Tag: Economy

Will Colorado Output Continue to Expand as Slower Rate than U.S.?

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Between 1997 and 2012, the Private Sector Real GDP and job growth for Colorado outpaced the nation.  For this period, data released by the Bureau of Economic Analysis and the Bureau of Labor Statistics shows:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and private sector wage and salary employment expanded at a rate of 0.5%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1% and private sector nonfarm jobs grew at a rate of 0.9%.

More recently, the data tells a different story.  Colorado did not fare as well as the nation between 2009 and 2012.  While the rate of job growth was similar, U.S. output expanded at a faster rate.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and private sector wage and salary employment expanded at a rate of 1.1%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2% and private sector nonfarm jobs grew at a rate of 1.1%.

Time will tell whether the Colorado output will continue to grow at a slower rate than the U.S. or if this is a short-term variance that will reverse itself in 2013 or 2014.

Private Sector Real GDP
©Copyright 2011 by CBER.

State Per Capita Real GDP Increased by 1.1% Since 1997

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There are many data sets that can be used to evaluate the performance of the state and national economy. One of those metrics is Per Capita Real GDP. This measure is derived by dividing real output by the population.

For the period 1997 to 2012, Per Capita Real GDP for Colorado and the U.S. grew at essentially the same rate, 1.11% and 1.13% respectively.

Within that period there were some differences:

  •  Between 1997 and 2001 the Per Capita Real GDP for Colorado increased at an annualized rate of  3.88% compared to 2.49% for the U.S.
  •  Between 2001 and 2012 the Per Capita Real GDP for Colorado increased at an annualized rate of  0.13% compared to 0.64% for the U.S.
  • Between 2009 and 2012 the Per Capita Real GDP for Colorado grew at an annualized rate of 0.58% compared to 1.39% for the U.S.

During the final years of the go-go 90s, Per Capita Real GDP for the state increased at a faster rate than the nation.  Since the 2001 recession, the nation has outpaced the state.

©Copyright 2011 by CBER.

Tepid Job Growth Continues

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When the Bureau of Labor Statistics announced (June 7th) that 175,000 jobs were added in May the stock market rose by 200+ points.  While the number of jobs added in May exceeded expectations, a significant downward revision in April offset those gains.

Said differently, the number of jobs added in May was comparable to the monthly average for 2011.  It is difficult to explain how that level of job growth could drive the market up.

The good news is that jobs are being added at a steady, albeit tepid pace.

On average, the U.S. has added 189,200 jobs per month in 2013. This compares to +185,000 workers in 2012 and +175,000 workers in 2011.  In other words, job growth continues to be lackluster, but well above the average for 2010 (+85,000) and 2009 (-421,000).

At this rate, U.S. employment will return to the 2008 peak some time in 2014.

©Copyright 2011 by CBER.

Colorado’s Smaller Firms Pay Lower Wages

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As discussed in the blog post Most Colorado Firms have Fewer than Twenty Workers, BLS data shows that Colorado has about 171,000 private sector firms.  Only 238 of those firms, or 0.1%, have 500 or more workers.  There are just under 19,000 firms, or 11.0%, with 20 to 499 workers. The majority of firms have fewer than 20 workers. Almost 152,000 firms, or 89%, are in this category.

In Q3 2012, Colorado’s private sector firms paid about $23.1 billion in payroll. About $13.0 billion, or 56.4%, is paid to workers at firms with 20 to 299 employees.  About $6.2 billion, or 26.8%, is paid to companies with fewer than 20 workers. Finally, total wages at the firms with 500 or more workers is 3.9 billion, or 16.8% of total wages.

In other words, about 17% of total wages are paid at 0.1% of the state’s firms (the largest). Meanwhile, about 27% of the state’s wages are paid at 89% of the firms.  Higher wages are paid at firms with more employees.

Average annual wages for firms with less than 20 workers is $43,304, firms with 20 to 499 workers have average annual wages of $47,423 and firms with 500 or more workers have average annual wages of $65,048.

Clearly, large and small firms are important to the economy for different reasons.

©Copyright 2011 by CBER.

Recovery from Recession Led by Large Companies

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Large and small companies have had different employment patterns over the past 7-8 years.

According to employment data produced by ADP, about 17.6% of total private sector workers were employed at small companies, those with 1 to 19 workers, in January 2005. Companies with 500+ workers accounted for 17.1% of private sector employment.

Between 2005 and April 2013 the small companies expanded at a faster rate. The most recent ADP data shows the smaller companies currently account for 18.3% of private sector workers and the larger companies account for 15.9%.

The small companies had the least number of workers in January 2005. Jobs were added until July 2008, when they peaked. Employment tapered off slowly until December 2010. The number of jobs has been on the rise since.

Employment at larger companies increased slowly from January 2005 until March 2006. At that time employment began to taper off and declined for six years. Steady increases have occurred since March 2010.

The Great Recession officially ended in June 2009. Since then the small companies have added about 1.03 million workers and the large companies have added about 1.58 million.  In other words, large companies have played a greater role in the recovery than the small companies.

©Copyright 2011 by CBER.

Colorado’s Dwindling Concentration of Manufacturers a Concern for the State

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Manufacturing is a critical part of Colorado’s economy.  Between 1998 and 2010 manufacturing employment decreased significantly in the state and the nation. Despite a slight rebound in jobs, Colorado’s concentration, or location quotient (LQ), of manufacturing workers has not bounced back.

A LQ is the local concentration of workers in a particular sector relative to the concentration in another area (typically the other area is the United States). If the local concentration is the same as the national concentration, the LQ=1.

The Colorado LQ for manufacturing is .645.

In December 2012:

  • 5.72% of Colorado employment was manufacturing
  • 8.87% of U.S. employment was manufacturing.
  • 5.72% / 8.87% = .645

Colorado has a lower concentration of manufacturing that the U.S. In short, this is important because many manufacturing jobs have higher than average pay. As well, segments of the manufacturing industry are critical components of the state’s high tech cluster.

For additional information on the state’s manufacturing sector check out Colorado Manufacturing Update Analysis of Employment Data Through 2012. It is available in the Special Reports section at https://cber.co.

©Copyright 2011 by CBER.

2012 CDLE Monthly Employment Numbers Didn’t Reflect Reality

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In 2012, the monthly Colorado Department of Labor and Employment (CDLE ) employment press releases told a story about the economy that did not agree with what happened on the streets.  The initial seasonally adjusted employment data depicted huge swings in employment, ranging from an unbelievable gain of 19,500 jobs in January to an equally absurd loss of 6,900 jobs in June.  This is a range of 26,500 jobs.

The initial data showed losses in two months and no growth in a third. The initial data indicated that job gains only occurred in nine months.

The benchmarked revision, released in March 2013, told a much different story. There were consistent job gains in all 12 months, rather than the erratic job growth portrayed by the initial data.  That range of job growth was 7,300 jobs, from a low of 1,700 jobs added in May to a peak of 9,000 jobs added in October.

The correlation coefficient between the initial data and the March benchmark data is .56. The coefficient of determination is .31. In other words, the relationship between the two sets of data is weak. It is difficult to understand why the initial data set does such a poor job projecting employment growth.

It is important for public and private leaders to have “accurate” data available to make critical business decisions relating to their industry. In this case, it was difficult for consumers to have confidence in the business climate when the story being told by state officials did not reflect what was actually happening on the street. CDLE must revisit its priorities. Publishing credible data is much more important than conducting a media blitz for the sake of gaining exposure for the agency.

©Copyright 2011 by CBER.

How Would You Describe Colorado’s 2010 Job Growth of 2.3%?

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The world would be a much better place if economists were not allowed to use thesauruses. Only economists use phrases and terms such as irrational exuberance, the new normal, conundrum, albeit, and exacerbated.  Even worse are their descriptors for the performance of the economy.

Some economists refer to job growth of 2.3% as encouraging, on the upswing, or comparatively modest. Others might describe that same level of growth as dismal, subpar, or in line with expectations.

The state added 51,800 jobs in 2012. In the 73 years that employment data has been recorded for Colorado, 2012 was the 18th best year in terms of absolute job growth.

If you talked to a group of sixth graders, instead of an economist, they would probably smile and give such a performance an enthusiastic thumbs-up.

The 2012 job growth can also be measured in relative terms. In other words, state employment increased by 2.3%. In the 73 years that employment data has been recorded for Colorado, 2012 was the 46th best year of relative growth.

A group of sixth graders would describe that level of growth as follows, “If I did that poorly on a test I would flunk. That sucks!”

It’s your call, how would you rate the 2012 job growth in Colorado? Would you use the verbiage of an economist or the wisdom of a sixth grader?

For more information about the performance of the Colorado economy in 2012 refer to “Review of Colorado Economy – 2012“.

©Copyright 2011 by CBER.

Establishment Openings Not Up to Par in Colorado

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Colorado prides itself on being a leader in entrepreneurship, yet it has fallen short in that area for the past decade. Business creation, as measured by Gross Establishment Openings, has been somewhat  volatile. In addition, Openings have trended flat to slightly downward since 2001.

As well, the annual change in the number of establishments (openings minus closures) has paled compared to the period 1994 to 2001. To add insult to injury, the annual change was negative for 3 years from 2009 to 2011.

Annual Change

1994  4,977
1995  5,056
1996  3,535
1997  4,742
1998  3,729
1999  3,271
2000  4,138
2001  3,885
2002     876
2003  1,154
2004  2,540
2005  3,256
2006  2,991
2007  3,078
2008  1,586
2009 -3,708
2010 -3,809
2011    -176
2012  1,818
Note: The above years end in March.

There were 18,033 Openings and 16,215 Closings in Q2 2012, the last quarter that data is available for. That quarter, Openings accounted for 23.2% of Gross Establishments Added and Closing accounted for 24.1% of Gross Establishments Lost.

For more information go to the report, “Why Weaker Job Growth?” on cber.co. It can be found in the Special Reports Section.


©Copyright 2011 by CBER.

Milken Report Shows Solid Economic Performance in Four Corner States

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The Milken Institute recently released Best-Performing Cities 2012-Where America’s Jobs are Created and Sustained. Coloradans will be pleased to note that Fort Collins was ranked 12th and Boulder was ranked 15th in 2011. As well, Denver-Aurora-Broomfield was 30th, Greeley was 42nd and Colorado Springs was 57th. Pueblo was ranked 33rd and Grand Junction 50th for small MSAs. Since the ratings began in 1999, the Denver MSA has never been in the top 20.

The rankings are based on an index that measures growth in jobs and high tech output from 2006 to 2011. Technology output and wages and salaries are tracked for 2005 to 2010. Five-year ranges account for fluctuation in business cycles. The latest year’s growth from these five-year ranges is also included. The high-tech concentration and the number of high tech industries with a location quotient greater than one for 2011 are also included. Finally, the change in employment for May 2011 to May 2012 is included to capture momentum. This index measures the performance of the country’s MSAs coming out of the recession into 2012.

Overall, the report shows that Silicon Valley is back, Texas remains strong, tech centers have rebounded (Texas, North Carolina, Washington D.C. Utah, and Massachusetts), and Utah is the top state in the Mountain region.

1    San Jose-Sunnyvale-Santa Clara, CA

2    Austin-Round Rock-San Marcos, TX

3    Raleigh-Cary, NC

4    Houston-Sugar Land-Baytown, TX

5    Washington-Arlington-Alexandria, DC-VA-MD-WV

6    Salt Lake City, UT

7    Provo-Orem, UT

8    Cambridge-Newton-Framingham, MA

9    Charleston-North Charleston-Summerville, SC

10    Fort Worth-Arlington, TX

11    New York-White Plains-Wayne, NY-NJ

12    Fort Collins-Loveland, CO

13    Seattle-Bellevue-Everett, WA

14    Dallas-Plano-Irving, TX

15    Boulder, CO

16    Kennewick-Pasco-Richland, WA

17    Peabody, MA

18    El Paso, TX

19    Bakersfield-Delano, CA

20    Lubbock, TX

21    Durham-Chapel Hill, NC

22    San Antonio-New Braunfels, TX

23    Portland-Vancouver-Hillsboro, OR-WA

24    Lafayette, LA

25    Knoxville, TN

In addition to the report, the website provides a historic perspective showing the evolution of the top 20 cities for 1999 to 2011. In the table below, the year represents the year of the data, not the year of the report. Results for the Four Corners states show that the Denver MSA was never in the top 20 and Utah’s MSAs  outshined those in Colorado. The data makes the case that the four states represent a region with solid economic performance.


©Copyright 2011 by CBER.