Tag: Colorado employment

Construction Finally on the Uptick

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Construction was hit harder than most employment sectors during the Great Recession. For a number of years Colorado has had an oversupply of construction workers, relative to other industries. That has significantly lengthened the time of recovery.

Nationally, seasonally adjusted employment peaked in April 2006 at 7,726,000 workers. The number of workers declined with the Great Recession and appears to have bottomed out in January 2011 at 5,456,000. A total of 2,270,000 workers lost their jobs over that 57 month period. Since bottoming out, only 95,000 construction jobs have been added in 14 months.

There was a similar pattern for Colorado, but not as severe. Construction employment peaked in July 2007 at 170,100. It declined with the recession and appears to have bottomed out at 110,400. A total of 59,700 construction jobs were lost over this 47 month period. Since reaching bottom, 6,500 construction jobs have been added in nine months.

To put this in perspective, national tourism employment moved from peak-to-trough-to-peak in 50 months, while it took Colorado tourism employment 44 months to make the same journey. It has taken the Construction sector longer to go from peak-to-trough than it took the tourism industry to lose jobs and regain them.

On April 24, 2012 Aldo Svaldi of the Denver Post reported that the number of homebuilders in the state declined by 80%, a decrease of 2,903 to 616 builders.

Holy Moly Batman!

For additional information on the overall economy go to the cber.co website.

For additional information on the construction industry check out the cber.co report,Colorado’s Construction Industry – Impact Beyond the Hammers and Nails .

 

©Copyright 2011 by CBER.

Leisure and Hospitality Leads the Recovery

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The Leisure and Hospitality (L&H) Sector has played a critical role in the recovery of the national and state economies. It is important because of the number of jobs added and because it is part of the economy in every county in the state.

Nationally, seasonally adjusted employment peaked in December 2008 at 13,560,000 workers. The number of workers declined with the Great Recession and in March 2012 employment surpassed that previous peak, reaching 13,587,000. It took 50 months for the sector to go from peak-to-trough-to-peak.

There was a similar pattern for Colorado. L&H employment peaked in May 2009 at 276,000. L&H Employment declined with the recession and in January 2012 it surpassed the prior peak at 277,800. It took 44 months for the state sector to recover.

While 50 and 44 months is a long time, it is possible that the overall state economy may take close to six years before it reaches the 2006 peak.

Nationally, the time from peak to trough was 24 months, or two years. During this time 637,000 jobs were lost. The recovery period was slightly longer, 26 months.

At the state level, the time from peak-to-trough was 20 months. About 16,000 jobs were lost during this period. The recovery period was 24 months.

It is depressing to consider some of these number; however, it is even more unsettling to think that these numbers describe one of the state’s stronger sectors.

For additional information on the overall state economy go to the cber.co website.

©Copyright 2011 by CBER.

Colorado’s Recovery is Broad Based and Includes Primary Jobs

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Within the past month, there have been several reports citing how Colorado has one of the faster growing economies in the country. This is good news, but it must be remembered that for several years local economists were saying, “Thank God for Nevada, if it weren’t for them Colorado would have the worst economy in the country.” Part of the reason for the comparatively “strong growth” is about 150,000 jobs were lost in the Great Recession and our current tepid growth looks great compared to job losses.

Case in point…  Job losses in Colorado’s Construction sector have been so severe that employment is at mid-1990s levels. The Manufacturing sector declined for 12 years. It is just now beginning to add jobs again. Despite the build out in the Retail Trade sector, employment has been volatile over the past decade. Today it is similar to the late 1990s and retail Trade jobs are up 4,600.

With increased population in the state growth is inevitable in these sectors.

The real story is that the Colorado recovery is broad-based and it is includes primary jobs (jobs that create wealth).

The recovery has been led by the Tourism and Health Care sectors. They are sectors that add jobs in all areas of the state. There are very few primary jobs in either sector. They account for 19,000 of the 47,300 jobs added when comparing Q1 2012 to Q1 2011.

The Manufacturing and Professional Scientific sectors have added a combined total of 7,700 jobs. Many of these are primary jobs.

Colorado has added 3,900 jobs in the Employment Services sector – The addition of temporary jobs is considered a harbinger that the economy is improving.

Only two sectors recorded significant job losses during this period. Combined, the Information and Local Government, excluding schools, sectors declined by 5,700 jobs.

For additional information go to https://cber.co.

©Copyright 2011 by CBER.

BLS reports 33,000 Colorado jobs added in 2011

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The Bureau of Labor Statistics recently released its benchmark revisions for 2011 that show Colorado added 33,000 jobs in 2011. The updated total is nearly double the projected job growth of the monthly data presented throughout the year.

After peaking in 2008, approximately 150,000 jobs were shed in 2009 and 2010. Employment declines were so severe that total employment dropped below the 2001 peak. Finally, in 2011, Colorado employment again surpassed the high point in 2001.

If Colorado employment increases by about 1.7% in 2012 and 1.9% – 2.2% for the 2 years after that, it will reach the 2008 peak in 2014. In other words, it will take six years to return to the 2008 peak.
By comparison, it took 4½ years for employment to return to the 2001 peak after jobs losses associated with the 2001 recession. (Some economists are saying the full recovery will return to peak just in time for the next cyclical downturn).

Here’s to quicker recoveries from future recessions.
©Copyright 2011 by CBER.

Where are all the Startups? – Are they Really a Job Creation Machine?

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Suppose your investment advisor called you and said, “Have I got a deal for you? I will sell you 12,027 shares of a fund at $6.10 per share. The total cost to you is only $72,918. Sound good?”

Your advisor continues, “This is a killer fund. In 17 years, the price per share will rise from $6.10 to $18.30. And, in full disclosure I am required to tell you the fund will buy back a few shares along the way.  Sound good?

You reply, “Sounds great, but could you tell me more about the number of shares that will be bought back along the way?”

The advisor nervously answers, “Well, you see…the price per share increases from $6.10 to $18.10. Sound good?” Very quickly the advisor continues, “And the fund will only buy back 9,348 shares. You will still have about 22%-23% of your original shares. Sound good? Can you sign right here?”

You say, “Let me get out my calculator. That means the value of the fund is only $48,987 after 17 years. Sound good?”

The manner in which jobs are created by startups has a similar rate of return. (For purposes of this discussion, startups will be defined as companies less than one-year old that have employees. The Bureau of Labor Statistics (BLS) has tracked the performance of these companies since 1994.)

From the BLS data it is possible to look at the number of firms, average firm size, total employment, and survival rates for the firms formed in 1994. The BLS data shows:

Number of Firms
• In 1994 there were 12,027 firms.
• In 2011 there were 2,679 firms.
Average Firm Size
• In 1994 the average firm size was 6.1 employees.
• In 2011 the average firm size was 18.3 employees.
Total Employment
• In 1994 the firms had 72,918 employees.
• In 2011 the firms had 48,987 employees.
Survival Rate
• In 1994 the survival rate was 100%.
• In 2011 the survival rate was 22.3%.

Do the numbers look familiar? If not, revisit the opening paragraphs.

Startups are critical to future of our country for a variety of reasons; however, they may not be job creation machine that we have been led to believe. They add jobs in year one, but that base declines in year 2 and erodes further over time. Sound good?

With the decline in the number of startups and survival rates, this is a particularly frightening model for economic growth in the state!

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

 

©Copyright 2011 by CBER.

Where are all the Startups? – Jobs Created Have Increased at a Declining Rate Since 1999

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Startups, entrepreneurs, and small businesses have been the focal point of discussions about how the U.S. and Colorado will fully recover from the 2007 recession. As part of this dialogue, there is a wealth of information and misinformation about the importance of these businesses to the economy.

So what do the numbers say?

The first step in analyzing the growth of startups is to define them. The second step is to find a data set that tracks changes based on that definition.

There are many ways to define an entrepreneurial business venture or a startup company that include:
• No formal structure.
• Type – Sole proprietorships or LLCs.
• Funding – Microenterprises.
• Size – A company with 1-4 employees.
• Age – A company less than 1 year in age with employees.

For purposes of this discussion, startups will be defined as firms less than one-year in age that have employees. By definition, sole proprietorships, microenterprises, or LLCs may be included if they meet these criteria. The Bureau of Labor Statistics produces data about startups defined in this manner. BLS reports the number of firms and employees based on a year ending on March 31. For example, 1994 data includes startups for the period April 1993 through March 1994.

A review of the data shows the number of jobs created at startups has increased at a declining rate since 1999 for both Colorado and the U.S.

In 1999, 94,100 jobs were created at Colorado startups. That number decreased every year through 2010. That year the new group of startups created only 47,100 jobs. A slight increase was posted in 2011.

A similar pattern occurred at the national level. In 1999, 4,703,000 employees worked at U.S. companies started that year. By 2010, the number of employees working at companies that began operations that year had fallen to 2,457,000. A slight increase was recorded in 2011.

Colorado has a track record for having world renowned startups. Clearly good things have come from Colorado entrepreneurs and startup companies; however, by this definition, Colorado may not be the entrepreneurial Mecca that we are led to believe.

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

©Copyright 2011 by CBER.

Cber.co Colorado Economic Forecast 2012 – Continued Improvement

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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

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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.

 

©Copyright 2011 by CBER.

Challenges Facing Colorado Manufacturers in 2012

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Colorado’s seasonally adjusted manufacturing employment peaked at 192,700 employees in April 1998. On an annual basis, it has been declining since. As 2011 comes to an end, it appears that net jobs will be added for the first time in Colorado in 13 years.

Some economists are projecting that manufacturing job losses will resume in 2011. Manufacturers face a number of challenges. The following questions point to some of the challenges they face in terms of demand, the workforce, and the industry.

Demand
• Will there be sufficient demand for manufactured goods given the fact that consumers have received minimal increases in wages and disposable income?
• Will manufacturers be able to pass on increased input costs to customers and maintain demand?
• How much longer can shipments and output increase without significant increases in the size of the workforce?
• What impact will personal and private sector debt have on demand?

Workforce
• How much longer will productivity increase without adding labor?
• What is being done to address the mismatch between the skills that manufacturers need and a different set of skills in the workforce?
• What is the role of the older worker in the workforce? Are there sufficient workers in the pipeline to replace them when they retire?
• Has Colorado lost its pool of trained workers as a result of the Lost Decade?
• What is being done to educate high school and college students about the importance of learning skills that can be transferred between professions?
• What type of training opportunities are available to meet the changing needs of the manufacturing workforce?

The Industry
• How will changes in the manufacturing sector affect the growth of Colorado’s high tech cluster?
• Has Colorado lost its critical mass of manufacturers?
• Has Colorado lost the supply chain associated with the decline in its manufacturers?
• What is being done to retain existing manufacturers and attract new manufacturers?
• How will second and third generation manufacturers transition their businesses into the future?

For additional information on the Colorado manufacturing sector go to https://cber.co. or click on Colorado Manufacturing Update.

 

©Copyright 2011 by CBER.

Sectors Losing Jobs Have Higher Wages

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Through the first 8 months of the year there are 7 sectors of the economy that have lost a net total of 25,100 jobs, compared to the same period last year.

Construction                                     -8,800
Financial Activities                            -4,200
Federal Government                         -3,400
Information                                       -3,400
B-to-B (Not Employment Services)  -2,600
Local Government (Not K-12)         -1,600
K-12 Education                               -1,100

These sectors account for 33.3% of total employment. Average wages for this mix of workers is about $56,600 compared to average annual wages for all employees of about $47,900 (calculations based on 2010 QCEW data). In other words, the average wages for the sectors that are losing jobs is significantly greater than the overall state average, based on 2010 data.

The 2011 prognosis is that each of these sectors will show job losses for the year (2011) and that average annual wages for the group will remain well above the overall state average.

For a comprehensive review of the Colorado economy visit the CBER website.

©Copyright 2011 by CBER.