Tag: The Great Recession

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.

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.

Job Losses Expected in 2011 – State Demography Office

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The 2010 Annual State Demography Meeting kicked off on a somber note, when staff economist David Keyser;  announced that the state’s recovery from the Great Recession will be painfully slow.

Some of the key points from Keyser’s review of the past year (2010) were:
• Job gains occurred in health care, government, and education.
• Ongoing losses in manufacturing continue to hinder the recovery because they have a high multiplier effect.
• Low wage jobs were hit harder.
• Access to credit provided a challenge for many companies.
• Small businesses saw significant setbacks.
• Rural counties that relied on oil and gas or tourism (such as the Western Slope) suffered greater losses, while agriculture-based economies were more stable.
• The loss of basic jobs, such as manufacturing, will have a long-term effect on the state because these jobs are likely to be relocated elsewhere.
• On the other hand, the loss of non-basic jobs, such as retail, food and beverage, or personal services will return in the same location.
• Colorado will remain a popular place to live and work and net migration will remain positive, but slightly below previous years.

Looking ahead, key points from Keyser’s presentation for 2011 were:
• Non-farm wage and salary employment will decline slightly and a best case scenario is that it will be flat. Wage and salary job losses should not exceed 22,000 (1%).
• Agriculture and small businesses are likely to post a slight increase, offsetting declines in wage and salary employment.
• Construction won’t come back in the immediate future.
• Health care will continue to add jobs.
• Colorado will continue to be closely tied to the US economy.
• Many of the effects of the 2007 recession could be permanent.

Keyser’s forecast for 2011 is slightly lower than what cber.co projected in late October, but the basic analysis of the current state of the economy is similar.

©Copyright 2011 by CBER.

Colorado to add 15,000 Jobs in 2011

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In late October, the Bureau of Labor Statistics released its first estimate of September employment data for Colorado. Based on that report, the state is on track to lose 35,000 jobs in 2010. (Preliminary 2010 data will be released in March 2011.)

Recently, many of the nation’s top economists have revised their 2011 Real GDP forecasts downward, in the range of 1.9% to 2.6%. Output growth of 2.4% points to a miniscule job increase of 0.7%, or 15,000 jobs, for Colorado next year.

This Colorado economic forecast  was shared with state business and government leaders this past week. A summary of the responses from these individuals follows:

  • The country should be concerned about the effect the Lost Decade will have on its competitiveness.
  • The recent announcement that Q3 Real GDP was 2.0% is better than expected; however, if output growth continues at this level next year, Colorado cannot expect meaningful job growth.
  • The lack of overall growth in the economy is reflected in the real estate market.
  • Colorado typically lags the nation in entering and exiting economic downturns. Colorado’s exit from the Great Recession seems to be slower than that of the nation – despite lower unemployment.
  • For some time, I’ve been concerned about unrealistic expectations for growth in consumer demand, given the deleveraging overhang and unemployment.
  • Colorado’s major wealth creation industry – mineral extraction – continues to be hobbled by policy, yet Wyoming is projecting a healthy recovery in the months ahead- thanks to their policies regarding extractive minerals.
  • Southwest Colorado is no better than the Front Range.
  • The word that best describes the Western Slope economy is “lagging.” We’re used to growing faster than the state; recently we were losing jobs faster, although those declines have slowed.
  • There is a reasonable chance that Colorado will experience back-to-back-to-back job losses.
  • We are seeing more inquiries, which hopefully will bode well for our local economy.
  • We are seeing more inquiries, but they are not translating into sales – yet.
  • Efforts are being made to manipulate the housing and equity markets to create the illusion that the economy is better than it really is. The hope is that if consumers see their net worth rise, then they will start spending again. This makeshift effort does not eliminate the fundamental problems.

While these comments are not intended to be a representative sample of all Coloradans, they support the belief that the prospects for a solid recovery are not in the immediate future.

 

©Copyright 2011 by CBER.

Real GDP and Colorado Employment

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Over time, there has been a strong correlation between the values of Real Gross Domestic Product and Colorado employment. Logically, this makes sense because both are growth variables that follow similar paths.

Employment data for Colorado was first recorded in 1939. In 4 of the decades since, (50s, 60s, 70s, 90s) there has been a strong correlation between changes in the U.S. economy and Colorado employment. In three of the decades, the tie between the two variables was weaker. This can be explained by a variety of economic disruptions:
• 1940s – World War II and the post-war effect caused the two variables to be out of sync.
• 1980s – Colorado experienced regional issues including an oil and gas boom and bust, savings and loan crisis, overbuilt housing market, and net out-migration for 5 years.
• 2000s – The primary and secondary effects of two recessions hit Colorado harder than other regions of the country.

Since 1939, Colorado has experienced net job losses 8 times. On 5 of these 8 occasions, the U.S. recorded positive Real GDP growth.

Colorado experienced job losses 4 times during the past 8 years:
2002    42,700 jobs lost.
Real GDP = 1.8%.
2003    31,400 jobs lost.
Real GDP = 2.5%.
2009    106,300 jobs lost.
Real GDP = -2.6%
2010    35,000 jobs lost.
Real GDP = 2.6%.
There was positive expansion in output in 3 of the 4 years that job losses occurred.

Recent forecast updates suggest that the U.S. will experience below potential output growth through 2011. This raises the question, “Has the fragile state economy recovered to the point where it can add jobs in such a volatile economic environment?”

 

©Copyright 2011 by CBER.

Transportation Industry Hit Hard

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Previous blog discussions have focused on the relationship between the economy and two important components of Colorado’s transportation infrastructure, DIA  and RTD . The state’s transportation system also includes bridges, roadways, smaller airports, and mass transit systems – all falling under the oversight of the Colorado Department of Transportation (CDOT) .

In addition to infrastructure, Colorado has a very vibrant transportation industry, i.e. the companies that transport people and goods. Approximately 58,000 people, or 2.8% of the state’s workforce, are employed at 3,800 companies. They receive $2.6 billion in total wages, or 2.5% of the state’s total. Average annual wages are in the neighborhood of $41,000, slightly less than the overall state average. Some of the major types of companies include:

• 2,100 Truck transport companies
• 670 Transportation support companies
• 340 Couriers
• 250 Warehouse companies
• 200 Ground transport companies
• 140 Air transportation companies

About 60% of the transportation workforce is located in Adams and Denver counties, in close proximity to DIA, Front Range Airport, and the state’s major arteries  (I-25, I-70, Colorado I-76, and Colorado US 85).

Over the past two years about 10,000 jobs have been trimmed from the transportation workforce, a disproportionately high percentage of workers. Time will tell whether or not all of these positions will be recovered and the impact these job losses have on Colorado’s competitiveness.

 

 

©Copyright 2011 by CBER.

Net Job Losses Occur Beyond the Official “End” of Recession

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On September 20, 2010, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) issued a press release that said, “The committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.”

Did you breathe a sigh of relief when you first heard that news?

Because the criteria for determining a recession includes a variety of factors, it is possible for a downturn to continue to take a toll beyond the trough. That was certainly the case with Colorado employment in the past two recessions.

Seasonally adjusted employment data for the 2007 recession show that Colorado experienced net job losses of 113,800 workers, from peak to trough. Between July 2009 and August 2010, job losses have occurred in 10 of 13 months. Post-trough job losses have totaled 41,800 workers to-date and may go higher.

By comparison, the 2001 recession lasted from March to November. During that period, net job losses were 42,500 employees. Post-trough declines occurred in 15 of 20 months and totaled 60,600 workers.

In summary, there was a drop of over 100,000 jobs associated with the 2001 recession; to-date over 155,000 employees have been shed as a result of the 2007 recession. That is a significant decrease for a state that employs 2.2 million workers.

Looking forward, we can only hope that the expansion cited by the NBER is strong enough to include employment growth for Colorado in 2011.

©Copyright 2011 by CBER.