Colorado economic forecast Archives - Page 2 of 3 - Colorado-based Business and Economic Research

Occupy the Labor Market – Shields Foretells Growth in Northern Colorado

March 5, 2012March 5, 2012 horvath Leave a comment

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.

Colorado Economic Forecast Challenges (Education, Industries, Clusters)

January 16, 2012January 16, 2012 horvath Leave a comment

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!

Colorado Economic Forecast – Challenges (Demand and Debt)

January 10, 2012January 10, 2012 horvath Leave a comment

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.

Cber.co Colorado Economic Forecast 2012 – Continued Improvement

December 23, 2011December 23, 2011 horvath Leave a comment

The economy is fragile and there are a number of variables that could alter any forecast. At the risk of sounding like a broken record, 2012 will look a lot like 2011. Colorado will experience below average growth for another year. Cber.co is projecting that we will see real GDP growth of 2.1% to 2.5% in 2012, with employment growth of 27,500 to 37,500 in Colorado. Go to Cber.co for the 2012 Colorado Economic Forecast.

The sectors of the economy can be evaluated in three groups: solid growth, limited growth, and volatile growth. A summary of these analyses for each of the groups follows.

Solid Growth Sectors (About 41% of total employment)

These sectors posted stronger growth in 2011 than any time in the past two decades. Growth will taper off slightly 2012 with the addition of at least 1,500 jobs in each of the following sectors.

Tourism
Private Education and Health Care
Professional and Scientific
Extractive Industries
Wholesale Trade
Employment Services
Higher Education

In total, these sectors will add 26,500 to 32,500 net jobs in 2012.

Limited Growth Sectors (about 26% of total employment)

In 2011 these sectors individually recorded minimal change in their number of employees. Significant change is unlikely in a slow economy.

Personal (Other) Services
Utilities
Retail Trade
Corporate Headquarters (MCE)
State (Not Higher Education)
Manufacturing
Transportation & Warehousing

Combined, these sectors will add 3,000 to 9,000 net jobs.

Volatile Growth Sectors (33% of total employment)
These sectors have either bottomed out, are near the bottom, or have turned the corner. Combined they will shed fewer jobs than in 2011.

Construction
Financial Activities
Information
Federal Government
B-to-B (Not Employment Services)
Local Government (Not K-12)
K-12 Education

Combined, there will be a change of -6,000 to 0 net jobs.

2012 Employment Outlook

Because the economy is still not on a solid foundation, it is reasonable to provide three scenarios for the summation of the above groups: optimistic, most likely, and pessimistic.

Optimistic Scenario
U.S. Real GDP 2.6%+
More than 37,500 Colorado Workers or More

Most Likely Scenario
U.S. Real GDP 2.1 % to 2.5%
+ 27,500 to 37,500 Colorado Workers

Pessimistic Scenario
U.S. Real GDP 1.6% to 2.0%
Less that 27,500 Colorado Workers

If probabilities were to be assigned to each of these scenarios, they would be as follows:
Most Likely 55%
Pessimistic 25%
Optimistic 20%.
At the time the forecast for 2012 was prepared, there was slightly more downside risk.

To access the Cber.co 2012 Colorado Economic Forecast click here.
©Copyright 2011 by CBER.

Leeds School Annual Forecast Calls For Slowdown in Colorado Employment Growth

December 5, 2011December 5, 2011 horvath Leave a comment

The Leeds School of Business released its 47th annual business forecast, calling for the U.S. economy to grow at a faster rate and a modest slowdown in the growth rate of the state economy in 2012. The report projected a sharp increase in U.S. Real GDP growth, from 1.8% to 2.4%. Surprisingly that gain translates into an increase of only 23,000 workers in Colorado. This follows on the heels of job gains of 27,500 in 2011.

Job losses are projected for the Manufacturing, Information, and Financial Activities sector. After manufacturing gains in 2011, it is disappointing to see the projected return to negative growth. Evidently renewable energy, which sparked manufacturing growth in 2011, will either flatten or taper off in 2012. Consolidation in the other two sectors will drive further cutbacks.

According to the Leeds School, 2012 growth will be driven by the Health Care and Professional Business Services sectors. Smaller gains will occur in tourism and construction. It is encouraging to see the Construction sector on the positive side of the ledger again.

Although, the 2011 preliminary employment estimates will not be updated until March 2013; the Leeds estimate of 27,500 additional jobs is reasonable. In evaluating their projections for 2012, it is interesting to see how they fared with their 2011 forecast.

1. The Forum (UCCS) error -2,500
25,000 jobs (10/2/2010).

2. OSPB error -3,200
24,300 jobs (12/2010).

3. BBVA Compass error -5,500
22,000 jobs

4. (tie). Legislative Council error -7,500
19,900 jobs (12/2010).

4. (tie). BBER error -7,500
(15,000 to 24,999) (10/2010).

4. (tie) Jeff Thredgold’s Small Business Index error +7,500
(33,000+) (Autumn 2010).

7. CSU Economics Class error – 8,500
19,000 jobs (11/16/2010).

8. CU Colorado BEOF error -17,400
10,100 jobs (12/6/2010).

9. Demographer’s Office error -27,500
No growth (11/5/2010).

10. Moody’s/Dismal.com error +28,500
56,000 jobs (3/2011).

Like most forecasts, the Leeds projections have historically understated periods of growth and decline. If the Leeds pattern of error continues in 2012, then job gains above 30,000 might be more realistic. For additional information on forecast accuracy click here.

State to Add 28,000 Jobs – State Demography Office

November 11, 2011November 11, 2011 horvath Leave a comment

On November 4, State Economist David Keyser unveiled his annual economic forecast at the 29th Annual State Demography meeting. In his report Keyser stated that the economy remains fragile, but that jobs will be added an a slow rate in 2012. Growth will be in the range of 1.0%, or 28,000 civilian jobs. He projected that more than 50,000 jobs would be added in 2013.

Unemployment will remain high through 2012, about 8.4%. There will be an insufficient number of jobs added to lower the rate significantly. In addition, labor participation rates are low. As jobs are created at a faster rate, the participation rate will pick up. That in turn, will keep the unemployment rate at a high level.

The painfully slow recovery will be extended by the lack of growth in per capita personal income. Stronger income growth is needed to spur on increased demand for goods and services. Real PCPI is projected to grow at 2.8% and 2.2% respectively in 2012 and 2013. On a positive note, the state inflation rate will remain around 2% in 2012 and bump up to 3% in 2013. Rising energy prices will play a role in the increase.

Looking ahead to 2012, Keyser sees tourism and retiree driven jobs as bright spots. As well, agriculture and the extractive industries, particularly oil and gas, will have strong years. In fact Keyser also sees an uptick in construction, as both single family and multifamily permits will more than double. Total permits will approach 30,000, up from about 13,000 in 2010. It should be noted that the mix of permits will be different than in the past. It will include a greater concentration of multifamily units. On the downside, Keyser points to weakness in investment and wealth driven jobs.

Click on State Demography Office for further information about their work.

Colorado Legislative Council – Momentum Building

July 2, 2011May 31, 2014 horvath Leave a comment

In late June the Colorado Legislative Council (CLC) released its quarterly update of the state economy Focus Colorado: Economic and Revenue Forecast. The report included mixed economic news – most of it good.

Nationally, there was reduced optimism compared to the CLC March forecast, with output growth revised downward from 3.2% to 2.6%. The Conference Board and Kiplinger have recorded downgrades of similar magnitude for real GDP. Other revisions include stronger employment growth and improved wage and salary projections.

The analysis of General Fund Appropriation budgets for FY 2010-11, FY 2011-12, and FY 2012-13 illustrates the fiscal challenges facing the state legislature. While funds from various sources are projected to increase, general fund appropriations will remain in the range of $7.2 to $7.3 billion for each of these periods.

On a positive note, CLC has upgraded its 2011 employment outlook from 0.7% to 1.1% or 24,400 jobs. They expect just under 40,000 jobs to be added in 2012. The forecast also points to slightly improved retail trade sales, income growth, and construction activity. On the down side slightly higher inflation is on tap.

The risks to continued growth remain significant. Consumer confidence remains low, constrained by concerns about debt, inflation, monetary policy, and weakness in the housing and construction markets. Despite these concerns, it is generally believed that these are factors that will prevent the economy from growing at a faster rate in the near term. Finally the chances of a recession are thought to be slim, less than 1-in-5.

At last, the majority of indicators are pointing to gradual improvement for the remainder of the year and solid job growth in 2012.

A Tale of Two Colorado Employment Forecasts

April 23, 2011May 31, 2014 horvath Leave a comment

Edgar Fiedler, Assistant Secretary of the Treasury for Economic Policy under Nixon and Ford said, “If you have to forecast, forecast often.” Fiedler’s words are particularly relevant during volatile economic times.

Consider the case of two prominent Colorado forecasts. Both USA Today/Moody’s Colorado and the Leeds School of Business at the University of Colorado prepare composite and sector forecasts for the state.

The two employment forecasts are at opposite ends of the spectrum. Moody’s is most likely too high (2.6%) and CU is hopefully too low (.5%).

The most basic test for measuring forecast accuracy is to determine whether the forecast correctly predicts the direction of the forecast (is it positive or is it negative). CU projects 5 of the 14 sectors will post job losses, while Moody’s says 1 of 14 will shed jobs. Said differently, there is a difference in opinion about the direction of the sectors on these 6 sectors.

There is also great disparity in the magnitude of the forecasts. Projections for only two sectors are remotely similar, with a difference of less than 1% points.

Through Q1, the Office of Labor Market Information reports employment gains of 0.7%.

The country would have to experience a mild double dip to achieve the CU forecast. On the other hand, Colorado would have to add jobs at a rate of at least 3% for the remainder of the year to achieve the Moody’s forecast.

Expect a flurry of forecasts from CU, Moody’s, and others as they try to understand the strength of the recovery.

Colorado Legislative Council – Outlook for the State Improving

March 23, 2011May 31, 2014 horvath Leave a comment

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.

University of Northern Colorado Economic Forecast Points to Slow Growth in 2011

January 18, 2011May 31, 2014 horvath Leave a comment

The economic outlook for Northern Colorado matches that of the state – a slow but, painful recovery, according to Dr. John Green regional economist. In his annual forecast, Green pointed to 3.0% Real GDP growth this year with the possibility of a negative quarter.

On a sobering note he indicated that the labor supply will exceed demand – at least until the last of the baby boomers retires (2029). Green also indicated that the computer revolution has decreased the need for certain occupations, which will maintain a high level of competitiveness in the job market.

Green was not particularly optimistic about the housing market. He felt the housing supply was too high, further price declines are possible, mortgage rates are expected to rise, and that problems within the financial/mortgage industry will remain a problem. Finally he expects inflation to higher in both 2011 and 2012.

Locally, Green’s economic model pointed to flat employment growth in Northern Colorado. He felt that a more likely scenario was for employment to recover slowly throughout 2011 and 2012. Growth will be led by agriculture, the biosciences, clean energy, retail and the hospitality sectors. (On a positive note, NPR recently reported that Vestas plans to add 60 employees at its Windsor facility and begin operations in Brighton in 2011. The Windsor facility has a workforce of about 700 workers).

The high levels of foreclosures will prevent the housing market from gaining momentum. In addition, Green reported that houses under $280,000 are moving whereas more expensive ones are not. On the commercial side, construction is likely to resume in late 2011 at the earliest. Lastly, the number of bankruptcies are on the rise in Northern Colorado.

The NCBR Economic Forecast was held on Jan 6, 2011 at the University of Northern Colorado campus and also featured Mark Snead, Vice President, Economist, and Branch Executive Federal Reserve Bank of Kansas City – Denver Branch and Sandra Hagen Solin of The Capitol Solutions Team .