Tag: Colorado employment

Concentration of State Construction Workers Declining

horvath Leave a comment

Colorado Construction employment peaked in 2006 and has been on a downward path since. Not seasonally adjusted data topped 175,000 jobs in 2006. Today, there are 102,000 workers, comparable to mid-1995.

The large number of foreclosures and reduction in housing prices brought the construction of single family housing to a screeching halt. Approximately 9,500 permits will be pulled in 2011, up from the trough in 2009 (7,231). This is a far cry from the peak in 2004 (40,753).

Because it is difficult for geographically large states to develop distinctive competencies in construction, the concentration or workers, or location quotient (LQ), should be near 1.0. (A location quotient is the ratio. It is the percentage of state construction workers divided by the percentage of U.S. construction workers).

A LQ greater than 1.0 indicates a higher concentration of construction workers, much as the state has had for the past 20 years. On the other hand, a LQ less than 1.0 means Colorado has less of a concentration, much as occurred at the end of the 1980s because of overbuilding.

The state LQ for construction workers remained below 1.0 through mid-1991. It increased for the next 10 years (2001) to about 1.5. In early 2001, the LQ began declining and dropped off sharply for three years (2004). It leveled off for five years, then plummeted again in 2009.

How low will the LQ go? In theory it is reverting to 1.0. As the country recovers from the Great Recession, other sectors will expand at a faster, thus driving the LQ lower. It will rise again when Colorado experiences another strong expansionary phase.

©Copyright 2011 by CBER.

A Tale of Two Colorado Employment Forecasts

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.

©Copyright 2011 by CBER.

The Employment Recession Has Finally Ended

horvath Leave a comment

When the NBER officially announced the end of the Great Recession, the general reaction was, “Oh really?” It was clear to most that while the technical recession was over, the employment recession was not.

More recently, it has been announced that the employment recession has ended, although unemployment remains high. In the case of Colorado, the rate has reached record levels and is higher than the U.S. Again, the general reaction has been, “Oh really?”

Yes, the country is in expansion mode again. (The unemployment rate is dismal, but it is a lagging indicator.)

There are clearly risks to the continued expansion; however, sufficient momentum appears to be in place to sustain growth in the near-term. Arguments supporting the expansion follow…

Mathematically, the recovery has to occur. Over the past three years Colorado had one of the worst performing economies in the country. At some point it has to improve and that time is now. The global economy is likely to expand by 4 to 5% this year and U.S. output growth will increase by at least 2.5%. Given that environment and Colorado’s assets, simple mathematics point to sustained job growth.

The country has experienced 7 quarters of heavily-stimulated Real GDP growth (Q1 2011 data has not been released, but it will be positive). Annualized real GDP growth for this period is in the range of 2.8%. Typically, solid job growth occurs when the economy expands at that rate.

As the recession drew to a close, companies increased output per hour at the expense of labor. The rate of productivity gains peaked in 2009 and 2010. The addition of labor will most likely be necessary for companies to experience further output gains.

As a result, the addition of jobs has begun. Nationally, March 2011 marks the sixth consecutive month of job gains. On average, increases for December 2010-March 2011 averaged 158,000 – not great, but a drastic improvement.

The Colorado growth pattern is a little more sporadic. Beginning in February 2010 job gains have occurred in 9 of the past 13 months and 4 of the past six months. While the path to prosperity is a little bumpy, job gains this year will push total state employment back to the 2001 peak.

Last year, healthcare led the state in job creation. At the end of the first quarter, it is projected to be up about 8,800 workers from a year ago.

The good news is that the sector has been joined by tourism, the extractive industries, and the Professional Business Services (PBS) sector for job creation. At the end of the first quarter, the three sectors will add 25,000 to 30,000 net jobs.
Colorado is coming off a solid ski season which, in part, has helped push tourism employment higher by about 8,200 jobs. Increased traffic at DIA points to solid growth in the industry. High gas prices may work to Colorado’s benefit, if it incents the state’s regional market to enjoy less expensive drive vacations to the state this summer.

The extractive industries comprise a small, but important sector because of the severance taxes  generated and jobs added in other industries. Year-over-year the sector is about 2,100 workers ahead of the same period last year. Sustained growth is likely to continue, particularly if the Niobrara oil patch proves to be a worthy producer.

The PBS sector has added about 8,200 workers over the past year. It is a mixed blessing that more than 40% of that increase is derived from Employment Services, i.e. temporary help. While these are typically not high paying jobs, gains in this subsector often point to expansion of other areas.

While the state may be at three years from recovering all the jobs lost in the Great Recession, we are finally on the path to that recovery. Sustainable growth, at some level, is on tap for Colorado.

©Copyright 2011 by CBER.

Gap between U.S. and Colorado Unemployment Widens

horvath Leave a comment

The Colorado economy is a lot like the final two weeks of the 2010 Colorado Rockies baseball season – very ugly.

On a positive note, the word on the street is that both are going to be better in the near term (despite at opening day loss in extra innings).

On March 25, the Colorado Office of Labor Market Information (LMI) announced that the statewide seasonally adjusted unemployment rate had risen to 9.3% in February (the non-seasonally adjusted rate was 9.7%). By comparison, the national seasonally adjusted rate dropped further to 8.9%. Prior to January, the last time Colorado’s rate was higher than the U.S. was September 2005.

Seasonally adjusted unemployment rates for the state’s Metropolitan Statistical Areas (MSAs) are:
• Boulder  7.3%
• Fort Collins 7.9%
• Denver 9.4%
• Colorado Springs 10.1%
• Greeley 10.7%
• Grand Junction 11.0%
• Pueblo 11.1%.
These metros areas account for about 86% of the Colorado labor force. A majority of the state MSAs have unemployment at or above 9.4%.

There is more to the story…

Through February, year over year, seasonally adjusted data points to weak employment gains of 13,800 workers.

The areas of net job growth are:
• 11,400  Private education and health care
• 8,200  Tourism
• 8,200  Professional business services
• 2,200  Trade, transportation, and utilities
• 2,100  Oil, gas, and mineral extraction
• 800  Personal services
Employment in these 6 sectors is about 63% of all workers and 57.3% of total wages. The increase is about 32,900 workers.

The areas with continued declines are:
• -8,900 Construction
• -3,900 Financial Activities
• -3,200 Information
• -2,600 Government
• -500 Manufacturing
These 5 sectors have shown losses of 19,100.

It is good news that there is an increase in net jobs; however, there are 3 areas of concern:
• The weak level of net job growth is being driven by a reduction in job losses rather than a significant increase in job gains.
• Many of the jobs that are being added are not primary jobs.
• Many of the jobs being added pay lower wages and have less on an impact on the economy.

So, are we headed for continued improvement and another Roctober or lackluster economic growth and another October watching other teams play in the World Series? A few months from now we will have a much better idea where the economy and Rockies are headed.

©Copyright 2011 by CBER.

Colorado Legislative Council – Outlook for the State Improving

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.

©Copyright 2011 by CBER.

The Lost Decade – Colorado Sheds A Quarter Million Jobs As a Result of Recessions

horvath Leave a comment

This topic is being revisited (last discussed October 1, 2010). In early March, the Bureau of Labor Statistics released benchmark revisions for the Current Employment Statistics (CES) series for 2009 and 2010.

The Lost Decade (January 2001 through December, 2010)

  • Two recessions
  • 69 months of job gains
  • 51 months of job losses
  • Net loss 28,800 jobs over ten years

Now that the revised data is in, the employment pattern for the 10 years ending this past December is clear: DOWN, UP, DOWN, UP.

The recession, as defined by NBER, is irrelevant.

DOWN

The employment situation started off bad in January 2001. And it stayed bad for 30 months (this includes the 2001 recession).

NOTE: More jobs were lost in the 22 months in the months before and after the recession, as defined by NBER than during the 8 months of the recession (March through October 2001).

Net job losses (from peak to trough) -103,600.

UP

Beginning in July 2003, employment turned positive. Steady gains occurred over the next 58 months.

NOTE: Colorado was late entering the Great Recession (December 2007 through May 2009). The state posted net job gains of 11,600 during the first 5 months.

Net job gains (from trough to peak) +214,900.

DOWN

NOTE: During the last 13 months of the Great Recession, the state lost 109,500 net jobs.

The trend of monthly losses began in May 2008 and continued for 21 months, 8 months past the end of the recession.

Net job losses (from peak to trough) –151,100.

UP

Employment turned positive in February 2010 and posted slight gains for the remaining 11 months in 2010.

Net job gains (from trough to peak) +10,900.

NET LOSS 28,900 JOBS FOR THE TEN YEARS 2001 through 2010!

 

©Copyright 2011 by CBER.

Colorado Unemployment Rate Tops the U.S.

horvath Leave a comment

On March 10th, the Colorado Office of Labor Market Information (LMI) announced that the statewide seasonally adjusted unemployment rate reached 9.1% in January. By comparison, the national rate dropped to 9.0%. The last time Colorado’s rate was higher than the U.S. was September 2005.

These results are further indication that the state is lagging the nation in its recovery. Over the past year, the
national rate has declined, while the state rate has increased slightly.

A review of the 64 counties shows that 35 have a rate less than the state (9.9% non-seasonally adjusted). In
several counties with small labor forces there is unemployment of about 20%. In other words, both urban and rural counties have not been spared.

Colorado has 7 Metropolitan Statistical Areas (MSA) that cover 17 counties and account for 86% of the labor force. The unemployment rate (non seasonally adjusted) in 9 counties is less than the rate for the state.

A review of unemployment rates by MSA shows that the Denver-Aurora is the same as the state, whereas Boulder-Longmont and Fort Collins-Loveland fall below the state. The remaining four MSAs have rates (Greeley, Pueblo,Colorado Springs, and Grand Junction) above the state.

In addition, Colorado has seven Micropolitan Statistical Areas (MCAs) that cover 8 counties. About 5.5% of the
labor force works in these locales.

Five of the seven MCAs have unemployment lower than the state average (Durango, Edwards, Fort Morgan, Silverthorne, and Sterling). On the other hand, unemployment in Canon City and Montrose is well above the state average.Unemployment in 5 of the 8 counties is below 9.9%. In the remaining 39 rural counties, 21 had unemployment rates lower than 9.9%.

The aggregate rate of unemployment was greatest in the MSAs (9.94%), followed by the MCAs (9.70%), and the rural counties (9.58%). About one-third of the counties have unemployment below 8.0%.

On a more positive note, limited job creation began in the second quarter of 2010. If that growth continues, the state rate is likely to follow the national trend, and decline as the year progresses.

©Copyright 2011 by CBER.

Michael Porter Highlights Colorado’s Strengths and Weaknesses in New Study

horvath Leave a comment

Harvard Business Professor Michael Porter is widely recognized for his research in the competitiveness of cities, states, regions, and nations. His studies have emphasized clusters, specialized skills, infrastructure, and commerce as distinguishing factors that delineate the prosperity of these areas.

Most recently Porter measured the performance of clusters within each of the states at the National Governors Association Winter Meeting 2011 (February 26). At that meeting he talked about strategies that would allow the states to become more competitive in the future .

In addition, Porter prepared economic profiles for each of the 50 states. The 50-slide PowerPoint presentations, which were released at the NGA meeting, are formatted in a way that allows for easy comparisons between the states.

For example, it is to match Colorado’s biotech cluster against others in the nation. In 2008, Colorado was ranked 25th in biopharmaceuticals, with 2,032 employees and 11th in medical devices with 13,440 workers.

Each presentation begins with a performance snapshot with a position and trend ranking, by quintile, in five key areas. As well, Porter identified the “strong” clusters for each state.

Colorado’s overall prosperity rating was in the second quintile; however, it was rated in the 4th trend quintile. Essentially the state has strong output per capita; however, it is trending downward. This might suggest Colorado’s competitive position might be in jeopardy.

A second area of possible concern is labor mobilization (labor force/civilian population). On a positive note, Colorado is in the top ten; however, it is in the fourth trend quintile. Again, this is a strength that is trending downward.

There is better news for Productivity (average private wages) and Innovation (Patents per 10,000 workers). Colorado was ranked in the second quintile in both strategic categories. From a trend perspective it was also in the second quintile. These are areas where the state has maintained its strengths and remained competitive.

Finally, the state was ranked in the second quintile for cluster strength and in the top trend quintile. This points to increased strength, as defined by greater market share, in its “strong clusters”.

Porter identified Colorado’s top five clusters as:
• Business Services
• Distribution Services
• Entertainment
• Oil and Gas Products and Services
• Aerospace Vehicles and Defense.

The presentation highlights subtle strengths and weaknesses not mentioned in this brief overview. As such, it is recommended reading for any one interested in understanding the opportunities and challenges Colorado might face moving forward.

 

©Copyright 2011 by CBER.

Has the Colorado Job Creation Machine Stalled?

horvath Leave a comment

Most analyses of Bureau of Labor Statistics (BLS) employment data report net change in the number of workers. For example, Colorado lost about 25,000 jobs in 2010.

BLS also produces data series, based on the Quarterly Census of Employment (QCEW – private sector only), that report the following employment flows:
• employees added (establishments were opened); in 2009 this total was 101,869.
• workers added (firms currently in business); in 2009 this total was 369,773.
• employees lost (establishments contracted); in 2009 this total was 472,895.
• workers lost (firms closed); in 2009 this total was 111,574.
The sum of the first two categories measures gross job gains, whereas the sum of the latter two categories is gross job losses. In 2009 there was a gross gain of 471,642 jobs and a gross loss of 584,469 jobs.

The net change in employment is the difference between job gains and job losses. In 2009 the net change in employment was -112,827 workers. Total QCEW private employment for 2009 was 1,828,955 workers.

The magnitude of the net jobs lost is striking. It is a result of reduced job creation and increased job losses – the perfect storm on steroids. It should also be noted that in both 2008 and 2009 more jobs were lost by firms closings than were added by firms that were opened.

The following points stand out in an analysis of the jobs gained and jobs lost data:
• During the “go-go 90s” there was a high level of gross jobs lost and an even higher level of gross jobs added. There was a high level of job churn accompanied by strong net gains in employment.
• For the period 2002 through 2004, weak gross job gains were offset by much stronger gross job losses. There were net job losses of about 50,000 workers for this period.
• Gross job gains were comparatively weak for 2006 through 2008, although the state added about 170,000 net jobs over that period. There was a net increase in employment because of a decline in the number of gross jobs lost. In other words, job churn subsided. Workers were content to stay in the jobs they held at the time and fewer jobs were created, which increased competition for the available openings.
• It is especially disturbing to see the decline in the number of employees working for firms that were opened.
At this point, data for 2010 is available through mid-year. The good news is that there seems to be significant improvement in the number of gross jobs lost. On the downside, there is not corresponding improvement in the number of gross jobs gained.

For the moment it appears that Colorado’s wild-west entrepreneurial job creation machine seems to have stalled!

©Copyright 2011 by CBER.

Hickenlooper Proposes Closure of Fort Lyon Correctional Facility

horvath Leave a comment

Governor Hickenlooper recently proposed closing the Fort Lyon Correctional Facility as part of cost cutting measures to bring the state budget into balance. The facility employs roughly 200 workers.

For those in the metro area companies come and go and the loss of a company with 200 employees often goes unnoticed, unless a person works there. Approximately 1.2 million people work in the Denver-Aurora-Broomfield MSA, so a loss of 200 jobs would be 0.02% of total employment- not even a bleep on the radar. Bent County residents obviously have a different perspective.

A short lesson about the county will provide insight into their point of view. Bent County is located in Southeast Colorado east of Pueblo, between Otero and Prowers County. Approximately 6,500 people call the county home. Between 2000 and 2009, Bent County population actually increased by about 650 people, or an annualized rate of 1.2%. While this is less than the rate of growth for the state, at least it is positive. Not all rural counties in Colorado have seen their population expand over the past decade.

A review of Census data (Quickfacts) shows that there are about 2,000 households in the county and 2,400 housing units. There is a higher concentration of minorities (Black, American Indian, and Hispanic – terms used by the Census Bureau ).

About 65% of the population (which include prison inmates) are male. As is the case with many other rural counties, Bent has a lower concentration of people under the age of 18 and a higher percentage of workers over the age of 65.

In 2008, median household income for the county was about $33,000 compared to $57,000 for the state. As might be expected from these income levels, approximately 29% of the population lives below poverty level.

With that background let’s look again at the importance of the correctional facility. Fort Lyon is Bent County’s second-largest employer. (Note: Many Colorado rural counties are the home to correctional facilities).

Data from the Colorado Office of Labor Market Information  (QCEW) reported that in 2009, Bent County has 1,303 covered workers (workers on payrolls who paid unemployment insurance) in 88 establishments. Only 560 are private sector employees.

At that time the top employment sectors were as follows: local government (451), state government (234), retail (68), hotels and restaurants (65), federal government (58), health care and social assistance (49), and finance and insurance (45). In December, 2009 the county unemployment rate was 8.7% (LMI). The loss of 200 employees in this economy would be devastating!

Should Governor Hickenlooper rescind his recommendation to eliminate the Fort Lyon facility? If so, what other programs can be cut or eliminated to keep the facility in operations? There is no right answer and there is no winner in this situation.

It’s a tough time to be a governor!

 

©Copyright 2011 by CBER.