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Economic Impact of Colorado Mining Employment is Significant

In October, the Bureau of Labor Statistics reported the Colorado Mining Sector employed about 35,000 workers, or about 1.4% of the state’s 2,534,600 wage and salary employees.

In 2014 the GDP for the Colorado Mining Sector was $19 billion, or 6.2% of the 2014 Colorado GDP. More importantly, the Mining Sector accounted for about 18.2% of the growth in the state’s GDP.

In a nutshell, mining employment is a small portion of total employment in Colorado. On the other hand, the industry makes a major contribution to the GDP.

The Oil and Gas Industry accounts for about 75% of the employment and GDP total.

With that as a background, it is easy to see why state leaders were concerned when the price for a barrel of oil plummeted to below $40 per barrel in a matter of months.

To make matters worse, the Bureau of Labor Statistics may have overstated employment in the Oil and Gas industry by as much as 4,000 workers. In other words, the data for the state does not appear to have measured the direct, indirect, and induced impact of lower employment caused by lower prices for a barrel of oil.

A quick analysis using IMPLAN shows the loss of 3,200 oil and gas workers and 800 support workers would result in a loss of $4.2 billion in economic activity and a total loss of 12,486 jobs. The direct average annual wages for the oil and gas industry are $96,425 and the direct average annual output per worker is $701,480.

The Bureau of Labor Statistics will update wage and salary data for 2015 in its benchmark revisions next March. At that point we will have a better look at the magnitude of the layoffs in the Mining Sector in 2015.

While we are anxiously awaiting the update, the reduction in mining employment is not a number we really want to see – it will be ugly!

mining impact

U.S. Employment Shows Strong Gain in October

On November 6th, the Bureau of Labor Statistics released its monthly update for U.S. nonfarm payroll employment. The number of seasonally adjusted jobs increased by 271,000 in October. Over the previous 12 months, employment has increased by an average of 230,000 workers per month. That equates to 2.8 million per year.

The unemployment rate was down from 5.7% to 5.0% a year ago and 5.1% in the previous month. The number of unemployed persons was down from million a year ago to 7.9 million in October.

The areas with the largest increases were professional and business services (PBS), health care, retail trade, food services and drinking places, and construction.
• Employment in the PBS Sector increased by 78,000 in October, compared with an average gain of 52,000 per month over the prior 12 months.
• Health care employment increased by 45,000 jobs in October. Over the past year, health care has added about 41,200 jobs per month, or slightly less than a half million jobs for the year. About 27,000 jobs were added in ambulatory health care services and 18,000 in hospitals.
• The number of retail trade jobs increased by 44,000 in October. This is well above the average monthly gain of 25,000 jobs for the past 12 months. In October about 20,000 were added in clothing and accessories stores, 11,000 were added in general merchandise stores and 6,000 were added in automobile dealerships.
• About 42,000 workers were added in food services and drinking places in October. For the past year the monthly average has been about 31,000.
• Finally, construction employment rose by 31,000 in October. This is slightly higher than previous months. About two-thirds of the October growth was in nonresidential specialty trade contractors.

On the down side, mining employment fell by 5000 workers. The sector peaked in December 2014 and has since shed 109,000 jobs.

Employment in other major industries was similar to the prior month.
It was encouraging to see this level of job gains. Next month, we will learn whether the level of October employment was a “one hit wonder” or a reversal of the downward trend that has been taking place since the second quarter.

Rocky Mountain National Park Will Top 4 Million Visitors in 2015

For many years Rocky Mountain National Park has been one of the state’s top tourist attractions. This year it is on track to surpass four million visitors.  Lower gas prices have played a role in increasing the number of visitations at Rocky Mountain as well as other western national parks.

In addition, the higher number of visitors is a result of the celebration of the park’s 100th birthday and the publicity surrounding that landmark. Throughout the year there have been numerous events celebrating the event that culminated with a re-dedication of the park on September 4th. National Park officials have indicated that visitations are frequently 10% to 15% higher during their centennial years.

The park opened in 1915 and 31,000 people visited the park. By 1948, the number of visitations topped 1 million for the first time (1,023,262). More recently the number of visitors has shown steady growth:
• 2010   2,955,821
• 2011   3,176,941
• 2012   3,229,617
• 2013   2,991,141
• 2014   3,443,501
• 2015   4,100,000 estimated.

Note: the decline in 2013 is a result of a federal government shutdown and severe flooding.

Here are some fascinating facts about Rocky Mountain National Park from the park’s website:
•Rocky Mountain National Park was established in 1915.
•The Continental Divide (a demarcation of the flow of water between the Pacific Ocean and Atlantic Ocean) runs through the park.
•Grand Lake Cemetery (which was founded in 1892) is the only active community cemetery operating inside a national park.
•Elevations inside Rocky Mountain National Park range from 8,000 feet in the valleys to 14,259 feet at the top of Longs Peak (the highest point in the park).

In Rocky Mountain National Park, there are:
•35 trailheads, with 359 miles of established trails
•585 drive-in campsites (situated in 5 campgrounds) and 200 backcountry campsites
•60 types of mammals (including moose, elk, bighorn sheep, black bears, coyotes, and mule deer)
•280 species of birds
•900 different plants
•150 lakes
•476 miles of streams and creeks, including, most notably, the headwaters of the Colorado River
•260 miles of horse trails
•5 visitor centers.

Whether it is the year ’round spectacular views, the spring-time flowers, or the bugling elk in October – its worth the trip.Rocky Mountain National Park

Colorado’s October Job Growth Reverses Downward Trend

Recent data from the Bureau of Labor Statistics shows that 2015 wage and salary job growth continues to be positive, but it is increasing at a decreasing rate. Through the first nine months Colorado employment is 61,000 jobs greater than the same period last year.

During Q1 job growth was 75,000 greater than the same period a year ago. It dropped significantly during Q2 – 60,100 greater than Q2 2014. Q3 2015 job growth was only 47,700 greater than Q3 2014.

After declining for six months (March through August), employment increased from 42,100 in August to 42,400 in September.

About 76.2% of total jobs added were in the top five sectors:
Health Care 13,800
Accommodations and Food Services 12,300
Construction 11,500
Professional and Scientific 5,200
Manufacturing 3,600

Approximately 23.8% of all jobs added were in Leisure and Hospitality (AFS + AER). This sector touches all Colorado counties.

About 10.8% of total jobs added were in the PST, Manufacturing, and Information Sectors. These sectors are the source of primary and advanced technology jobs.

Colorado is projected to add 73,000 to 79,000 jobs in 2015, a gain of 3.0% to 3.2%. As mentioned earlier Colorado is on track to add 61,000 jobs this year.

CDLE/LMI has projected that a significant upward adjustment will be made to the Q4 2014 data and data for the first four months of 2015. These revisions will be made in March 2016. Total employment for 2015 should be at the lower end of the range of 73,000 to 79,000. This is the level of job growth forecasted by cber.co for 2015.

The good news is the downward trend in the number of jobs added may have been reversed in October. We will learn more next month and in March 2016 when the 2015 data is revised.

Wage and Salary Job Growth

 

Colorado Job Growth On Solid Footing

This post touches on a few of the national and state trends that will affect Colorado job growth through the remainder of the year. They are made In anticipation of the September release of employment data from the BLS

National Trends That Affect Colorado

Nationally, there are several trends that are relevant to Colorado:
• Jobs are being added at a slower rate than in the past, yet the U.S. is on track to add about 3 million jobs this year. This will be the fifth consecutive year for accelerated job growth.
• The slower rate of job growth is occurring for two reasons. First, the slowdown in the Chinese economy has caused a pullback in other economic growth in other countries. Second, U.S. job growth has reached a point where the past level of job growth cannot be sustained. A slowdown in this case does not suggest the country is headed for a downturn.
• Real GDP growth for 2015 will remain in the neighborhood of 2.5%.
• The service sector will continue to post solid growth through the end of the year, while manufacturing remains sluggish.
• Holiday sales will be so-so. Industry experts expect an increase of 3.5% to 4.0% compared to last year. Stronger labor markets and lower gas prices should point to stronger sales; however, the savings rate is around 4.6%. At this point consumers appear to be cautious.
• It is likely the strong level of mergers and acquisitions will continue. Companies have money and they appear to be ready to spend it when the time is right. This has impacted several companies in Colorado.

Colorado’s Economic Trends

There is conflicting employment data. The Bureau of Labor Statistics shows that Colorado employment has trended downward beginning in Q2, with a significant decline in the rate of growth in August. There are also indications the number of jobs added for the first half of the year will be revised upward with the benchmark revisions.

Either way it is likely the rate of Colorado job growth is declining, in line with the national trends. The state will feel the effects of a slower global economy. As well, Colorado has reached a level of job growth that is unsustainable.

The bottom line is that Colorado will continue to have a higher rate of job growth than the U.S. for the remainder of the year and into next year.

U.S. Posts Weak Job Growth in September

On October 2nd the Bureau of Labor Statistics released its monthly update for U.S. nonfarm payroll employment. The number of seasonally adjusted jobs increased by a meager 142,000 workers in September.

Despite the weak job growth in September, the unemployment rate was unchanged at 5.1% and is likely to continue on a downward trend for the remainder of the year.

For the month of September job growth occurred in five major areas.

• Health care added 34,000 jobs in September. This is slightly below the average increase of 38,000 jobs per month over the prior 12 months. About 16,000 jobs were added in hospitals and another 13,000 in ambulatory health care services.

• Employment in information rose by 12,000 in September. The sector has about 44,000 more workers than a year ago.

• During September professional and business services added 31,000 jobs. This is well below the average of 45,000 per month so far this year. By comparison, the sector increased by an average of 59,000 in 2014. Notable job gains occurred in computer systems design and legal services. Because many companies in this sector are a part of the country’s advanced technology cluster, there are concerns that growth is not stronger.

• Retail trade employment rose by 24,000 in September. This is slightly less than the average monthly gain of 27,000 jobs over the past 12 months. Notable gains were in general merchandise stores and automobile dealers.

• Employment in food services and drinking places added 21,000 workers in September, well below the monthly average of 29,100 workers.

Once again, mining employment dropped sharply, this time a decrease of 10,000 workers. Most of the lost jobs were in support activities. Lower prices for a barrel of oil is taking a toll on the industry.

Employment in other major industries was similar to previous months.

Two things are unsettling about the employment report for September:
•The level of job growth is weak.
• The quality of jobs are weak. While it is great that people are finding work, many of the jobs have lower than average wages.

Time will tell whether the economy has headed south or if it has hit a bump in the road.

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

In the previous blog post, the topic of the economic recovery was discussed. Although it has been a solid recovery, why doesn’t it feel more robust?

The 2007 recovery was atypical in that it occurred over a period of years, as opposed to months. As a result Colorado posted accelerating job growth for four consecutive years. Essentially, the recovery from the recession was weak and gradual. At no point has the state reached a point where public and private leaders could really say, “We have arrived.”

At the national level, the U.S. will add 3.0 million jobs in 2015. Yet, the focus is on the slowdown of the global economy, not the fact that 2015 will be the fifth consecutive year of solid job growth.

Nationally, GDP growth has been subpar. It is hard to get excited when the rate of Real GDP growth is 2.0% to 2.5%. Consumer spending has increased at a similar anemic rate. In other words consumers have remained cautious, as if they are always looking over their shoulder.

The construction industry is “booming” and there is a shortage of trained workers. At the same time, the growth of the industry pales when compared to the 2000s. The good news is that housing has been built on an “as needed basis” and the chance of being overbuilt is slim.

During the recovery period, the state has suffered natural tragedies. There were multiple severe forest fires in several parts of the state, as well as flooding and drought. That was taxing on the state – fiscally and psychologically. Fortunately, Coloradans have remained resilient.

Lower oil prices have dampened growth in parts of the state that had previously experienced strong growth. It is easy to forget the risk associated with the extractive industries until the price of the commodities (oil, molybdenum, coal) drops precipitously or regulations are established that eliminate demand for these commodities.

Then there is the state government… The legislature has focused on social issues for the past couple of sessions – and that is not bad. Some feel insufficient time and resources were spent addressing issues that could improve the state’s ability to conduct business.

At one point, there was sufficient discourse to cause several counties to threaten secession from the state. At times, state government seemed dysfunctional over the past five years.

State government faces a new problem – the state economy is on solid footing and the state will generate record levels of revenue, yet the legislature will be forced to make cuts to key service areas. This conundrum is caused by the combination of Amendment 23, the Gallagher Amendment, TABOR, the initiative process, and Medicare obligations. It is difficult for legislators to govern the state in a way they feel is appropriate.

Despite the challenges and angst created by the items mentioned above, the growth of Colorado’s economy has exceeded the growth of the U.S. economy in many key areas (rate of job growth, rate of population growth, growth of Gross Domestic Product).

Unfortunately, the picture hasn’t always been rosy for the past five years, despite the many great things that have happened.

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.

Bureau of Labor Statistics Data May Not Correctly Tell the Story

It is questionable whether the wage and salary data produced by the Bureau of Labor Statistics reflects what is happening on the streets of Colorado. With that in mind, the following paragraphs tell the story of the Colorado economy based on the headlines.

The Headlines

Comments made by Mark Snead

The former director of the Denver Branch of the Kansas City Fed has said that the Tier I energy states are on the verge of recession. To date, the economies in Tier II states have been much stronger and job gains in other industries have more than offset job losses in the energy sector.

On a different note, Snead posted in a blog post saying that” the current expansion is getting to be a bit long in the tooth.” It is 74 months and running.

Government

Governments are optimistic given the following actions:
• Boulder has approved their 2016 budget which includes the addition of 48 employees.
• Governor Hickenlooper has promised $100 million to make Colorado the “best state for biking.”
• The U.S. Treasury CDFI fund has given a $2 million grant to The Colorado Enterprise Fund to support local small businesses.
• The state approved $12.8 million in tax credits for two companies that might result in 1,600 jobs. These companies are in the health care and energy solutions industries.
• Loveland city council will discuss a proposal to provide high-tech manufacturing consulting and training organization EWI with $2 million in funding to open a facility at the Rocky Mountain Center for Innovation and Technology.
• In an uncharacteristic move, the state rejected a proposal for tax credits for a Colorado company that would increase health care employment by 1,418 jobs. The justification was the state did not have the workers to fill the jobs and would have to import them.

Aerospace
Aerospace is one of Colorado’s targeted high tech industries, yet it is in a state of flux with increased involvement from the private sector. The impact of some of the changes remains to be seen.
• Lockheed Martin could lay off 500 IT workers (nationally).
• Aeroject Rocketdyne made an unsolicited bid of $2 billion for United Launch Alliance.
• Jeff Bezos announces Cape Canaveral as the base for his commercial aerospace program.

Retail
The budgets for many cities rely heavily on taxes generated from retail trade sales. Nationally some retail chains are struggling. At the moment that appears to be an issue with the companies, not the industry.
• Best Buy in Broomfield has announced it is closing on October 31.
• A January restructuring caused Macy’s to shutter 14 stores and it recently announced it will close an additional 35 to 40 stores in early 2016. The company runs 770 Macy’s stores and has closed 52 locations over the last five years while opening 12. It is not known if Colorado stores will be closed.

Technology
Colorado has always prided itself for its technology clusters.
• Hewlett-Packard has announced worldwide cuts of 25,000 to 30,000. There is uncertainty whether this will negatively impact Colorado or benefit it if consolidation brings workers to the state.
• Level 3 has announced a round of layoffs associated with the company’s merger with TW Telecomm that took place last fall. The location and number of these workers has not been announced.
• Seagate will layoff 70 workers in Longmont
• Astra Zeneca bought the Boulder Amgen facility and may add 400 jobs.

Construction
Some construction leaders are clamoring that the growth of the industry and the economy may not reach its potential in part because of the lack of trained workers. The lack of a trained workforce has occurred despite solid growth in wages. At the same time, non-seasonally adjusted construction spending is at its highest level since May 2008.

Energy
Synergy Resources paid $78 million to K.P. Kaufman for assets in the Wattenberg Field. After record oil production in May, June production dropped off slightly.

Time will tell whether the Bureau of Labor Statistics or the headlines are correct.

Colorado has Diverse Cost of Living

How does the cost of living in your area compare to Broomfield County or Yuma County? The Colorado Legislative Council collects Cost of Living data for Colorado’s 64 counties and has done so every two years since 1993 for the Public School Finance Act of 1994 for the School District Funding Formula.

The current data is from 2013. It assumes a three person household, 1,500 square foot home, with household income of $49,100.Annual expenditures are broken down as follows:
• Housing 33.8%
• Transportation 19.3%
• Food 13.6%
• Health Care 7.3%
• Entertainment 4.5%
• Apparel 3.3%
• Other Categories 18.2%

The counties are indexed off the state HHI, $49,100. Twenty-one counties are above the state value and 43 are below it.

As expected the counties in the state’s “Very High” category are the ones where the state’s prime ski areas are located.

Rank County HHI Index Index Category
1 Pitkin $84,810 172.7 Very High
2 Summit $59,836 121.9 Very High
3 San Miguel $54,717 111.4 Very High
4 Routt $54,311 110.6 Very High

Four counties are in the “High” category. Boulder County is in the “High” category. It is the Boulder MSA

Rank County HHI Index Index Category
5 Eagle $53,931 109.8 High
6 Denver $53,796 109.6 High
7 Grand $52,067 106.0 High
8 Boulder $52,041 106.0 High

Twenty-two counties are in the “Mid-Range” category. Larimer County is in the “Mid-Range” category. It is the Fort Collins MSA. Note that Park County, #21, is only a few dollars above the state average.

Rank County HHI Index Index Category
9 Hinsdale $50,800 103.5 Mid-Range
10 Gilpin $50,677 103.2 Mid-Range
11 La Plata $50,670 103.2 Mid-Range
12 Broomfield $50,651 103.2 Mid-Range
13 Gunnison $50,298 102.4 Mid-Range
14 Jefferson $50,108 102.1 Mid-Range
15 Clear Creek $49,949 101.7 Mid-Range
16 Garfield $49,777 101.4 Mid-Range
17 Lake $49,745 101.3 Mid-Range
18 Douglas $49,722 101.3 Mid-Range
19 Ouray $49,502 100.8 Mid-Range
20 San Juan $49,197 100.2 Mid-Range
21 Park $49,115 100.0 Mid-Range
22 Arapahoe $48,570 98.9 Mid-Range
23 El Paso $48,427 98.6 Mid-Range
24 Larimer $48,319 98.4 Mid-Range
25 Mineral $48,222 98.2 Mid-Range
26 Moffat $47,874 97.5 Mid-Range
27 Elbert $47,706 97.2 Mid-Range
28 Teller $47,489 96.7 Mid-Range
29 Adams $47,477 96.7 Mid-Range
30 Chaffee $47,320 96.4 Mid-Range

Sixteen counties are in the “Low” category. Weld, Mesa, and Pueblo Counties represent three of the states MSAs.

Rank County HHI Index Index Category
31 Morgan $46,604 94.9 Low
32 Delta $46,514 94.7 Low
33 Weld $46,419 94.5 Low
34 Custer $46,234 94.2 Low
35 Mesa $45,986 93.7 Low
36 Rio Blanco $45,932 93.5 Low
37 Pueblo $45,707 93.1 Low
38 Montrose $45,605 92.9 Low
39 Logan $45,519 92.7 Low
40 Rio Grande $45,301 92.3 Low
41 Alamosa $45,295 92.3 Low
42 Fremont $45,274 92.2 Low
43 Montezuma $45,206 92.1 Low
44 Jackson $44,834 91.3 Low
45 Archuleta $44,665 91.0 Low
46 Kit Carson $44,563 90.8 Low

Eighteen counties are in the “Very Low” category. These are all rural counties.

Rank County HHI Index Index Category
47 Dolores $43,943 89.5 Very Low
48 Phillips $43,713 89.0 Very Low
49 Costilla $43,537 88.7 Very Low
50 Saguache $43,331 88.3 Very Low
51 Las Animas $43,233 88.1 Very Low
52 Lincoln $43,044 87.7 Very Low
53 Huerfano $42,970 87.5 Very Low
54 Washington $42,947 87.5 Very Low
55 Yuma $42,786 87.1 Very Low
56 Sedgwick $42,781 87.1 Very Low
57 Otero $42,013 85.6 Very Low
58 Cheyenne $41,956 85.4 Very Low
59 Conejos $41,889 85.3 Very Low
60 Bent $41,477 84.5 Very Low
61 Crowley $41,440 84.4 Very Low
62 Prowers $41,197 83.9 Very Low
63 Baca $40,779 83.1 Very Low
64 Kiowa $40,438 82.4 Very Low

The Colorado Springs MSA includes El Paso and Teller Counties. They are both in the Mid-Range category, slightly below the state level of 100.

The Denver MSA has ten counties. Denver is in the “High” category and the following counties are in the “Mid-Range” category: Gilpin, Broomfield, Jefferson, Clear Creek, Douglas, Park, Arapahoe, Elbert, and Adams counties.

As can be seen, Colorado is a diverse state from many perspectives: geographically, ethnically, and from an industry mix. It is also a diverse state in terms of the cost of living. In simplistic terms, the cost of living is higher in the metro areas and the mountain resort communities and lower in the rural communities.