The Colorado Legislative Council (CLC) recently released its quarterly update of the state economy Focus Colorado: Economic and Revenue Forecast. The report was released in mid-March, at a time when it appears that Q1 2011 employment will be approximately 15,000 jobs higher than Q1 2010. It is great to hear that net employment is again trending upward; however, state employment remains below the peak 2001.
Increased employment is good news for the state coffers!
The Q4 2010 forecast pointed to a budget shortfall of $1,015 million. Because Colorado is required to have a balanced budget, it became necessary to significantly reduce spending for K-12 education and other programs.
Over the past year, there has been an increase in consumption and private sector employment that now appears to be sustainable, hence justification for adjusting the revenue forecast upward. Projections for FY 2010-11 were raised by $116 million, while revenues for the subsequent two years were upped by $99 million and $105 million respectively.
The combination of budget cuts and revenue increases point to a much lower projected shortfall, $450 million, for FY-2011-12. This is good news, but…
Nationally, CLC is calling for real GDP growth of 3.2%, similar to Q4 2010. After three years of net job losses, employment will increase by 0.4% to about 130.3 million jobs. Unfortunately, average annual unemployment for the year will be 8.7%.
At the state level, CLC projects population growth of 1.6% or about 78,000 people. This reflects a reduction in net in-migration to less than 40,000.
Wage and salary employment will post gains of 0.7%, or about 16,000 workers. While this growth is encouraging, it is not enough to significantly lower the rate of unemployment. Unemployment of 8.8% will be slightly higher than the national rate.
Retail sales are projected to record gains of 4.2%; however, inflation (2.3%), will account for more than half of that gain. Retailers will remain challenged to maintain profitability. Finally, single family building permits will be 15,300, slightly higher than in 2010.
The risks to continued growth remain significant. Consumer confidence is fragile and talk about a double-dip has resurfaced. Constraints facing Colorado include a painfully slow housing recovery, rising food and energy prices, and continued concerns about the banking system.
While the picture painted by CLC is certainly not a bright one, it is clearly much more encouraging.
©Copyright 2011 by CBER.