration, or location quotient (LQ), of manufacturing workers has not bounced back.

A LQ is the local concentration of workers in a particular sector relative to the concentration in another area (typically the other area is the United States). If the local concentration is the same as the national concentration, the LQ=1.

The Colorado LQ for manufacturing is .645.

In December 2012:

  • 5.72% of Colorado employment was manufacturing
  • 8.87% of U.S. employment was manufacturing.
  • 5.72% / 8.87% = .645

Colorado has a lower concentration of manufacturing that the U.S. In short, this is important because many manufacturing jobs have higher than average pay. As well, segments of the manufacturing industry are critical components of the state’s high tech cluster.

For additional information on the state’s manufacturing sector check out Colorado Manufacturing Update Analysis of Employment Data Through 2012. It is available in the Special Reports section at https://cber.co.

©Copyright 2011 by CBER.