Tag: Government Spending

Are We Better Off Than We Were Four Years Ago? – Colorado

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This election season has featured an abundance of discussion about where the state is better off now than we were four years ago. In some cases, we are better off today and in other cases we are not.  The following data provides a snapshot of key metrics that fit into both categories.

Colorado Population
People like to visit and live in Colorado. Continued population growth is projected on a long-term basis.
• Although Net Migration has slowed, Colorado’s population continues to grow at a steady pace.
Colorado Employment and Unemployment
Increased population growth points to long-term job gains and lower employment.
• During the 69 months between January 2007 and September 2012 Colorado only gained jobs in 34 months (seasonally adjusted data).
• In 2012, Colorado employment is well below employment of 2007 and 2008, but it is trending upwards.
• In 2012, jobs are being added at a faster rate than they were in 2008, but not 2007.
• The number of unemployed workers is more than twice as much in 2012 as it was in 2007. It is also greater than 2008.
• The unemployment rate in 2012 is twice the 2007 rate and much higher than in 2008.
• In 2012, the unemployment rate and the number of unemployed workers is trending downward, whereas, it was trending upward in 2008.

Colorado Employment by Sector
Segments of the economy are healthier than they were in 2008.
• Projected annual state employment for 2012 will be about 56,900 less than the total for 2008. The following sectors have greater 2012 employment than 2008: Private Education and Health Care, Higher Education, Tourism, K-12 Education, Corporate Headquarters (MCE), Federal Government, Employment Services, State Government, Extractive Industries, and Professional and Scientific and Technical Services.
Colorado Job Creation
Improved firm and job creation is necessary if the economy is to recover at a faster rate.
• Gross job losses and job gains for 2011 are less than 2008. Improvement in net job gains is more a result of decreased layoffs than actual job creation.

Income and Wages
Recent wage and income data is mixed.
• Per Capita Personal Income – The 2011 average is slightly below the value for 2008.
• Colorado Median Household Income – The 2011 median is below the value for 2008.
• Average Annual Wages – The 2011 average is above the value for 2008.

Colorado Output
Increased employment and wages will point to increased demand for goods and services. This in turn will push output upwards.
• Colorado Real GDP was greater than the U.S. for 2007 to 2011.
• The following sectors have shown steady growth since 1997 and 2011 output is greater than 2007 and 2008: Retail Trade; Professional, Scientific, and Technical Services; Health Care; Finance and Insurance; and Information.
• Real output for the Construction sector was greater in 2007 and 2008 than 2011 for both Colorado and the U.S.

Colorado and Inflation
Overall inflation has been minimal; however, inflation in key areas has been noticeable.
• Overall inflation has been minimal since the beginning of the Great Recession. Apparel and Housing are the only sectors that have grown at a lower rate than All Items for Coloradans.
Construction and Housing
There is improvement in the Construction and Housing markets.
• The number of permits in 2012 is greater than 2008, although they are well below the levels shown in the 2000s.  Most importantly, permits are slowly trending upwards.
• 2012 Colorado housing prices are approaching 2008 levels.
• Home ownership rates in 2011 are below the rates in 2008. More importantly, they are trending downwards.

General Fund and Retail Trade Sales
Gross General Fund Revenue is trending upwards because of stronger job gains (income taxes) and retail trade sales (sales taxes).
• Retail Sales are improving. Projected Sales Tax Revenue for the fiscal year ending June 2013 will exceed revenue for FYE 2008 (not adjusted for inflation). This tax accounts for about one-fourth of Gross General Fund Revenue.
• Projected Net Individual Income Tax for the fiscal year ending June 2012 will exceed FYE 2008 (not adjusted for inflation). This tax accounts for about two-thirds of Gross General Fund Revenue.
• Projected General Fund Revenue for the fiscal year ending June 2012 will match FYE 2008 (not adjusted for inflation).

For more detailed analysis of the state of the economy compared to four years ago, visit https://cber.co or click here.

 

©Copyright 2011 by CBER.

Congress Votes to Slash Funding for Data Producers – Again

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Business and government leaders in the U.S. are fortunate to have a wealth of statistical data to guide their policy decisions. For the most part, the programs that produce the data have integrity and they try to provide the best data possible.

Periodically, Congress attempts to eliminate some of the federal government statistical agencies. On May 17th, the National Association of Business Economists distributed emails to members and friends discussing the latest attempt by Congress to reduce funding for key data programs.

While government doesn’t need a blank check to collect information, the data that will allegedly be eliminated is valuable in the decision-making process. Hopefully Congress will find a fund collection and production of the data in an efficient and cost effective manner.

See the NABE communiqué below.

Dear NABE Members and Friends:

Last week, we alerted you that the U.S. House of Representatives was considering an appropriations bill for Commerce, Justice, Science, and Related Agencies (H.R. 5326) that would drastically reduce funding for the Census Bureau and make participation in the American Community Survey voluntary. Thanks to the many NABE members and other data users who contacted their representatives to try to prevent this action. Regrettably, the legislation ultimately passed the House along party lines and was much more damaging than originally proposed.  In its current form, H.R. 5326 will “devastate” the nation’s economic statistics.

Specifically, the legislation will:
•Terminate the American Community Survey;
•Cancel the 2012 Economic Census; and
•Halt development of cost-saving measures for the decennial census.

NEXT STEPS:

The Senate is expected to take up its own FY2013 Commerce, Justice, Science, and Related Agencies appropriations bill shortly. The Senate and House versions of the bill will then presumably be addressed by a conference committee comprised of members of both bodies.

HOW YOU CAN HELP:

Call or email your senators and representative today to tell them why you value the Economic Census and the American Community Survey. You can use this sample letter below:

Dear(Senator/Representative):

I am writing to express my concern over passage of H.R. 5326 by the U.S. House of Representatives, which would drastically cut funding for the U.S. Census Bureau and eliminate the Economic Census and the American Community Survey (ACS) – two of the most important tools we have for understanding the U.S. economy.

These programs are critically important to businesses, policymakers, and government agencies which use the data to make informed decisions and plan for the future. The increased uncertainty accompanying the loss of these data will most certainly result in more missed opportunities and waste for businesses and misallocation of resources by policymakers and government agencies. I urge you to ensure that the Census Bureau receives adequate funding to continue these vital programs.

How are Economic Census data used?
•By the federal government as an input to calculate elements of key economic indicators, such as economic growth (GDP), prices, and productivity;
•By retailers in evaluating whether to expand into new market geographies;
•By economic development commissions in attracting new businesses to their areas; and
•By companies to benchmark performance against industry averages

How are ACS data used?
•By corporations to examine workforce characteristics of neighborhoods to determine optimal locations for new factories or sales centers;
•By homebuilders looking to tailor new subdivisions to surrounding neighborhoods based on income, family size and existing home values; and
•By municipal governments in planning to meet the educational, safety and housing needs of their citizens.

The information we glean from the Economic Census and the ACS increases our understanding of current economic  conditions and reduce uncertainty, allowing businesses and policymakers to make well-informed, efficient decisions.

If we eliminate these programs, we are choosing to “fly blind,” an alarming proposition in these challenging economic times. Again, I urge you that you vote to ensure adequate funding for both the ACS and the Economic Census.

Sincerely,

(Your Name)

 

©Copyright 2011 by CBER.

Contribution of Consumer to Real GDP Continues to Increase

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There are an abundance of data sets that are useful in evaluating the performance of the U.S. economy. If only one could be used to measure overall performance it would be Real GDP, or the inflation adjusted output of the economy. The current Real GDP is approximately $13.4 trillion.

There are 4 components of the GDP. Mathematically speaking GDP= C+I+G+X.

The following analysis briefly looks at the change in the composition of output for each of these four components over the past two decades. As such, it is not intended to depict the total amount of output or changes in that output.

Consumers (C) are the primary drivers of the U.S. economy. As can be seen, the importance of the consumer has increased:
• Q1 1990 Personal consumption was 65.8% of Real GDP.
• Q1 2001 The go-go 1990s treated the consumer well – too well. Consumption rose to 69.4%.
• Q1 2003 Consumers were encouraged to keep spending as a way to pull the country out of the 2001 recession. Consumption rose to 70.2%. Creative financing helped sustain auto sales and allowed home owners to use their dwellings as ATMs. As a result consumers saved less, spent more, and  became overleveraged.
• Q1 2008 The Great Recession and the accompanying housing bust caused sharp declines in Investment (I). That decline increased the importance of government and consumer spending (70.3%).
• Q1 2011 The reliance on consumers continued as housing markets remained weak and government spending tapered off. Consumption rose to 71.1% of Real GDP.

Investment (I) includes business spending and the housing markets. The ups and downs of the contribution of investment follow:
• Q1 1990 Investment was 15.4% of Real GDP.
• Q1 1992 After the 1991 recession, investment dropped to 13.1%.
• Q1 2000 Investment rose during the go-go 1990s to 17.4%.
• Q1 2002 The 2001 recession pushed investment down to 15.5%.
• Q1 2006 With the recovery, business activity increased and investment rose to 17.7%.
• Q1 2009 Investment dropped to 11.7% as a result of the Great Recession and the fallout in the housing market.
• Q1 2011 With the recovery, a slight rebound has been seen. Investment has risen to 12.5% of Real GDP.

Government (G) spending was 20.3% of real GDP in Q1 1990. Shortly after, expenditures related to the first Iraq war and the 1991 recession temporarily drove the percentage up slightly. For the remainder of that decade, the strength in personal consumption and investment decreased the relative importance of government spending. Its percentage of real GDP declined to 17.5% in Q1 2000. Since then, it has risen steadily as a result of the wars in Iraq and Afghanistan and efforts to offset the effects of two recessions. Government spending was 20.2% of real GDP spending in Q1 2011.

Finally, net exports (X) have subtracted from Real GDP, i.e. there has been a trade deficit for over 20 years. In Q1 1990, Real GDP was -1.6% of Real GDP. As the trade deficit increased, net exports reached -5.9% of Real GDP in Q1 2006. In Q1 2011, net exports were -3.8% of Real GDP.

This zero sum analysis illustrates how declines in the relative importance of one GDP component require increases in the relative importance of other components. In short, this analysis shows the role of the consumer (C) in the recovery and the drag placed on the economy by the decline in the contribution of investment (I), particularly the housing market.

Looking to better times in the months ahead and an economy that has more balanced output.

©Copyright 2011 by CBER.