Category: Colorado Economy

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

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

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

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

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

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

Private Sector Real GDP
©Copyright 2011 by CBER.

State Per Capita Real GDP Increased by 1.1% Since 1997

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

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

Within that period there were some differences:

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

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

©Copyright 2011 by CBER.

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

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

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

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

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

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

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

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

©Copyright 2011 by CBER.

Colorado’s Smaller Firms Pay Lower Wages

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

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

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

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

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

©Copyright 2011 by CBER.

Lack of Primary Job Creation May Slow Future Employment Growth

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

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

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

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

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

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

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

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

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

©Copyright 2011 by CBER.

Most Colorado Firms have Fewer than Twenty Workers

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

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

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

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

©Copyright 2011 by CBER.

Colorado Adds 62,600 Jobs in Q1 2013

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A review of 22 NAICS sectors shows that on average, Colorado added 62,600 jobs in Q1 compared to the same period last year.  Only four of the sectors posted losses (Information 1,800; Federal Government 900; Natural Resources 600; and State (Not Higher Education) 100.

The following sectors added jobs at a faster level, Q1 2013 vs. 2012:
Accommodations and Food Services; B-to-B (Not Employment); Retail Trade;  Construction;  K-12 Education;  Wholesale Trade; Health Care; Arts Entertainment, and Recreation; and Other Services.

The following sectors added jobs at the same level, Q1 2013 vs. 2012:
Corporate Headquarters (MCE), Local (Not Higher Education), and State (Not Higher Education).

The following sectors added jobs at a slower level, Q1 2013 vs. 2012:
Private Education; Information; Employment Services; Transportation, Warehousing, and Utilities;  Higher Education; Financial Activities; Federal Government; Manufacturing; Professional, Scientific, and Technical; and Natural Resources and Mining.

While it is great news that most sectors are adding jobs, it may be cause for concern that many of the state’s primary job creators have fallen in the latter category – adding jobs at a level slower than 2012.

©Copyright 2011 by CBER.

2012 CDLE Monthly Employment Numbers Didn’t Reflect Reality

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In 2012, the monthly Colorado Department of Labor and Employment (CDLE ) employment press releases told a story about the economy that did not agree with what happened on the streets.  The initial seasonally adjusted employment data depicted huge swings in employment, ranging from an unbelievable gain of 19,500 jobs in January to an equally absurd loss of 6,900 jobs in June.  This is a range of 26,500 jobs.

The initial data showed losses in two months and no growth in a third. The initial data indicated that job gains only occurred in nine months.

The benchmarked revision, released in March 2013, told a much different story. There were consistent job gains in all 12 months, rather than the erratic job growth portrayed by the initial data.  That range of job growth was 7,300 jobs, from a low of 1,700 jobs added in May to a peak of 9,000 jobs added in October.

The correlation coefficient between the initial data and the March benchmark data is .56. The coefficient of determination is .31. In other words, the relationship between the two sets of data is weak. It is difficult to understand why the initial data set does such a poor job projecting employment growth.

It is important for public and private leaders to have “accurate” data available to make critical business decisions relating to their industry. In this case, it was difficult for consumers to have confidence in the business climate when the story being told by state officials did not reflect what was actually happening on the street. CDLE must revisit its priorities. Publishing credible data is much more important than conducting a media blitz for the sake of gaining exposure for the agency.

©Copyright 2011 by CBER.

CDLE’s Monthly Unemployment Data Misses the Mark in 2012

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Last year, did it  seem like the Colorado unemployment rate didn’t match what was happening on the streets?

For the most part, the initial data, which is used in the monthly CDLE media blitz, told a much different story from the unheralded benchmark revisions released in March. In fact, the correlation coefficient between the initial release data and the March benchmark data is .44. This means there is a relationship between the two data sets, but it is not strong.

The initial data indicated that unemployment rate was flat at 7.8% for the first quarter, had four months of increases up to 8.3%, then five months of declines.

On the other hand, the benchmarked revisions started at 8.3% and dropped in February to 8.2%. The rate stayed at that level until June, when it declined for the last 6 months of the year.  The benchmarked data ended the year at 7.5% compared to 7.6% for the initial data.

Good data is most valuable during times when the economy is the most volatile. The unemployment rate published by the Colorado Department of Labor failed to meet that critical need in 2012.


©Copyright 2011 by CBER.

How Would You Describe Colorado’s 2010 Job Growth of 2.3%?

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The world would be a much better place if economists were not allowed to use thesauruses. Only economists use phrases and terms such as irrational exuberance, the new normal, conundrum, albeit, and exacerbated.  Even worse are their descriptors for the performance of the economy.

Some economists refer to job growth of 2.3% as encouraging, on the upswing, or comparatively modest. Others might describe that same level of growth as dismal, subpar, or in line with expectations.

The state added 51,800 jobs in 2012. In the 73 years that employment data has been recorded for Colorado, 2012 was the 18th best year in terms of absolute job growth.

If you talked to a group of sixth graders, instead of an economist, they would probably smile and give such a performance an enthusiastic thumbs-up.

The 2012 job growth can also be measured in relative terms. In other words, state employment increased by 2.3%. In the 73 years that employment data has been recorded for Colorado, 2012 was the 46th best year of relative growth.

A group of sixth graders would describe that level of growth as follows, “If I did that poorly on a test I would flunk. That sucks!”

It’s your call, how would you rate the 2012 job growth in Colorado? Would you use the verbiage of an economist or the wisdom of a sixth grader?

For more information about the performance of the Colorado economy in 2012 refer to “Review of Colorado Economy – 2012“.

©Copyright 2011 by CBER.