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Metro Counties a Drag on Colorado Economy

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Colorado added 6,200 net employees during the 10-year period (2001 to 2010). This is in sharp contrast to the previous 10 years (1991 to 2000) when the state gained almost 700,000 workers.

During the go-go 90s, payrolls in the Denver MSA increased by more than 355,000 followed by gains of about 95,000 in rural Colorado. Almost 93,000 jobs were added in El Paso County (Colorado Springs MSA) and another 57,000 in Boulder County (Boulder MSA).

At the risk of being repetitious… the state added only 6,200 workers between 2001 and 2010.

During this period the Denver MSA lost 20,000 workers, the Boulder MSA shed 4,900, and Colorado Springs payrolls decreased by 3,600. Employment in the state’s top three MSAs declined by 28,500 workers. The drop-off in Denver and Boulder began in 2002 and continued throughout the decade, whereas it started in 2007 for Colorado Springs. This was around the time Intel and other high-tech and semiconductor companies left the area.

At the risk of being repetitious… rural Colorado and the smaller MSAs were the only areas to add workers during the decade. Given the weakness in Colorado’s three major metro areas, it seems why the state is struggling to add jobs at a sustained level in 2011.

©Copyright 2011 by CBER.

Rural Employment Growth Rate Outpaces State MSAs

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After a promising start in 2000, employment in all parts of the state suffered from back-to-back recessions. This brief analysis shows that the rate of growth in the rural areas outpaced the metro areas.

Presently, the breakdown between the Metropolitan Statistical Areas (MSAs) and rural areas follows:

MSAs

  • 1.9 million workers.
  • 86.8% of total workers.
  • 17 counties.

Rural

  • .3 million workers.
  • 13.2% of total workers.
  • 47 counties.

Despite modest job gains after the first downturn, declines resulting from the second recession dropped statewide employment to 2001 levels.

Seasonality is more evident in rural areas because there is a small base of workers. As a result rural employment is more volatile.

Colorado employment is forecast to increase by 15,000 to 25,000 jobs this year, or in the neighborhood of 1.0%. The rate of growth for rural areas is expected to be slightly higher than in the rural areas.

©Copyright 2011 by CBER.

Manufacturing, Information, and Professional Business Services Drive Colorado Economy

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All industries play different and important roles in our economy. Some pay high wages or create new jobs, while others provide services that generate tax revenue.

Economic developers welcome the creation of any job, but they emphasize the recruitment and retention of companies that have primary jobs. A primary job brings in money from outside the local community and often pays higher than average wages. As a result, these jobs create wealth and other local jobs.

In Colorado most primary jobs are in the Manufacturing, Information, and Professional Business Services sectors. They account for about 29% of total state private sector employment and 35% of the state’s private sector Real GDP. Colorado’s Advance Technology cluster is a subset of these three sectors.

In recent years, the Mining and Logging sector has employed about 1.5% of total private sector workers, yet it has accounted for about 6% of the state’s private sector output. The Real Estate and Finance group of sectors are also small from an employment perspective; however, they make a significant contribution, 23%, to the state’s private sector output.

Tourism and retail are important for different reasons. First, they touch the economies of all 64 counties.
Colorado’s scenic mountains provide the state with a distinctive competency, that cannot be replicated. Sales tax from the retail sector are a funding source for special districts and state and local governments. These sectors are important because they employ about 1 out of every 4 workers. Combined, they are responsible for about 11% of the state’s private sector output.

Finally, industries such as health care, personal services, utilities and the remaining sectors are important
because they add to the quality of life. These and the remaining sectors employ 35-40% of private sector workers, while being responsible for about 25% of private sector output.

The above analysis is based on 2009 data. The Bureau of Economic Analysis is scheduled to release its 2010 data within the month. Watch for more in-depth analysis at www.cber.co.

©Copyright 2011 by CBER.

Weak U.S. Employment Report – a Trend or a Bump in the Road to Recovery?

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The BLS recently announced that U.S. employment in May rose by just 54,000 workers on a month-over-prior month seasonally adjusted basis. This is a sharp departure from the average monthly gains of 200,000+ for the previous three months. Clearly, the lackluster Q1 real GDP growth of 1.8% was too weak to stimulate increased job gains in the second quarter.

On a positive note, May was the 15th consecutive month of job gains in the private sector, with an addition of 83,000 in May. At the same time, the public sector shed 29,000 jobs as state and local governments scramble to address either budget cuts or inadequate revenue gains. This is the seventh consecutive month of declines for government employment.

Most of the gains (+51,000) came from the service producing sectors, while the goods producing sectors added only 3,000 jobs. Construction and housing woes continue to be a serious drag on the national economy.

Simplistically speaking, about 100,000 jobs need to be added each month to keep up with increases in the population. The unemployment rate will increase when fewer jobs are added.

About 200,000 jobs are required to bring the unemployment rate down significantly. At that rate (200,000 jobs added each month), it will take about three years to return to the peak employment of 2008.

In 30 days we will know if this dismal report was a sign that the economy has slowed or if it is a blip in the road to recovery. In about two weeks, the Office of Labor Market Information will provide their update for the state. Stay tuned.

©Copyright 2011 by CBER.

Cooperation and Sharing… Can You Say CIC?

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A member of the 1967 Ohio State University lacrosse team was recently being harassed by friends about the firing/resignation/departure of Jim Tressel, the Buckeye football coach. After a few minutes he politely told his tormenters, “Can you say CIC?”

Say what?

For the benefit of his distracters, the proud Buckeye explained how the CIC is one of the nation’s top economic engines. For the unenlightened, the Committee on Institutional Cooperation is a consortium of the Big Ten member universities plus the University of Chicago.

For five decades the group has worked together to further the missions of their respective universities. They have done this by sharing their knowledge, unique skills, and expertise for the good of the greater cause.

According to the CIC website, 385,000 students attended the universities in the consortium in 2006-2007 (last available data). During that period members received $6 billion in R&D funding. Overall, the institutions awarded 6,532 doctoral degrees, including 20% of U.S. engineering doctoral degrees, and 25% of U.S. agricultural doctoral degrees. While it would be easy to further summarize CIC successes, a greater appreciation of the their programs and impacts can be gained by visiting their website.

Cooperation and sharing expertise – two simple concepts that we were taught in kindergarten.

Looking closer to home… While it is not reasonable to expect Colorado’s higher education system to match the impacts of the CIC, it is fair to hold the system accountable for their cooperative spirit and their willingness to share expertise.

Over the past decade, Colorado’s colleges and universities have been focused on Ward Churchill, Lisa Simpson, 4/20, a lawsuit over toilet paper, which school had the best advertisements at DIA, and a series of PR other gaffes. Colorado higher education has created the impression that it is driven by $$ more than the greater good of the cause.

The system has posted gains in employment during two recessions. Average annual wages have grown at a faster rate than the private sector. Despite tough economic times, Colorado higher education has ramped up its lobbying and fund raising efforts. It has requested and expected double-digit tuition increases to be granted without question.

Cooperation and sharing…the backbone of the CIC. Do they exist in Colorado higher education?

LASP, Maven, EUV, and JILA are great examples of what can happen when people respectfully work together and exchange ideas. Does this collaboration exist beyond engineering and the sciences? What is being done to increase partnerships and eliminate fiefdom building and working in silos? What is being done to make collaboration and the legitimate exchange of ideas a greater part of all disciplines at each of the state’s community colleges, colleges, and universities?

As Colorado legislators ponder ways to improve higher education, the concepts of cooperation and sharing should be part of the discussion. Colorado deserves a higher education system that delivers the goods with the cooperative spirit of the schools in the CIC.

 

©Copyright 2011 by CBER.

Got Jobs? Colorado Economy Stalled

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Got jobs?

The Colorado Office of Labor Market Information recently released data that shows that four-month average employment for the state was 12,500 workers above the same period in 2010. The private sector posted a gain of 14,700 employees while total government employment decreased by 2,200.

Over the past four months, a group of industry sectors have increased their payrolls by 32,800 jobs (see chart below). These sectors account for 60% of total employment.

At the top of the list of gainers are tourism (+10,300) and private education  and health services (+9,900). The next three sectors are the extractive industries (+2,800), wholesale trade(+1,900), and higher education (+1,800).

Nationally, the recovery is shaping up differently than in Colorado. The leading U.S. sectors are professional and business services (PBS), tourism, health care, and manufacturing. Job growth in the Colorado PBS and manufacturing sectors seems lackluster compared to the U.S.. Companies in both sectors are part of the state advanced technology cluster, a key driver of the economy.

Meanwhile, the other 40% of the sectors has shed 20,300 jobs. Construction jobs continue to top out the list of industries shedding jobs (-8,800), followed by financial activities and the information sector, both posting losses of 3,600 jobs. Local education, PK-12, has dropped 2,200 workers while the federal government payrolls are down by 1,700. The decrease in federal employment is an anomaly. A number of temporary jobs were added in mid-2010 to complete the decennial census.

Fortunately, the movement of the state economy is different than movement of an airplane, where “stalling out” can have disastrous consequences. At the moment, a recession is unlikely; however, it is frustrating to endure a two-year recovery (jobs and output) that is moving forward at a “stalled pace.”

©Copyright 2011 by CBER.

Colorado Photonics Cluster Outperforms Job Growth for State

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Can you remember the names and order of all the planets?

Ball Aerospace announced that task just got tougher. In a presentation at the May 18th meeting of the Colorado Photonics Industry Association (CPIA), the local aerospace company discussed their role in the search to find habitable planets.

Pictures taken from a satellite built by Ball, as part of the Kepler project, have confirmed 15 new planets and their composition. That is just the beginning. About 1,000 additional potential planets have been discovered and are being evaluated. Expectations are that 80% will be classified as planets.

A second segment of the CPIA program included a presentation on the performance of the Colorado economy and a review of the Governor’s Bottom-Up Economic Development plan. That discussion focused on the importance of Advanced Technology in Colorado and the growth of the photonics cluster.

The AT cluster is a subset of the Information; Manufacturing; and Professional, Scientific and Technical Services sectors. About 20% of the state’s private sector workers are employed by companies in these three sectors, yet they account for about 35% of the state’s private sector Real GDP.

By comparison, tourism accounts for about 5% of Real GDP and retail is 6%. Both sectors are important to the state in different ways.

The tourism sector is an important part of the economy for the state’s 64 counties. Major attractions include Rocky Mountain National Park, Mesa Verde, mountain sports, and shopping at Cherry Creek mall.

Retail is important to local governments. They derive between 50 to 75% of their total revenue from retail sales taxes. As well, the state and special districts rely on retail sales taxes as their primary source of revenue.

The economic review concluded with a look at an analysis of data  that showed the growth of the photonics cluster between 2004 and 2010. Cluster growth for this six year period exceeded total state growth in all but one employment size category.

In short, the cluster benefitted from growth of renewable energy companies, but suffered from the decline of the state’s semiconductor industry. The analysis illustrates the importance of enabling technologies and how they play a key role in the success of companies in a wide array of industries.

©Copyright 2011 by CBER.

Is Colorado Higher Education Effectively Delivering the Goods?

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Earlier this spring Dan Hawkins was replaced as CU football coach because his teams lost too many games and ticket sales began to wane. There was a perception that investments in the CU football program were not paying dividends. A change was made and public sentiment turned from outrage to support when CU leadership announced a replacement (Yes, athletics are an important part of higher education).

When are the masses that cried for the removal of Hawk going to show a similar sense of concern when investments in academic programs do not pay dividends? It only seems fair that college deans should endure the same scrutiny as Hawk when their faculty cannot conduct research or connect with content in the classroom. Shouldn’t deans be held responsible when they manage programs that are irrelevant or not cost effective?

Colorado has one of the most highly educated workforces in the country. An exceptional higher education system is essential if the state hopes to retain it.

Non-farm wage and salary data shows that there are about 66,000 employees at higher education institutions in metro and rural areas across the state (This number includes some student workers). More importantly, they are a source of training for the world’s current and future workforce. Higher education is an economic driver of the state for both reasons.

During the Lost Decade (2000 – 2010), the state’s higher education sector added 12,300 workers. Meanwhile, the private sector (non-farm wage and salary) declined by 50,100 workers.

In Boulder County, higher education employment increased by 2,700 workers. At the same time, private sector employment shed 10,600 workers.

Current wage data for the period 1999 to 2009 shows that average wages for higher education increased faster than the private sector. In 1999 average annual wages for higher education and the private sector were similar, $34,126 and $34,317 respectively. By 2009, there was a noticeable gap between the two groups, $49,610 for higher education and $46,855 for the private sector.

During this time, many businesses were forced to reduce their staffs, cut expenses, and creatively mange their businesses. In the process, the surviving companies became more efficient and productive. All the while, higher education lobbied hard for increased funding and tuition increases. As well, they embarked on the silent phase of a $1.5 billion fund raising campaign.

The question must be asked, “What dividends did Colorado receive from this increase in the number of higher education workers and their higher than average wage increases?”

Consider the value proposition of the Laboratory of Atmospheric and Space Physics (LASP) at CU-Boulder. LASP’s goal is to train the next generation of space scientists, engineers, and mission operators. LASP is the world’s only research institute to have sent instruments to all eight planets and Pluto.

Recently, they were awarded a $425 million grant to work on the MAVEN (The Mars Atmosphere and Volatile Evolution Mission). MAVEN will be launched in 2013 to learn more about the Mars climate and atmosphere. Both undergraduate and graduate students will be taught the basics in the classroom, integrated into all phases of MAVEN, and provided opportunities for on-the-job training that will be invaluable when they enter the job market.

Historically, LASP has had a strong value proposition for students, faculty, sponsors, and its private sector partners.

Also consider the value proposition of the Leeds School of Business at CU-Boulder.

About a year ago, the Denver Business Journal published the results of national rankings for 111 business schools. The DBJ listed rankings for CU, CSU, and DU.

The Leeds School can point with pride to their ranking in sustainability:
• Sustainability: CU/Leeds, 19th; CSU, 36th; DU/Daniels, 40th

The Leeds ranking in the core areas of a business education make Dan Hawkins look like an All-Star:
• Accounting: DU/Daniels, 27th; CSU, 74th; CU/Leeds, 78th.
• Ethics: DU/Daniels, 3rd; CSU, 85th; CU/Leeds, 91st.
• Financial management: DU/Daniels, 50th; CSU, 84th; CU/Leeds, 89th.
• Strategy: DU/Daniels, 55th; CSU, 82nd; CU/Leeds, 105th.
• Operations management: CSU, 45th; DU/Daniels, 57th; CU/Leeds, 109th.
• Marketing: DU/Daniels, 31st; CSU, 73rd; CU/Leeds, 111th.

If the perception exists that Leeds students are not taught the basics, does it really matter if CU/Leeds has a solid sustainability program?

A more recent ranking of MBA programs shows that Leeds provides a solid MBA experience. However, a look at the average GMAT scores suggests that a Leeds MBA falls in the third or fourth-tier.

Why haven’t previous deans and associate deans who oversaw the MBA program been held responsible for not seeking “flagship status” for a Leeds MBA.

Let’s look at the cost of producing these results for Leeds undergraduates and graduates. The faculty pecking order ranges from senior instructor to full professor (tenured), with annual salaries varying from $100,000ish to $300,000+. The directors of the various centers receive salaries in this same range. Many of the higher paid professors have minimal “real-world” experience and often teach fewer students than the lower paid instructors. The leader of the group is the dean, with at salary of $400,000+ per year.

LASP can send a satellite to Mars and incorporate students in the process and the Leeds School can claim that their marketing program is ranked 111th out of 111. It doesn’t take a rocket scientist to see that there is a difference in programs and the accountability of their leaders.

Will the Leeds dean be held accountable for improving the performance of the business school in exchange for the $1+ million he will receive for his brief layover in Boulder? (The life expectancy of a Leeds dean is about 2.5 years). What steps is he going to take to ensure that a Leeds education includes a strong foundation in the basics (marketing, accounting, strategy, operations, and ethics). What is going to be done to make the Leeds School as meaningful and relevant as LASP?

While these two examples focus on CU-Boulder, this isn’t just about them. Every institution of higher education has a number of programs and value propositions. Some are like LASP, some are like Leeds, and others are in between.

Every dean and faculty member at these institutions must be held accountable for efficiently and effectively training our country’s current future workforce.

During the Lost Decade, higher education employment increased and workers received greater wage increases than the private sector. It is now up to higher education to demonstrate and justify the dividends that have been generated because of that investment. If that dividend cannot be confirmed, then higher education has an obligation to reduce employment, eliminate programs, and seek the efficiencies that were gained by the private sector in the last two recessions.

Just as Hawk was held accountable for his team’s performance, stakeholders (state policy makers, parents, business leaders, alumni, and students) must hold higher education leaders accountable for the performance of their system. Colorado deserves a higher education system that pays greater dividends.


Large advertisement at Denver International Airport for CSU’s business school.

©Copyright 2011 by CBER.

Do Colorado Companies Receive Their Fair Share of VC Funding?

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Colorado policy makers and business leaders take great pride in the state’s innovation and cowboy entrepreneurial spirit, but do Colorado’s innovators receive the funding or venture capital necessary to take their companies and ideas to the next level?

Most business leaders and policy makers answer the question with a resounding “No!” It is their belief that the local entrepreneurial community would be stronger if Colorado innovators had greater access to local capital.

On the other hand, the National Federation of Independent Business (NFIB) research resoundingly states that most businesses are adequately funded and that their greatest need is to have more customers. Admittedly, the NFIB customer base includes small businesses other than those who seek VC funding, so their results may not be totally representative of the VC community.

Some venture capitalists claim that Colorado lacks the critical mass of companies in any one cluster to warrant the attention that companies and policy makers feel they deserve. It is their belief that quality innovation will attract sufficient funding, no matter the location.

Price Waterhouse Coopers (PWC) Moneytree conducts research regarding the number of VC deals and investments for the U.S. and the states. Since 1995:
• Colorado companies have received 1.6 to 4.2% of total U.S. investment.
• Colorado companies have received 2.2 to 3.4% of total U.S. deals.
• The average size of an investment per deal is similar for Colorado and the U.S.
• Colorado has approximately 2.0% of total U.S. private sector firms.

Based on the number of companies in Colorado, the state typically receives more than its share of VC funding. The question is, “Do Colorado companies receive their fair share of VC funding?”.

For additional slides about Colorado’s VC funding  go to the PWC website.

©Copyright 2011 by CBER.

Third Consecutive Month of 200,000+ Job Growth

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On Friday (5/6/11), the Bureau of Labor Statistics announced the U.S. had added 244,000 jobs in April (2011), the third consecutive month for the U.S. to add at least 200,000 net jobs. Private sector jobs were added at the highest rate in 5 years.

The Professional and Business Services sector added about 51,000 new workers, followed by tourism (46,000), and health care (37,000). Manufacturing posted gains of 29,000 employees.

As expected the largest loser was government, primarily local governments. Sector employment dropped off by 24,000 workers.

The nation has regained 1.3 million jobs in the past year; however payrolls have about 7 million fewer workers than at the pre-recession peak. Despite this improvement, the recovery continues to be painful for a society that thrives off instant gratification.

The current momentum will continue if inflation remains in check, the double dip in the construction sector and housing markets is short-lived, and net job gains continue to average at least 200,000 jobs per month. It will take about 3 more years to recover all jobs at that rate of growth.

In two weeks the Colorado Office of Labor Market Information will release its preliminary employment update for April. Positive, but less than robust job gains are expected, with PBS, Tourism, Health Care, and Higher Education leading the way.

©Copyright 2011 by CBER.