Category: Colorado Economic Forecasts

Colorado Economic Forecasts Point to Growth in 2015

horvath

It is the forecast season and three Colorado economic forecasts are on the streets.

First, the Governor’s Office of State Budgeting and Planning and the Colorado Legislative Council released their2015 Colorado economic forecasts.

Their forecasts are used for policy and budgetary purposes and at times tend to err on the conservative side. (That comment is intended to serve as a reference point, and is not meant as a criticism). The March forecast is often a more accurate reflection of what will happen during the year.

The good news is that both groups are realistically optimistic about the state’s outlook.

OSPB projects U.S. Real GDP growth of 2.7% with state job growth of 68,300. CLC is slightly more optimistic. They project U.S. Real GDP growth of 3.1% and state job growth of 73,600.

The quarterly reports produced by OSPB and CLC are recommended reading for anyone interested in the state economy. They discuss the economy for all regions of the state, key industries, and factors that impact the budget for the state government.

Finally, Richard Wobbekind recently unveiled the CU Leeds School Colorado economic forecast earlier in the month.  As usual it was a rewrite of the past four years. He expects the U.S. to see significantly stronger U.S. output growth. At the same time he focuses on Colorado being one of the leading states for job growth, yet he states that Colorado will add jobs at a decreasing rate in 2015 after modest growth in 2014. CU is projecting Real GDP growth of 3.1% and state job growth of 61,300 in 2015. Those numbers just don’t make sense.

Between now and next year, Wobbekind and the CU gang should read the paper “Macroeconomic forecasts and microeconomic forecasters”. Author Owen Lamont raises the question, “Does an experienced research team, with a wealth of knowledge, produce a more accurate forecast or does the added knowledge result in an “arrogance” which may reduce the accuracy of the forecast? The state would benefit from CU producing a Colorado economic forecast based on academic rigor rather than self-promotion.

The good news is that this part of the forecast season has passed and all projections point to continued modest growth in 2015. Bring on the new year!

 

Issues That Will Present Opportunities and Challenges for Colorado in 2014

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The improving global economy will support broad-based growth of the U.S. economy and vice versa.  In turn, Colorado will enjoy its strongest job growth in over a decade. Click here to review the CBER forecast and other economic reports.  Some of the opportunities and challenges for 2014 are listed below.

Opportunities

  1. Both Global and U.S. Real GDP are projected to increase at rates greater than 2013. Will that translate into a 4th consecutive year of rising job growth for the state?
  2. After the dysfunctional 2013 Colorado legislative session, a threat by counties to secede from the state, and two successful recalls, are legislators ready to work together for the good of the state?
  3. How much will the passage of Amendment 64 benefit the state fiscally? Will tax revenues exceed enforcement, social, and opportunity costs?
  4. Primary jobs are essential to the economy because they create wealth and usually pay higher than average wages. Will 2014 be the year that there is a stronger increase in primary jobs?
  5. Will Colorado’s strategy to attract millenials prove to be an effective economic development strategy?

Challenges

  1. Are global financial sectors in the mature economies stable? Are financial bubbles looming on the horizon?
  2. Will U.S. monetary policy be conducive to growth of the global economy? Will Janet Yellen be able to unwind Quantitative Easing without drastically raising inflation or the causing a downturn in the equity markets?
  3. Is U.S. public and personal public debt excessive? Will Americans manage their finances more responsibly?
  4. Will the off-year elections bring about more conflict, change, or more of the same?
  5. Will gun-control legislation,  anti-fracking efforts, energy legislation that hurt rural Colorado, and other anti-business activity create the impression that Colorado is not business-friendly?
  6. What does Mother Nature have in store for Colorado in 2014?
  7. Will 2014 be the year Colorado begins adding establishments at a significant level?

The most critical item on the list of opportunities and challenges…Will Peyton Manning bring a Super Bowl to Denver in 2014? Go Broncos!

©Copyright 2011 by CBER.

cber.co Colorado Economic Forecast for 2014 – 68,000 to 74,000 Jobs to be Added

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In 2013 the state experienced natural disasters and self-inflicted political wounds, yet Colorado employment grew at a faster than expected rate. The cber.co economic forecast points to continued expansion  for 2014.

On a Positive Note…

  • The state population grew at a higher rate than expected in 2013. Stronger growth is on tap for 2014.
  • The story is the same for employment. In 2013, the state added approximately 68,000 workers and will add another 68,000 to 74,000 in 2014. This represents job growth in the rage of 2.9% to 3.1%.
  • Unemployment will continue to decline, and will be in the range of 5.5% to 5.8% at the end of 2014.
  • In 2013 consumers were delighted that gasoline prices declined. At the moment there is no reason to believe they will rise precipitously (knock on wood).
  • Colorado new car registrations have risen steadily for the period 2010 to 2013. A decline is unlikely in 2014.
  • Colorado’s general fund, particularly sales and income taxes, has been a benefactor of increased population, employment, and wages. Likewise the revenue for city and county governments has improved.

Some Mixed News…

  • Per Capita Personal Income will increase by 3.7% in 2014.  This is slightly less than the rate of growth for the U.S. Over the past two decades the gap between the U.S. PCPI and the state PCPI has closed significantly.
  • In 2014, Colorado inflation will be 3.0%, well above the rate for the U.S.
  • In Colorado, housing prices have increased at a faster rate than the nation. That is great news for home owners, but not so good news for people wanting to enter the housing market.
  • The Construction Sector is slowly improving.  Increased building activity supports growth in multiple sectors and causes greater congestion on the highways. For some, the latter is not desirable.
  • Although the state returned to 2008 peak employment, it will be a long time before the state returns to the 2007 peak number of establishments.

Looking ahead, the economy will build on the foundation established in 2013. Hopefully the state’s leadership will be less dysfunctional.

Click here to review the cber.co forecast and other economic reports.

cber.co forecast

©Copyright 2011 by CBER.

Leeds Economic Forecast Points to Slower Growth in Year Ahead – AGAIN

horvath

On December 8th Professor Richard Wobbekind and the Leeds School of Business (SOB) released the 49th annual economic forecast for Colorado. Unfortunately, the fundamentals of the 2014 outlook were as questionable as the 2012 and 2013 forecasts.

For three consecutive years (2012 to 2014) the SOB has projected fewer jobs would be added in the coming year, even though Real GDP was predicted to increase significantly in two of those three years.

A summary of the SOB forecasts from 2012 to 2014 are provided in the table below.

 

Leeds School of Business Forecast – US Real GDP and Colorado Employment

Year

Change in Real GDP

Change in State Employment

 

2012

In 2012 Real GDP will show a significant increase in the rate of growth for 2011

Fewer jobs will be added in the coming year

 

2013

In 2013 Real GDP will growth at about the same rate as 2012, a slight decrease is possible

Fewer jobs will be added in the coming year

 

2014

In 2014 Real GDP will increase at a rate almost double the 2013 rate

Fewer jobs will be added in the coming year

 

Source:  SOB BEOF publications

 

The actual data for 2012 and preliminary data for 2013 are provided in the table below.

 

Performance of the Economy – US Real GDP and Colorado Employment

Year

Change in Real GDP

Change in State Employment

 

2012

The rate of growth of 2012 was significantly greater than the rate of growth for 2011

More jobs were added in 2012 than 2011

 

2013

The 2013 preliminary rate of growth was significantly lower than the rate of growth for 2012.

More jobs were added in 2013 than 2012

 

2014

To be determined

To be determined

 

Source: BLS, BEA, CBER

 

A historical look at the recoveries from the last three recessions is instructive.

After the 1991 recession, Colorado added jobs at an increasing rate for three years (1992 to 1994). This recovery was exceptionally strong. Job growth in 1994 was second highest in state history.

  •  Following the 2001 recession, Colorado “added” jobs at an increasing rate for four years (2003 to 2006). That rate of recovery for that period was anemic, but improving. Continued job growth at an increasing rate was cut short by the 2007 recession.
  •  After the 2007 recession, Colorado has “added” jobs at an increasing rate for four years (2010 to current). The rate of recovery has been so-so. In other words, there is a strong likelihood that job growth will continue at an increasing rate in 2014.

The saying “Every blind squirrel finds an acorn now and then” can be applied to the 2012-2014 SOB forecasts. If they continue to predict the state will add fewer jobs next year than this year, at some point they will be correct. Will 2014 finally be the year they are right?

We can only hope the SOB is wrong again!

 

©Copyright 2011 by CBER.

Colorado Legislative Council and OSPB Optimistic About 2014

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On September 20th, both the Colorado Legislative Council (CLC) and the Governor’s Office of State Planning and Budgeting (OSPB) released their quarterly economic updates. Their preliminary look at 2014 is positive.

Highlights from the CLC outlook for 2014 are:
• The unemployment rate will drop to 6.9%.
• 55,400 wage and salary jobs will be added.
• Retail trade sales will increase by 5.4%.
• 35,400 home building permits will be issued.
• Inflation will increase by 3.2%.
In summary, CLC feels the state will continue to add jobs at a similar rate to 2013, but unemployment will not decline substantially. Retail trade sales will show strong growth and there will be a modest increase in home building permits. Inflation may become an issue.

Highlights from the OSPB outlook for 2014 are:
• The unemployment rate will decline to 6.5%.
• 57,500 wage and salary jobs will be added.
• Retail trade sales will increase by 5.4%.
• 37,300 home building permits will be issued.
• Inflation will increase by 2.4%.
Job growth will be similar to 2013, which will lead to a slight decline in unemployment. Retail trade sales will show strong growth and the housing market will post modest gains. Inflation will remain in check.

For more details, check out the CLC quarterly report  and the OSPB report by clicking here. Both groups produce comprehensive economic updates on a quarterly basis. They are “must read” material for anyone interested in the state economy. The reports are released around the 20th of the month in March, June, September, and December.

©Copyright 2011 by CBER.

CBER Colorado Economic Forecast 2013 – Growth Rate Similar in Year Ahead

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CBER recently released its forecast of the Colorado economy and at the risk of sounding like a broken record, 2013 will look a lot like 2012 and 2011.

  • U.S. Real GDP will be in the range of 1.9% to 2.3%
  • The U.S. will add 1.9 to 2.1 million workers
  • Colorado will account for 2.5% of U.S. jobs added
  • Colorado will add 45,000 to 55,000 workers.

Since the end of the recession, Colorado employment has had five false starts. Despite serious national and international headwinds, the state may finally have enough momentum to begin showing solid, sustained job growth beginning in the second half of 2013.

Strong Growth Category ( About 32% of total employment)

This category has consistently posted strong growth over the past two decades. In 2013, job growth will be 2.9% to 3.1%, slightly below the category’s annualized growth rate of 3.25% for 1990 to 2011.

Limited Growth Sectors (about  40% of total employment)

This category has consistently posted solid growth over the past two decades (Annualized rates for the sectors range between 1.1% to 2.2%.) In 2013, job growth will be 1.4% to 1.6%, slightly below the category’s annualized growth rate of 1.85% for 1990 to 2011.

Volatile Growth Sectors (28% of total employment)

This category has been inconsistent in its growth rates over the past two decades. It is expected to add jobs at a rate of 2.1% to 2.3%. This is above the category’s annualized growth rate of about 0.79% for 1990 to 2011. This variance from the average is a reflection of the category’s  volatility.

©Copyright 2011 by CBER.

State Economic Agencies Point to Slower Growth in 2013

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The Colorado Legislative Council (CLC) and the Governor’s Office of State Planning and Budgeting (OSPB) recently released their Q3 economic updates. As can be surmised by their names, CLC and OSPB provide comprehensive economic information and forecasts to inform discussion about the state and national economies.

Their most current updates show the two groups are upbeat about the economy for 2012. At this point, they are much less optimistic about the prospects for 2013.

CLC
National Employment
2012  1.3% growth and 133,100,000 employees
2013  0.6% growth and 133,900,000 employees

National Unemployment
2012   8.3%
2013   9.1%

State Employment
2012  1.7% growth and  2,296,600 employees
2013   0.7% growth and 2,312,700 employees

State Unemployment
2012   8.3%
2013   9.4%

OSPB

National Employment
2012  1.3% growth and 133,000,000 employees
2013   0.8% growth and 134,100,000 employees

National Unemployment
2012  8.3%
2013  8.2%

State Employment
2012  1.7%  growth and  2,296,700 employees
2013  1.0%  growth and 2,320,300 employees

State Unemployment
2012  8.0%
2013  7.8%

There are notable differences between the two forecasts for 2013. This begs the question, “Are the two groups intentionally presenting best and worst case scenarios or are their differing viewpoints a legitimate indication of the diverse landscape?”

For more information about updates from OSPB click here.

To view the forecast for CLC click here.

For the most latest cber.co monthly update for Colorado click here.

 

 

©Copyright 2011 by CBER.

Occupy the Labor Market – Shields Foretells Growth in Northern Colorado

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In January, Dr. Martin Shields, CSU economics professor, produced his business and economic forecast for the Northern Colorado Business Review. In short, Shields pointed out that the U.S. will see a lackluster recovery that will be driven by national and international events (debt, war, oil prices, political crises, etc.)

At the national level, Shields emphasized three points:
• “Tepid and sustained” Real GDP growth.
• The decline in unemployment will be slow as the median number of weeks that workers are unemployed remains high, based on the slow rate at which jobs are being created.
• Core inflation has returned to pre-recession levels.

The Northern Colorado economy will continue to be a mixed bag, although it has been a leader in the recovery. It is expected to continue in that role. Nevertheless, unemployment will be high by historical standards. Locals have struggled with the decline in real household income, a challenge that is likely to continue in the months ahead.

Shields also emphasized the following:
• Northern Colorado lost 5,900 jobs over the past 3 years.
• On a positive note, the region added 1,900 jobs in the past year.
• Since 2008 the number of unemployed workers in the region has increased by 6,700.
• Larimer and Weld County have performed differently during the Great Recession.
o Larimer’s labor market has been stronger
o Median household income in Larimer has declined.
o Weld County household income has remained flat.
• FFHA data shows that housing prices are stagnant.
• While it is encouraging that there is an uptick in housing starts, it must be noted that the increase is small and it is from a very low base.

Looking ahead, Shields foretells continued growth in 2012.
• The unemployment rate might approach 5.0% in Larimer County.
• In Weld County, unemployment might fall below 8.0%.
• Between 2,700 and 3,300 workers might be added to local payrolls.
The Government, Information, and Financial Activities sectors will struggle, while the energy, food manufacturing, health care, and professional business services sectors will continue to grow.

Shields heavily emphasized the term “might” in each of his projections. In closing he stated that the real challenge will be to add jobs that pay good wages.

 

©Copyright 2011 by CBER.

Colorado Economic Forecast Challenges (Education, Industries, Clusters)

horvath

Another year, another economic forecast.

Looking ahead to 2012, the state will again experience improved, but below average employment growth. Cber.co is projecting that U.S. real GDP growth will be 2.1% to 2.5% in 2012, with employment growth of 27,500 to 37,500 in Colorado. For more details about the Cber.co 2012 Economic Forecast, click here.

There are a myriad of challenges facing the Colorado and U.S. economies in 2012. Some of the key questions relating to these challenges are categorized into the following four areas:
• Demand for goods and services;
• Debt, the financial system, and politics;
• Education and workforce; and
• Industry and cluster issues.

This post raises questions about the topics of education and workforce; and industry and cluster issues. The topics of demand for goods and services; and debt, the financial system, and politics were discussed in a post entitled “Colorado Economic Forecast – Challenges (Demand and Debt).”

Education and the Workforce
• When will the higher education bubble burst?
• How will higher education improve their performance in the classroom?
• How will the state fund PK-12 education, particularly given the outcome of the Lobato education adequacy lawsuit?
• Are high school and college students learning skills that can be transferred between professions?
• What is being done to address the mismatch between the skills that companies need and the skills of job applicants?
• What is the role of the older worker in the workforce? How are companies addressing their impending retirement?
• Has Colorado lost its pool of trained workers as a result of the Lost Decade?

Industry Issues
• How has Colorado’s high tech cluster weathered the Lost Decade?
• Has Colorado lost its critical mass of manufacturers?
• Has Colorado lost the supply chain associated with the decline in its manufacturers?
• Is Colorado saturated with retail stores?
• How will second and third generation businesses transition into the future?
• How much longer can the Health Care sector continue to add jobs?

Cluster Issues
• Is homeland security a cluster that is still important to the state?
• What happened to Colorado’s nanotechnology cluster? Five years ago it was top 10 in the country. Today it is seldom mentioned?
• Several studies have pointed to the rise of Colorado’s biosciences cluster? How will this translate into growth at Fitzsimons?
• How is the software industry going to survive and thrive given the mismatch of skills in the labor pool and the needs of the companies?
• Will 2012 be the year that photonics is recognized for its contribution to the state economy?
• Are state and local leaders poised for the volatility of the renewable energy cluster?
• How will budget reductions affect Colorado’s defense and aerospace clusters?

Clearly, it is easier to point out the difficult challenges than it is to answer questions relating to them. As well, additional obstacles will be added to the list throughout the year. While there is a lot that could go wrong, it is important to keep in mind the state has an equally impressive list of assets that can be used to address the challenges of the future. Game on!

 

©Copyright 2011 by CBER.

Colorado Economic Forecast – Challenges (Demand and Debt)

horvath

Colorado will experience below average growth for another year. Cber.co is projecting that U.S. real GDP growth will be 2.1% to 2.5% in 2012, with employment growth of 27,500 to 37,500 in Colorado. For more details about the Cber.co 2012 Economic Forecast, click here.

There are a myriad of challenges facing the Colorado and U.S. economies in 2012. Some of the key questions relating to these challenges can be grouped into the following categories:
• Demand for goods and services;
• Debt, the financial system, and politics;
• Education and workforce; and
• Industry and cluster issues.
This post raises questions about demand for goods and services; and debt, the financial system, and politics. The topics of education and workforce and industry issues will be discussed in the post dated January 16th.

Demand for Goods and Services
• Will there be sufficient demand for goods and services given the high unemployment rate and minimal wage increases?
• Will companies be able to pass on increased input costs to customers and maintain demand?
• How much longer can manufacturing shipments and output increase without adding to their workforce?
• There is an apparent lack of new firm creation. Is this caused by a lack of demand or insufficient innovation?
• What is being done to protect and encourage innovation?
• For the most part, companies have adequate access to capital. Do they know how to access it? When will there be enough demand for them to need additional capital?

Debt, the Financial System, and Politics
• Europe is a major trading partner for Colorado. How will the EU debt crisis impact the U.S. and the state?
• Worldwide there are countries other than Greece and Italy with public and private debt issues. Is anyone paying attention?
• Are our leaders paying attention to both the public and private debt crisis in the United States?
• Is the U.S. financial system sufficiently stable?
• How much uncertainty will be caused by the upcoming elections?
• Will politicians be able to instill confidence in the government after the elections?

Colorado will face these and other challenges in 2012. It will be interesting to look back a year from now and see how these issues unfolded and how state public and private leaders addressed them.

©Copyright 2011 by CBER.