Tag: Employment

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

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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.

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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.

Has the Colorado Job Creation Machine Stalled?

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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.

Colorado’s Bottom-Up Economic Development Strategy

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The first week in February Governor Hickenlooper (call me “John”) hosted the ninth stop in his Bottom-Up Economic Development tour across Colorado. For about two hours, the region’s top economic developers discussed job creation, economic development, and steps for increasing government efficiencies.

The most frequently discussed topic was transportation and the top priority was to complete FasTracks in a timely and cost effective manner. In addition leaders made a case for completion of the final leg of the beltway (between Broomfield and Golden) around the city, expansion of commercial air, maintenance of our bridges and highways, and reduction of congestion along I-70 into ski country.

Panelists felt that innovation and the attraction/retention of primary jobs was critical if we are to maintain our regional and national competitiveness. They also cited the need to have a well-trained workforce and an efficient, accountable, and adequately funded education system. As well, it is imperative that Coloradans work together to maintain the quality of life that makes the state so attractive. This will require leaders to address issues related to our water supplies, develop parks and recreation areas, invest in infrastructure, and utilize the state’s unique assets to attract commerce.

The metro area’s economic diversity was evident as leaders spoke in support of industries and clusters endemic to their region. For example, they addressed the need for the state to be more “military-friendly”, consider construction of nuclear power plants, understand the importance of refineries, realize the value of our construction and extractive industries, and support gaming and tourism.

As the Bottom-Up discussions continue, it would be beneficial to reflect on past economic-development successes. For example, consider the public-private partnership, the former Colorado Advanced Technology Institute (CATI). During the late 1980s, CATI was established to guide the development of science and technology and the growth of select high-tech clusters. Specifically, the group’s work laid the groundwork for the state’s photonics, materials, hardware, software, telecommunications, and bioscience clusters. While it may not be appropriate to resurrect CATI as it existed, there is merit in having the an organization that would fill many of CATI’s roles in fostering long-term growth.

Four years ago, a state job cabinet was formed, town meetings were held across the state to gather input, and plans were put in place. While that effort was well intended, it did not have the desired impact. Hopefully this Bottom-Up Planning approach with be more successful.

A well-thought out economic development plan couldn’t come at a better time. Colorado employment remains below the 2001 peak and it will be years before state payrolls return to the pre-Great Recession high mark.

©Copyright 2011 by CBER.

1 in 6 Colorado Jobs are Construction or Construction-Related

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The following is an excerpt from Colorado’s Construction Industry – Impact Beyond the Hammers and Nails  olorado’s construction and related industries employ one-in-six private-sector covered workers, yet almost 60% of the net jobs lost between 2007 and 2009 were in these sectors.

What type of economic activity is necessary to generate enough construction and construction-related activity to recoup these losses, particularly given the state of Colorado’s housing and commercial markets? (Note: this does not suggest that construction is primary or export industry or that is could or should be).

A financial analyst might suggest that the risk or volatility associated with the construction industry could be reduced if Colorado had a larger, more diverse economy. Therein lies the paradox. Because Colorado is a growth state, it is necessary to have a construction industry to support the current base of five million people and build the homes and buildings that would support a larger, more diverse economy. The Colorado State Demography Office projects continued population increases in the range of 1.5% to 2.0% for the extended future. (Population projections can be found on the State Demography Office website ).

Even with the recent reduction in state construction workers, the 2009 location quotient is 1.29, down from 1.44 in 2001. Because the industry is not considered a primary or export industry, at some point the location quotient will eventually revert to 1.0. At that time Colorado will have a concentration of construction workers comparable to most other parts of the country. Keep in mind that this correction will likely include a comparable adjustment in the related industries identified in this study.

Construction is necessary for the expansion and maintenance of the Colorado economy. It is essential that economic development, public, and private leaders understand the relationship between construction employment, its related sectors and the overall economy. That includes awareness of the volatility of the industry and the likelihood that construction employment will ultimately return to a location quotient of 1.0.

©Copyright 2011 by CBER.

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

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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 .

 

©Copyright 2011 by CBER.

Health Care Adds 15% of Colorado Jobs in Past Two Decades

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In a state that regards its tourism and high tech cluster as primary drivers of the economy, it is somewhat surprising to note that the Health Care and Social Assistance (HCSA NAICS category) has accounted for 15% of net jobs added between 1991 and 2009. The sector has been recession proof, adding jobs every year during this period and it currently employs  one-in-ten Colorado workers.

HCSA is divided into four distinct groups: hospitals, physicians, nursing homes, and social care. Physicians, or ambulatory care account for about 36% of total HCSA workers, followed by 29% at Colorado’s 90 hospitals.

Roughly 19% of workers are employed at nursing and residential care facilities with the remaining 16% in social assistance programs.  The latter category includes service providers ranging from Head Start programs to commercial child care centers.

Population growth has been the driving force behind the steady expansion of the sector. Two of the four sectors are increasing at about the rate of population growth while the other half is expanding at a more rapid pace.

With continued population growth is on tap for the state over the next decade, increases in HCSA employment are likely to continue. Issues facing the sector include:
• Double-digit cost increases for health care coverage
• Change in the manner in which health care is distributed
• Increased emphasis on quality of service provided
• Changes in government health care policy
• Changing demographics
– Aging Baby Boomers
– Increased life expectancy
– Increasing number of minorities
– Rise in frequency of diseases, such as diabetes
– Increased number of lower income families
• Supply of nurses and dental hygienists
• Matching supply and demand for nurses and health care employees, particularly in rural areas
• Saturation of hospitals in some metropolitan areas
• Impact of efficiency gains on employment
• Continued population growth
• Increased demand for specialized medical care

While other sectors that have diminished in importance over time, that is not likely to happen for Health Care.

©Copyright 2011 by CBER.

Colorado Legislative Council – State Economic Update December 2010

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The recovery of the Colorado economy continues to lag that of the nation, as evidenced in the December 20 release of Focus Colorado: Economic and Revenue Forecast , a quarterly publication of the Colorado Legislative Council . Many of the key economic indicators for the nation were revised upward while there were mixed results in the Colorado update.

The following discussion highlights revisions to key 2011 Colorado indicators:
• With Real GDP growth of 2.9% (U.S.),state employment will increase by 0.9%, slightly less than the September projection. This equates to 19,900 jobs.
• The most notable change is an increase in the 2011 unemployment rate. It was revised upward from 7.6% to 8.4% (Many economists in the state expect this rate to exceed 9.0% and possibly push past the national rate at some point this year).
• With more people on the payrolls, personal income is expected to post a modest increase of 3.1%.
• On the other hand Wage and Salary income will record a meager increase of 1.4%.
• Despite the increase in wages and personal income, projections for retail sales growth was revised downward from 3.1% to 2.5% (It should be noted that this rate of growth does not reflect changes associated with the tax reduction plan passed by Congress).
• On a positive note, the number of home permits was bumped up from 11,200 to 17,200. Continued subpar construction growth is projected beyond 2011 despite population increases in the range of 90,000 to 100,000 people per year.
• Finally, the projection for CPI growth remained at 1.9% for 2011; however, it is expected to ramp up by at least a point in 2012.

Positive factors not mentioned above include:
• Permitting in the oil and gas industry turned upward at the end of 2009 and have continued in that direction.
• While there is optimism within the industry about Colorado’s housing market, it is not yet reflected in the data. If it is any consolation, home prices are faring better in Denver than many other parts of the country.
• Foreclosures remain high, but they are on a downward path.

On the other side of the equation:
• Colorado’s financial sector is plagued with troubled mortgages.
• To illustrate that point, 27% of Colorado insured banks were not profitable at the end of September 2010. This compares to 20% nationwide.
• The state’s lending institutions have high exposure to troubled commercial real estate than other banks in most other states.

While there is good news in the most recent update, it should not be forgotten that the Lost Decade concluded with state employment at a level below the peak in 2001. Despite employment gains this year, it is likely that June 2001 peak employment will be reached again in 2012.

 

©Copyright 2011 by CBER.

Delivering The Next American Economy

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In early December the Brookings Institute sponsored the Global Metro Summit – Delivering the Next American Economy . The purpose of the event and webinar was to discuss their vision for long-term growth to occur in the U.S.

The foundation of their vision for short-term job growth and long-term economic success is better utilization of the strengths of our top 100 cities. To illustrate this point they cited a series of statistics. For example, two-thirds of the U.S. population lives in the top 100 metro areas, three-fourths of the GDP is generated there, and 94% of venture capital funding occurs in these focal points of business.

Bruce Katz, Brookings Vice President identified the following as the means for better utilizing the U.S. centers of commerce:
• Innovation is essential in delivering the “next economy”. The development and implementation of new ideas is essential for positioning the U.S. as a global leader, both in economic and social reform. On the economic side of the equation, this will allow American companies to develop distinct competencies. From a social perspective, innovation also has the potential to raise the standards of individuals with lower incomes. American innovation is most likely to occur in our top metro areas.
• Increased global demand and the growth of third world countries will result in increased exports. Today, the top U.S. cities will have a chance to develop strategies with other cities (rural and metro), states, and regions to take advantage of this opportunity.
• The energy revolution will bring about change through the use of alternate energy sources. It is essential for the world to develop cleaner and more diverse sources of energy, particularly for use in the top 100 cities.

While Katz’s notions are well conceived and thought out, time will tell if they will become the driving force of the next economy or if they are great ideas that will be celebrated by urban leaders, scorned by rural communities, and ignored by political leaders because they are perceived as too self serving.

©Copyright 2011 by CBER.

Small Business Start-Ups on the Decline?

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During a typical recession, the number of new or start-up businesses increases as some individuals start their own firms when they lose their jobs. As these start-ups become successful, job creation occurs, thus shortening the recovery periods. Unfortunately, the Lost Decade is not your typical recession.

On December 8, Aaron Smith of Moody Analytics reported that an analysis of BLS  data shows that the number of self-employed people fell from a peak of 15.5 million in December of 2006 to 13.7 million in October of this year, or a decline of 1.8 million. He went on to say that over the past decade, the self-employed have comprised 9.5% to 10.5% of the U.S. workforce, and today that percentage is closer to 9.5%.

Both Smith and others agree that small business sentiment is improving. For example, Vectra Bank’s Colorado Small Business Index has posted miniscule, but steady gains for the period of July through October. Despite increased optimism, small businesses do not appear to be thinking about expansion of capital expenditures, hiring, and increased inventory.

Assuming there is not a major revision in the data, this analysis raises a series of questions:
• Is this problem driven by a lack of demand or availability to credit? While both have been a problem, NFIB  research suggests that lack of demand has been more problematic.
• Is this reduction in startups tied to cutbacks in manufacturing and high tech jobs or might it be a function of increased dependence on imports?
• Has there been a structural change in our economic infrastructure that has diminished demand for start-ups?
• Is this a sign that the U.S. has lost its edge in competitiveness or innovation?
• Does this downward trend in firm creation exist in small-business-friendly states such as Colorado?

Hopefully this downturn in small business activity is just a brief hiccup, and that there will be a resurgence in start-ups in the near-term.

©Copyright 2011 by CBER.