Category: Colorado Economy

Colorado Adds High Number of Low-Wage Jobs

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Is Colorado adding too many low-wage jobs?

When analyzing the job changes in an economy there are several points that are understood. For example:

  • Jobs are often added unevenly. For instance, during expansionary periods construction jobs will usually be added at a faster pace than other jobs.
  • All jobs are important to the economy for different reasons. Some jobs provide basic services while others generate tax revenue.
  • Some jobs have higher than average wages while others have lower than average wages. There is often greater consumption when workers are paid higher wages.

For the past seven months the following five sectors account for about 45% of total jobs in the state, yet they are responsible for almost 75% of the jobs added this year.

  • Accommodations and Food Services
  • Health Care
  • Construction
  • Professional and Scientific Services
  • Retail Trade.

The following information includes the top sectors, the average annual private sector wages for the sectors, and the reasons those sectors are important. The average private sector wages $50,768.

  • Accommodations and Food Services, $18,808. About 10% of all jobs are in the Accommodations and Food Services sector. AFS has accounted for about 20% of the jobs added this year. As a major component of the tourism sector, AFS is an important part of the economy in all 64 counties.
  • Health Care, $45,905. Just under 11% of the state’s s jobs are in the Health Care sector. This category has accounted for about 15% of total jobs added this year. The Health Care sector affects our quality of life and plays a key role in the economy in all 64 counties.
  • Construction, $51,064. The Construction industry is small by comparison, with about 5.0% of total state jobs. Approximately 12% of the job growth is in this category. A segment of the Construction jobs are tied to the growth of the extractive industries.
  • Professional, Scientific, and Technical Services, 84,842. A portion of the Professional, Scientific, and Technical jobs are a key part of the state’s advance technology industries. They account for about 8% of the jobs and 11% of the job growth.
  • Retail Trade, $28,159. Retail Trade jobs account for almost 11% of total jobs and 11% of total job growth. The retail sector is critical to most local governments because a majority of their revenue is derived from retail trade sales taxes.

There is legitimate reason to be concerned that the state is adding so many low-wage jobs. On the other hand, it is a positive sign that the state is adding jobs that potentially impact all counties, jobs are being added in sectors that generate tax revenues, and jobs are being added that allow for a better quality of life.

So, is Colorado adding too many low-wage jobs?

 

Colorado Economy Remains Strong

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National Economy

The Colorado economy is outperforming the U.S. economy. Recent strength in the U.S. economy is a positive sign for Colorado.

Nationally, employment remains strong. The non-seasonally adjusted data shows that an average of 230,000 jobs have been added each month through seven months. Most likely the U.S. will add about 2.5 million jobs this year.

On a positive note, the labor force participation rate appears to have bottomed out.

Real GDP increased by 4.0% in Q2. The reasons for the increase in the real GDP were:

  • Stronger personal consumption.
  • Greater private inventory investment.
  • Increased residential fixed investment.
  • Stronger non-residential fixed investment.
  • Improved state and local government spending.
  • Greater demand for exports

Factors that offset the growth were:

  • Increased demand for imports.
  • Decreased federal government spending.

An area of potential concern is construction. Hopefully the industry is taking a breather after its recovery from the Great Recession. The number of building permits issued over the past year has been flat.

In addition, the housing market is cooling off. The rapid appreciation in housing prices is tapering off.

Both manufacturing and services have been solid since the second half of 2009. At least this is being reflected in the growth of the GDP.

Implications of the National Economy on Colorado

These indicators have several implications for Colorado. The short-term outlook points to stronger personal consumption, which bodes well for retailers and tourism, particularly if Mother Nature cooperates by bringing early and frequent snow for the ski season.

Stronger retail sales will add to the coffers of the state and local governments, which should point to continued increases in government spending. This would benefit everything from schools to infrastructure.

On the downside, lower or constrained government spending could impact the military and federal facilities and laboratories. This has the potential to impact the universities and federal facilities in Colorado Springs, Denver, Boulder, and the Northern Colorado metro areas.

The unemployment rate and the number of unemployed continue to trend downward; however, critical labor shortages are developing in many occupations. This is particularly critical to high-tech industries.

Labor shortages are impacting all industries in Northern Colorado which is experiencing rapid growth as a result of the extractive industries boom. Workers are being raided from other companies and industries, which will ultimately drive wages up.

The Colorado construction market still appears to be solid and the value of residential housing is growing, albeit at a slower rate than last year. At the same time the Dow Jones Industrial Average is about where it was at the end of 2013.

Appreciation in the housing and equity markets play into consumer confidence. If consumers feel their house and investments have appreciated, their wealth on paper is greater, and they are more likely to purchases goods and services.

Colorado Economy

The following five sectors account for about 45% of total jobs in the state, yet they are responsible for almost 75% of the jobs added this year.

  • Accommodations and Food Services
  • Health Care
  • Construction
  • Professional and Scientific Services
  • Retail Trade.

All of these jobs are important to the state for various reasons.

  • About 10% of all jobs are in the Accommodations and Food Services sector. AFS has accounted for about 20% of the jobs added this year. As a major component of the tourism sector, AFS is an important part of the economy in all 64 counties.
  • Just under 11% of the state’s s jobs are in the Health Care sector. This category has accounted for about 15% of total jobs added this year. The Health Care sector affects our quality of life and plays a key role in the economy in all 64 counties.
  • The Construction industry is small by comparison, with about 5.0% of total state jobs. Approximately 12% of the job growth is in this category. A segment of the Construction jobs are tied to the growth of the extractive industries.
  • A portion of the Professional, Scientific, and Technical jobs are a key part of the state’s advance technology industries. They account for about 8% of the jobs and 11% of the job growth.
  • Finally, Retail Trade jobs account for almost 11% of total jobs and 11% of total job growth. The retail sector is critical to most local governments because a majority of their revenue is derived from retail sales taxes.

Through seven months of 2014, the average job growth is about 67,300 greater than the same period in 2013.

Strong U.S. Economy Bodes Well for Colorado

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The U.S. economy got off to a horrendous start with weak employment in January and -2.6% real GDP growth in Q1. There has since been enough improvement in Q2 for the Federal Reserve to announce it will end QE3 in October. As well, interest rate hikes are likely to occur in 2015, which is good news for some and bad news for others.

It appears the Fed has satisfactorily unwound the quantitative easing program, something many economists feared might not happen at the time it was put in place. Today, most members of the Fed are bullish on the economy, at least for the remainder of 2014. Several members have expressed short-term concerns because retail sales, healthcare spending, and residential construction are underperforming.

A strong U.S. economy bodes well for Colorado.

The equity markets have been volatile in 2014, but the Dow has passed 17,000 and continues to establish new record – highs. Improved equity markets have increased the personal wealth of Coloradans and given them reason to remain optimistic about the growth of the economy.

Through the first half of 2014, U.S. wage and salary jobs have been added at a slightly faster pace than 2013. On average 188,000 jobs were added each month during 2013. By comparison, an average of 194,000 jobs have been added for the first six months of 2014 compared to the first half of 2013. (Source: non-seasonally adjusted data).

Nationally, the unemployment rate continues to drop. It has declined from 6.7% at the end of 2013 to 6.1% at the end of June. A year ago it was 7.5%.

In addition, the number of unemployed continues to decline, dropping to 9,474,000 in June. This is down significantly from 11,747,000 a year ago. By comparison, there were 15,333,000 unemployed in April 2010 at the height of the Great Recession. On the other hand there were 6,731,000 in March 2007 just prior to the Great Recession. Despite the improvement, there are still a number of people struggling to find work.

A similar situation exists in Colorado. Unemployment continues to trend downward, but the number of unemployed remains higher than desired. It has decreased from 6.2% at the end of 2013 to 5.5% in June. Unfortunately, about 150,000 workers remain unemployed. While this number is decreasing at a painfully slow rate, it is about 60,000 greater than the low point in April 2007, the low point prior to the recession.

While the decrease in unemployment is a positive sign, some industries such as construction, manufacturing, and segments of high-tech are struggling to find trained workers. In smaller metro areas such as Weld County there will be a domino effect as higher paying jobs in the oil and gas industry may pull workers from local manufacturers, hotels and restaurants, and construction companies.

The situation is slightly different for some rapidly expanding high-tech industries that require specialized talent (software, technicians, machinists, etc.). Talent attraction is a necessary option for supplying trained workers for these rapidly growing companies. This can be a challenge because there are national shortages in key occupations for the high-tech industry. It is important for Colorado to “train their own” but at the same time Colorado must continue to attract workers from other states.

Through the first six months of 2014 Colorado has added 67,000 jobs compared to the same period last year. Looking ahead, Colorado will continue to see strong growth through the remainder of the year. In certain parts of the state, that growth will occur as an indirect result of the extractive industries and agriculture. In the metro areas, it will be driven by broad-based growth across many industries. The leading areas of growth will continue to be tourism, construction, health care and sectors that are related to advanced technology.

 

Northern Colorado Leads MSA Job Growth

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The Northern Colorado Metropolitan Statistical Areas (MSAs) are leading job growth for Colorado. Through five months of 2014, the leaders in MSA job growth were Greeley and Fort Collins.

The MSA job growth rates for five months follow:

  • Greeley 5.4%
  • Fort Collins 3.5%
  • Boulder 3.1%
  • Denver 2.8%
  • Pueblo 2.1%
  • Grand Junction 1.4%
  • Colorado Springs 1.2%

The rate of growth for the state was 2.9%.

The MSA job growth for five months follows:

  • Denver 35,800
  • Boulder 5,200
  • Fort Collins 4,900
  • Greeley 4,700
  • Colorado Springs 2,900
  • Pueblo 1,200
  • Grand Junction 800.

For the first five months of 2014 Colorado added about 67,100 workers compared to the same period in 2013. About 11,600 were outside the seven MSAs.

As expected Denver added the greatest number of jobs. The percentage of MSA job growth follows:

  • Denver 64.5%
  • Boulder 9.4%
  • Fort Collins 8.8%
  • Greeley 8.5%
  • Colorado Springs 5.2%
  • Pueblo 2.2%
  • Grand Junction 1.4%

Combined, the Northern Colorado MSAs added 17.3% of all jobs. The state’s seven MSAs accounted for about 83% of total job growth in the state for this period.

Though most of the state’s land mass is rural, most of the job growth is in the seven MSAs.

MSA Job Growth for Colorado

 

Colorado Job Growth Will Exceed Projections

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In January, cber.co released its economic forecast for Colorado. U.S. employment was projected to increase by 2.3 million jobs in 2014 and the state would add 68,000 to 74,000 jobs. The cber.co forecast is more aggressive than all other state forecasts.

After five months, it appears that U.S. and Colorado job growth will exceed cber.co projections. Through five months, U.S. jobs are being added at an average rate of 213,600 per month (or more than 2.5 million jobs per year) and the state is projected to add 67,100 jobs this year.

To digress for a moment…The most recent QCEW data published by BLS suggests the wage and salary data for Colorado will be higher than the current 2014 estimates. These projections are expected to be bumped upwards by as much as 10,000 in the March 2015 revisions.

In other words, the current wage and salary job growth estimates are not fully capturing the magnitude of job growth in Colorado.

There is a downside to the rapid rate of growth. In 2013, the Consumer Price Index for Colorado rose by 2.8% versus 1.5% for the U.S. Major contributors to the higher rate for Colorado was higher rental and home prices, significant increases in heating utilities, and higher medical costs. Higher housing prices are a function of Colorado’s strong housing market and decreased inventories, while increased utility costs may be related to state energy policy.

After a rugged start to the year at the national level (-2.6% Real GDP Growth in Q1), the nation will see solid growth in the economy for the remainder of the year. What is good for the U.S. is also good for Colorado. All indications are that the state will likely record accelerating job growth for the fourth consecutive year.

 

Colorado Inflation for 2013 About Double the U.S. Rate

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Earlier today, the BLS released its CPI data for 2013. The data shows that Denver-Boulder-Greeley rate of inflation, 2.8%, was about double the rate for the U.S., 1.5%. (The Denver-Boulder-Greeley CPI is used as a proxy for Colorado inflation).

The inflation rate for three of the eight categories was well above the state average (2.8%). These categories were: apparel (6.5%), housing (4.8%), and medical care (3.6%). In addition, the rates for these categories were also significantly greater than the U.S. rate.

The housing category (4.8%) includes three subcategories:
• Inflation for the shelter category increased 4.5% in Colorado, compared to 2.3% for the U.S.
• Colorado fuels and utilities increased 9.3%, compared to 2.8% for the U.S. Within that category Colorado household energy rose by 11.2%, compared to 2.4% for the U.S.
• Colorado household furnishings rose by 0.9% compared to -0.8% for the U.S.
Colorado’s higher rate of inflation in the housing category is a reflection of stronger growth in the state economy and the residential real estate market than the U.S. The magnitude of the state’s increase in fuel and utilities may be a reflection of its commitment to alternative energy sources.

Finally, Colorado’s rate of inflation was somewhat higher in the other services category. The rise in prices for food and beverage was the only category that was significantly higher in the U.S. than Colorado. The remaining three categories (education and communications, recreation, and transportation) had similar growth rates for inflation.

Category Denver-Boulder-Greeley U.S.
Apparel  6.5% 0.9%
Housing 4.8% 2.1%
Medical care 3.6% 2.5%
Other goods and services 2.3% 1.7%
Education and communication 1.4% 1.5%
Food and beverages 0.6% 1.4%
Recreation 0.5% 0.5%
Transportation -0.2% 0.0%

 

 

Colorado Outperforms U.S. in Real GDP Growth

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Today the Bureau of Economic Analysis released its updated real GDP data by state for 2013. There were increases in 49 of the 50 states, with Alaska being the one state showing a decline.

In 2013 U.S. Real GDP growth expanded at a rate of 1.8%, compared to 2.5% in 2012. Private sector growth grew by 2.3% in 2013 compared to 3.0% in 2012.

In short, Colorado outperformed the U.S. in output growth last year. While the rate for the U.S. declined, real GDP growth for Colorado increased.

Nationally, the top six contributors to absolute growth were:

• Real estate and rental and leasing
• Agriculture, forestry, fishing, and hunting
• Health care and social assistance
• Finance and insurance
• Wholesale trade
• Professional, scientific, and technical services.

Combined, these 6 categories accounted for 53.6% of the change in U.S. output in 2013.

The Colorado Real GDP growth increased from 3.0% in 2012 to 3.8% in 2013. Real private sector growth expanded at a rate of 4.2% in 2013 compared to 3.4% in 2012.

In Colorado the leading contributors to absolute growth were:
• Mining
• Real estate and rental and leasing
• Professional, scientific, and technical services
• Agriculture, forestry, fishing, and hunting
• Construction
• Government.

Combined these six sectors accounted for 75% of the change in Colorado output in 2013.

There is a significant difference between the composition of the top contributors for the U.S. and Colorado. In part this helps explain why the Colorado economy has outperformed the U.S. economy over the past five years.

Note: There is a slight difference between the national GDP and the national GDP calculated as a summary by state outputs. Details are explained on the BEA website. Also, for methodological reasons, the contributions to absolute growth were calculated using the nominal GDP data.

The Decline in Colorado’s Unemployment Rate – Good and Bad News

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The Bureau of Labor Statistics released their latest job numbers for Colorado earlier today and there were no surprises. Growth continues to be solid and the unemployment rate is trending downward.

It is great to see the overall rate of unemployment drop; however, there is a downside. Barring a recession, the rate is likely to continue to drop to the 4.0% range over the next couple of years and remain at that level for an extended period of time. We have very quickly shifted from an employer’s market to a job seekers market.

The rate of unemployment for some occupations is now below 3.0%, for example, the management and professional occupations. It is good news that business is strong; however, it is bad news because it is not possible to find enough qualified workers to produce goods or provide services.

Since all industries require managers, the shortage of people to fill management occupations crosses all industries. The shortage in some professional occupations is in Colorado’s high-tech sector. It is good news there is growth, but bad if it hurts the local economy.

Nationally, the food preparation industry is another example where there is a substantial decrease in the unemployment rate. Over the past year the rate has dropped from 8.8% to 7.1%. This means it will be more difficult for many of the state’s restaurants to find an adequate number of workers.

As the construction industry has improved, the unemployment rate in the construction and extraction occupations have fallen from 14.3% to 9.8%.

While that is good news, it is estimated that 700,000 construction workers have left the industry. In other words, there is a shortage of trained workers.

The good news that is associated with the declining unemployment rates means there will be greater competition between industries for workers.

Eventually this will result in increased wages. That is good for the workers, but may cause the price of goods and services to increase.

Such is the case in economics, it seems that every story has an upside and a downside.

Colorado is on track to add 71,000 jobs in 2014.

Colorado Remains on Track to Add at Least 71,000 Jobs in 2014

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The state remains on track to add at least 71,000 jobs this year.

The BLS released their monthly employment report for Colorado earlier today. Rather than prepare a sector-by-sector analysis, the following comments evaluate the situation from 30,000 feet.

Colorado has had the perfect winter – snow in the mountains, but not so much that people couldn’t get to there to spend their money and ski. The state has had an excellent ski season which bodes well for hospitality industry employment. Good snow also means good rafting for the summer season.

A strong ski season also bodes well for the construction industry. Nationally, hotels and resorts had delayed repairs and expansions because of the recession. Upgrades and new construction that have been on hold are likely to occur in the months ahead.

A trip to DIA shows the importance of tourism to the state. Progress is being made on the Westin hotel located at the south end of the terminal. As well there are signs the light rail will soon be a reality. That will make it easier for travelers to connect to the metro area, which will further enhance Denver’s image as a place to hold conventions and conduct business.

It also appears the Gaylord project has cleared its latest set of hurdles and will begin construction soon. Shuttle drivers are anxiously telling their passengers where the project will be located.

The fact that Denver is on the short list for the Republican National Convention speaks to the increased reputation Denver is gaining as a place to host conventions. The fact that Colorado is a blue/purple state makes it an even more attractive destination. Wouldn’t the Republicans love to unseat the Democrats at a convention held in the Democrat’s backyard?

The snow and the cold of the winter season have not stymied construction along the Front Range. The state added over 10,000 construction jobs in 2013. Job growth has continued to be strong in 2014. Moving forward, the industry may be challenged to find sufficient workers, as unemployment in the industry has decreased substantially.

The construction industry will remain strong, with most of the growth coming from private sector investment. Despite improvement in tax revenues, the public sector is still not in a position to fund construction – such as schools or institutions.

Road construction has been held back by limited tax collections. One downside to improved fuel efficiency is less fuel is being consumed. The tax rates have not increased to support maintenance and repairs to our transportation infrastructure.

Residential construction will continue to improve, but will not approach the rates of growth that occurred prior to the Great Recession. For a variety of reasons, multifamily growth will remain strong. For example, young buyers prefer to live in the metro areas vs. the suburbs and many of them have high debt levels.

Obamacare enrollment has finally come to a close. For better or worse, the program is officially moving forward and healthcare organizations have greater clarity about how they can operate. They will be challenged by thin margins and will have to constantly be on top of their operations to remain profitable.

The industry continues to evolve rapidly. For example a focus for many organizations is bringing health care to local neighborhoods through urgent care and emergency facilities. The ACA will drastically impact the way healthcare organizations deliver services.

The oil and gas industry will continue to be extremely strong in Northern Colorado. In 2013 the state produced 64 million barrels of oil and about 80% was produced in Weld County. Colorado is one of the country’s top 10 states in terms of oil reserves. There are smaller counties that have enjoyed growth in oil production because of the Niobrara oil field, i.e. the industry is benefitting many parts of the state. Finally, the natural gas industry is strong on the western slope.

The state remains on track to add at least 71,000 jobs this year.

 

Colorado’s Natural Gas Production Declines in 2013

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In 2013 Colorado’s Coal bed methane and natural gas production declined by 5.8%, from 1.7 billion Mcf to 1.6 billion Mcf. The 2013 level of production is similar to 2009. Twenty-six of Colorado’s 38 counties that produce gas posted declines last year.

Three counties account for 81.3% of total production: Garfield, La Plata and Weld.

In 1999 production in Garfield County was 56.9 million Mcf. It rose to 700.1 million Mcf in 2012, but dropped off to 649.3 million Mcf in 2013.

La Plata County has been a leader in production since 1999. In 2003 production peaked at 473.4 million Mcf and has declined gradually since. In 2013 it has fallen to 356.5 Mcf.

Weld County has experienced steady growth between 1999 and 2013, rising from 127.7 million Mcf to 271.8 million Mcf.  Unlike Weld and La Plata counties, Weld County showed solid growth in 2013.

The combined total of the other 35 counties has grown gradually from 1999 to 2013, from 145.1 million Mcf in 1999 to 355.3 Mcf in 2013.

Colorado has 26 counties where there is no gas production.

Natural gas production remains strong in Colorado
Despite the decline in 2013, natural gas production remains strong.

 

©Copyright 2011 by CBER.