Tag: Professional Business Services

Professional, Scientific, and Technical Services – Key to Colorado Recovery

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The Professional, Scientific, and Technical Services (PST) sector is critical to the state. Companies in the sector provide engineering and architecture services, conduct scientific research, and manage computer systems. Of particular note, the sector is composed of companies from the various high-tech clusters (photonics, biosciences, nanotechnology, homeland security, IT, etc.).

PST accounted for about 10.6% of state private sector Real GDP in 2010. Between 1997 and 2010 it expanded at an annualized rate of 4.4% versus 3.4% for the Colorado private sector.

Average annual private sector PST Colorado wages for 2010 (most current year available) were $79,623, compared to $47,916 for the overall state average. In 2010, the Colorado PST sector accounted for 9.1% of total private sector employment. Between 1997 and 2010, the sector added employment at an annualized rate of 2.1% compared to 0.7% for the state.

The Healthcare, Higher Education, Tourism, and Extractive industries are leading the recovery. PST is next. It has added about 9,100 jobs since the low point in 2010.The sector has recovered about 78% of the jobs lost since peaking in 2008. If the positive employment trends continue, that level will be reached later this year.

It’s a long slow road to recovery.

For a more complete update on the recovery of the Colorado economy, go to https://cber.co/.

©Copyright 2011 by CBER.

U.S. Employment Tapers Off – Another False Start?

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After three months of solid job growth, BLS released what seems to be a bad April Fool’s Day joke in the form of the March jobs report. After adding jobs at an average monthly rate of 246,000 for December 2011 – February 2012, total nonfarm payroll employment rose by only 120,000 in March.

In light of projections by analysts that job gains would exceed 200,000, this report begs the question, “Are we seeing another false start in job growth, as we did in the first half of 2010 and 2011, or was the March report just another bump in the seemingly endless road to full recovery?”

On Monday (April 9), the DJIA lost 130 points, or 1%. Is that a real answer to the question or just a partial answer?

On a positive note, jobs were added in the Leisure and Hospitality (39,000); Private Education and Health Care (37,000); Manufacturing (37,000); Professional and Business Services (31,000), and Financial Services (15,000) sectors.

Many of the jobs in the Manufacturing and PBS sectors are primary jobs, i.e. they bring outside wealth to the community and they create more support jobs than other sectors. It is good news when jobs are added in the Tourism sector because the industry touches most regions. Increased tourism jobs are an indicator that people have greater disposable income – and they are spending it.

Increased jobs in the Financial sector may be a sign that the woes of the industry may be behind us – with an emphasis on “may”. And then there is the Private Education and Health Care sector. Depending on our perspective this sector may be viewed as a perpetual job creation machine or nothing more than a bureaucracy builder.

The losers were Retail Trade (33,800) and Construction (7,500) sectors.

So is the latest report an April Fool’s Day joke? Employment growth is likely to continue, but not likely at the rate of 2250,000 jobs a month that is needed to significantly lower the unemployment rate.

 

©Copyright 2011 by CBER.

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

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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.

Manufacturing, Information, and Professional Business Services Drive Colorado Economy

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All industries play different and important roles in our economy. Some pay high wages or create new jobs, while others provide services that generate tax revenue.

Economic developers welcome the creation of any job, but they emphasize the recruitment and retention of companies that have primary jobs. A primary job brings in money from outside the local community and often pays higher than average wages. As a result, these jobs create wealth and other local jobs.

In Colorado most primary jobs are in the Manufacturing, Information, and Professional Business Services sectors. They account for about 29% of total state private sector employment and 35% of the state’s private sector Real GDP. Colorado’s Advance Technology cluster is a subset of these three sectors.

In recent years, the Mining and Logging sector has employed about 1.5% of total private sector workers, yet it has accounted for about 6% of the state’s private sector output. The Real Estate and Finance group of sectors are also small from an employment perspective; however, they make a significant contribution, 23%, to the state’s private sector output.

Tourism and retail are important for different reasons. First, they touch the economies of all 64 counties.
Colorado’s scenic mountains provide the state with a distinctive competency, that cannot be replicated. Sales tax from the retail sector are a funding source for special districts and state and local governments. These sectors are important because they employ about 1 out of every 4 workers. Combined, they are responsible for about 11% of the state’s private sector output.

Finally, industries such as health care, personal services, utilities and the remaining sectors are important
because they add to the quality of life. These and the remaining sectors employ 35-40% of private sector workers, while being responsible for about 25% of private sector output.

The above analysis is based on 2009 data. The Bureau of Economic Analysis is scheduled to release its 2010 data within the month. Watch for more in-depth analysis at www.cber.co.

©Copyright 2011 by CBER.

Third Consecutive Month of 200,000+ Job Growth

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On Friday (5/6/11), the Bureau of Labor Statistics announced the U.S. had added 244,000 jobs in April (2011), the third consecutive month for the U.S. to add at least 200,000 net jobs. Private sector jobs were added at the highest rate in 5 years.

The Professional and Business Services sector added about 51,000 new workers, followed by tourism (46,000), and health care (37,000). Manufacturing posted gains of 29,000 employees.

As expected the largest loser was government, primarily local governments. Sector employment dropped off by 24,000 workers.

The nation has regained 1.3 million jobs in the past year; however payrolls have about 7 million fewer workers than at the pre-recession peak. Despite this improvement, the recovery continues to be painful for a society that thrives off instant gratification.

The current momentum will continue if inflation remains in check, the double dip in the construction sector and housing markets is short-lived, and net job gains continue to average at least 200,000 jobs per month. It will take about 3 more years to recover all jobs at that rate of growth.

In two weeks the Colorado Office of Labor Market Information will release its preliminary employment update for April. Positive, but less than robust job gains are expected, with PBS, Tourism, Health Care, and Higher Education leading the way.

©Copyright 2011 by CBER.

The Employment Recession Has Finally Ended

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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.