A review of the various Colorado economic forecasts for 2011 is encouraging. On a comparative basis, they are generally upbeat. The outlook is for continued improvement in the national economy and ultimately more jobs in Colorado.
Over the past 25 years, the Colorado economy has more closely resembled the U.S. economy (the world’s most diverse). As a result the state’s fortunes have mirrored those of the nation.
For that reason, much attention is given to projections for Real GDP growth. While output is not a leading indicator, Real GDP forecasts provide insight into the factors that will drive change in the national economy in the months ahead.
Overall, most expectations for 2010 have been raised slightly over the past month. The justification for these increases is the buildup of inventories, increased consumption, and improved consumer confidence. These are positive signs that will carry over into 2011.
To review briefly… Currently, most output projections for 2011 are in the range of 1.7% to 3.5%.
On the employment side of the equation, the 2011 outlook range varies from flat, or slightly negative, (Colorado Demography Office, November) to growth in the range of 33,000 employees, or 1.8% (Jeff Thredgold, September). Both OSPB and the Colorado Legislative Council, the two agencies that provide forecasts for the state government, will present their updated forecasts for the state during the second half of the month. CBER takes a middle ground with 15,000 jobs added.
This past week, Congress introduced a potential game-changer. Legislation has overwhelmingly passed the Senate that would extend the Bush tax cuts, reduce payroll taxes, and extend the unemployment insurance benefits. If passed, this legislation has the potential to increase consumer confidence, spur additional spending, strengthen demand, and ultimately add jobs. (At the state level, this may have the potential the push job growth to the upper end of the above mentioned range – 30,000+.)
The downside is that the legislation will significantly increase debt, potentially worsen income equality, increase dependence on financing from foreign lenders, and reduce potential funding for other essential investments that might stimulate long-term growth such as financial support for aerospace and technology, other scientific research, education, homeland security, infrastructure, and health care.
There are two schools of thought. On one hand, it is believed that addition stimulus is necessary and that this legislation along with the recent quantitative easing will make the difference. At the same time, it has been said that the leaders are determined to buy a good economy without regards to the long-term cost at a time when the only solution is time.
Time will tell.
©Copyright 2011 by CBER.