Tag: Job Growth

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

horvath

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.

U.S. Employment Situation Improves

horvath

The Bureau of Labor Statistics recently announced that wage and salary payrolls added 200,000 workers in December. This means that about 133,000 net jobs were added on a monthly basis in 2011. There was marked improvement as the year progressed, as about 143,000 jobs were added a month for the last 6 months of the year. Sectors adding jobs were transportation and warehousing, retail trade, manufacturing, health care, and the extractive industries.

This rate of growth has been sufficient to gradually reduce the unemployment rate, which reached 8.5% in December. It is necessary to add about 225,000 jobs a month on a sustained basis to lower unemployment significantly.

There are about 13.1 million unemployed workers. Most likely that number understates the severity of the situation as it does not include discouraged workers or those who did not want to deal with the hassles of seeking unemployment.

It is important to note that 5.6 million have been without work for 27 months. (Keep in mind the total number of unemployed people in January of 2001 was 6.0 million people).

The jobless rates for men (8.0%) and women (7.9%) are similar, while teenagers come in at 23.1%. The Asian population has the lowest unemployment rate at 6.8%, followed closely by whites at 7.5%. Hispanics have a jobless rate of 11.0% and blacks register 15.8%.

The Q4 preliminary Real GDP report is scheduled to be released in the latter part of January and is expected to be in the 2.5% to 3.0% range, a marked increase from the first part of the year. The combination of improved output and the increase in the number of jobs added bodes well (but not great) for 2012.

 

©Copyright 2011 by CBER.

Colorado Economic Forecast – Challenges (Demand and Debt)

horvath

Colorado will experience below average growth for another year. Cber.co is projecting that U.S. real GDP growth will be 2.1% to 2.5% in 2012, with employment growth of 27,500 to 37,500 in Colorado. For more details about the Cber.co 2012 Economic Forecast, click here.

There are a myriad of challenges facing the Colorado and U.S. economies in 2012. Some of the key questions relating to these challenges can be grouped into the following categories:
• Demand for goods and services;
• Debt, the financial system, and politics;
• Education and workforce; and
• Industry and cluster issues.
This post raises questions about demand for goods and services; and debt, the financial system, and politics. The topics of education and workforce and industry issues will be discussed in the post dated January 16th.

Demand for Goods and Services
• Will there be sufficient demand for goods and services given the high unemployment rate and minimal wage increases?
• Will companies be able to pass on increased input costs to customers and maintain demand?
• How much longer can manufacturing shipments and output increase without adding to their workforce?
• There is an apparent lack of new firm creation. Is this caused by a lack of demand or insufficient innovation?
• What is being done to protect and encourage innovation?
• For the most part, companies have adequate access to capital. Do they know how to access it? When will there be enough demand for them to need additional capital?

Debt, the Financial System, and Politics
• Europe is a major trading partner for Colorado. How will the EU debt crisis impact the U.S. and the state?
• Worldwide there are countries other than Greece and Italy with public and private debt issues. Is anyone paying attention?
• Are our leaders paying attention to both the public and private debt crisis in the United States?
• Is the U.S. financial system sufficiently stable?
• How much uncertainty will be caused by the upcoming elections?
• Will politicians be able to instill confidence in the government after the elections?

Colorado will face these and other challenges in 2012. It will be interesting to look back a year from now and see how these issues unfolded and how state public and private leaders addressed them.

©Copyright 2011 by CBER.

Cber.co Colorado Economic Forecast 2012 – Continued Improvement

horvath

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

horvath

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.

State to Add 28,000 Jobs – State Demography Office

horvath

On November 4, State Economist David Keyser unveiled his annual economic forecast at the 29th Annual State Demography meeting. In his report Keyser stated that the economy remains fragile, but that jobs will be added an a slow rate in 2012. Growth will be in the range of 1.0%, or 28,000 civilian jobs. He projected that more than 50,000 jobs would be added in 2013.

Unemployment will remain high through 2012, about 8.4%. There will be an insufficient number of jobs added to lower the rate significantly. In addition, labor participation rates are low. As jobs are created at a faster rate, the participation rate will pick up. That in turn, will keep the unemployment rate at a high level.

The painfully slow recovery will be extended by the lack of growth in per capita personal income. Stronger income growth is needed to spur on increased demand for goods and services. Real PCPI is projected to grow at 2.8% and 2.2% respectively in 2012 and 2013. On a positive note, the state inflation rate will remain around 2% in 2012 and bump up to 3% in 2013. Rising energy prices will play a role in the increase.

Looking ahead to 2012, Keyser sees tourism and retiree driven jobs as bright spots. As well, agriculture and the extractive industries, particularly oil and gas, will have strong years. In fact Keyser also sees an uptick in construction, as both single family and multifamily permits will more than double. Total permits will approach 30,000, up from about 13,000 in 2010. It should be noted that the mix of permits will be different than in the past. It will include a greater concentration of multifamily units. On the downside, Keyser points to weakness in investment and wealth driven jobs.

Click on State Demography Office for further information about their work.

 

©Copyright 2011 by CBER.

After 8 Months, 7 Sectors Show Job Gains

horvath

Through the first 8 months of the year there are 7 sectors of the economy that have added a net total of 34,900 jobs, compared to the same period last year.

  • Tourism                                                +11,600
  • Private Education and Health Care +9,600
  • Professional and Scientific                +4,100
  • Extractive Industries                             +3,000
  • Wholesale Trade                                  +2,300
  • Employment Services                          +2,300
  • Higher Education                                  +1,900

These sectors account for 40.6% of total employment. Average wages for this mix of workers is about $43,600 per worker, compared to average annual wages for all workers of about $47,900 (calculations based on 2010 QCEW data). In other words, the average wages for the sectors that are adding jobs is less than the overall state average.

The 2011 prognosis is that each of these sectors will show job gains for the year (2011) and that average annual wages for the group will be less than the overall state average.  For a more comprehensive review of the Colorado economy visit the CBER website.

 

©Copyright 2011 by CBER.

10 Years After 9/11 – Summary of Impacts on Colorado

horvath

This is the final post summarizing the way the economy has performed in the 10 years after 9/11. The series of posts began in early August and has included a review of tourism; construction, housing, and financial activities; retail sales and personal services; high tech and the military.

Tourism

• From an employment perspective, tourism (accommodations and food services) has expanded in Colorado since 2001. Competitiveness within the industry has increased, as evidenced by the flat growth in output.

• In Colorado, the airline industry was “restructured” after 9/11.

• The impact of 9/11 was short term. These declines may have been offset by gains in emerging industries,
such as teleconferencing and other means of communications.

Construction, Housing, and Financial Activities

• Construction, housing (prices and foreclosures), and finance are all interrelated. A portion of today’s
problems can be tied to 9/11 and the 2001 recession. There was a mindset that the country could “spend” its way back to prosperity. That mindset created problems when overextended consumers lost their jobs or saw declines in the values of their houses.

• Construction output peaked in 2000 and has dropped-off since. From an employment standpoint, there was a slight decline during the 2001 recession. A much more severe drop-off began in 2008.

• Creative financing allowed financial employment to grow throughout the 2001 recession. Some of the
products that spurred that growth were problematic in the second half of the decade. In turn, layoffs in the
financial sector began in 2007 and have continued since. These declines are a function of lack of activity,
consolidation, automation, bank failures.

• Year-end equity market values are about the same in 2010 and 2000.

Retail Sales and Personal Services

• Sales of retail goods and personal services has become more competitive during the past decade, yet
employment has remained relatively flat. Increased savings in recent years may be an indicator that consumers learned from the 2001 and 2008 recessions that they have limited resources that can be allocated to the consumption of goods and services.

High Tech (Manufacturing; Information; and Professional Technical Services)

• Employment has dropped significantly as a result of increased efficiencies, outsourcing, and offshoring. At
the same time output has risen dramatically. MIPTS is the driver of the state economy. 9/11 played a role in the adoption of high technology goods and services (surveillance, security, teleconferencing, etc.)

Military
• The U.S. military has increased their dependence on Fort Carson since 9/11.The movement of troops in and out of the base have had a noticeable impact on the El Paso County economy.

The “Lost Decade” was a turning point in the structure of the U.S. and Colorado economies. While 9/11 did not cause this transformation, it played a role in accelerating the change that occurred in some industries.

For additional information, see The Colorado Economy Ten Years After September 11, 2001 at cber.co in the Special Reports section.

©Copyright 2011 by CBER.

10 Years After 9/11 – High Tech Employment Falls Off

horvath

For the past 20+ years, Colorado’s high tech cluster has been a driver of the state economy, creating high-paying primary jobs that spawn growth in other sectors of the economy. During much of that time Colorado has been recognized as one of the top states in the country for its number of high tech workers, on a per capita basis.

There is no NAICS code that reports advanced technology employment. Rather than being called an industry, it is technically a cluster because it’s companies crosses a number of sectors. They vary from goods producers and extractive industries to service providers, such as engineers and architects. The high tech cluster has varied in size from 120,000 to 220,000 workers over the past two decades. Currently it employs about 172,000 people.

Because it is a cluster, special calculations are necessary to determine employment levels. Rather than perform these calculations, a good proxy of the presence of high tech or advanced technology, from both an employment and output perspective, is the performance of the Manufacturing; Information; and Professional, Scientific, and Technical Services (MIPTS) sectors.

The two recessions during the past ten years provided advanced technology companies with motivation to increase productivity through outsourcing and investments in capital. As a result employment declined precipitously, while output showed impressive gains.

In 2000, MIPTS employment was 451,100 workers. About 87,400 jobs were lost by 2010, or an annualized decline of  -2.1%. At that point, the MIPTS sectors accounted for 363,800 workers or 16.4% of total employment.

It remains to be seen what impact the sharp decline in employment will have on Colorado’s MIPTS and the high tech cluster. There are concerns that its dropoff will adversely impact the supply chain within the state as well as the base of trained workers. Can Colorado maintain its innovative edge? Time will tell.

©Copyright 2011 by CBER.

10 Years After 9/11 – Discounted and Marked Down

horvath

The Retail Sector is a mixed blessing for Colorado. On one hand it is one of the larger sectors, providing jobs for a number of people. As well, retail sales taxes are source of revenue for municipalities and state government. In fact, taxes generated from retail sales are so important that some municipalities are strategically zoned so their borders are lined with retail facilities. It is their intent to prevent leakage from their area and increase sales (and taxes) from neighboring cities and counties.

The retail sector did not fare well during the Lost Decade.

In 2000, Colorado retail employment was 245,200. Ten years later, it was 235,900, or a decline of 9,400 jobs. In 2010, the Retail Sector accounted for 10.6% of total state workers.

During this same period, retail trade sales increased from $52.2 billion in 2000 to $61.1 billion in 2010. It should be noted that sales peaked at $67.3 billion in 2007 before plummeting in 2008. They bottomed out at $58.5 billion in 2009. While sales post an increase of $8.9 billion over this 10-year period, the gain is not adjusted for inflation.

The annualized rate of growth for sales is 1.6%. The annualized rate of growth for Colorado inflation was 2.0%. Not only did the sector lose employment during the Lost Decade, there was a decrease in sales adjusted for inflation.

In short, the Lost Decade has been difficult for both retailers and the government organizations that rely on sales tax revenues to support their operations.

©Copyright 2011 by CBER.