Tag: The Lost Decade

BLS reports 33,000 Colorado jobs added in 2011

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The Bureau of Labor Statistics recently released its benchmark revisions for 2011 that show Colorado added 33,000 jobs in 2011. The updated total is nearly double the projected job growth of the monthly data presented throughout the year.

After peaking in 2008, approximately 150,000 jobs were shed in 2009 and 2010. Employment declines were so severe that total employment dropped below the 2001 peak. Finally, in 2011, Colorado employment again surpassed the high point in 2001.

If Colorado employment increases by about 1.7% in 2012 and 1.9% – 2.2% for the 2 years after that, it will reach the 2008 peak in 2014. In other words, it will take six years to return to the 2008 peak.
By comparison, it took 4½ years for employment to return to the 2001 peak after jobs losses associated with the 2001 recession. (Some economists are saying the full recovery will return to peak just in time for the next cyclical downturn).

Here’s to quicker recoveries from future recessions.
©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.

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

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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.

Is Colorado Higher Education Effectively Delivering the Goods?

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Earlier this spring Dan Hawkins was replaced as CU football coach because his teams lost too many games and ticket sales began to wane. There was a perception that investments in the CU football program were not paying dividends. A change was made and public sentiment turned from outrage to support when CU leadership announced a replacement (Yes, athletics are an important part of higher education).

When are the masses that cried for the removal of Hawk going to show a similar sense of concern when investments in academic programs do not pay dividends? It only seems fair that college deans should endure the same scrutiny as Hawk when their faculty cannot conduct research or connect with content in the classroom. Shouldn’t deans be held responsible when they manage programs that are irrelevant or not cost effective?

Colorado has one of the most highly educated workforces in the country. An exceptional higher education system is essential if the state hopes to retain it.

Non-farm wage and salary data shows that there are about 66,000 employees at higher education institutions in metro and rural areas across the state (This number includes some student workers). More importantly, they are a source of training for the world’s current and future workforce. Higher education is an economic driver of the state for both reasons.

During the Lost Decade (2000 – 2010), the state’s higher education sector added 12,300 workers. Meanwhile, the private sector (non-farm wage and salary) declined by 50,100 workers.

In Boulder County, higher education employment increased by 2,700 workers. At the same time, private sector employment shed 10,600 workers.

Current wage data for the period 1999 to 2009 shows that average wages for higher education increased faster than the private sector. In 1999 average annual wages for higher education and the private sector were similar, $34,126 and $34,317 respectively. By 2009, there was a noticeable gap between the two groups, $49,610 for higher education and $46,855 for the private sector.

During this time, many businesses were forced to reduce their staffs, cut expenses, and creatively mange their businesses. In the process, the surviving companies became more efficient and productive. All the while, higher education lobbied hard for increased funding and tuition increases. As well, they embarked on the silent phase of a $1.5 billion fund raising campaign.

The question must be asked, “What dividends did Colorado receive from this increase in the number of higher education workers and their higher than average wage increases?”

Consider the value proposition of the Laboratory of Atmospheric and Space Physics (LASP) at CU-Boulder. LASP’s goal is to train the next generation of space scientists, engineers, and mission operators. LASP is the world’s only research institute to have sent instruments to all eight planets and Pluto.

Recently, they were awarded a $425 million grant to work on the MAVEN (The Mars Atmosphere and Volatile Evolution Mission). MAVEN will be launched in 2013 to learn more about the Mars climate and atmosphere. Both undergraduate and graduate students will be taught the basics in the classroom, integrated into all phases of MAVEN, and provided opportunities for on-the-job training that will be invaluable when they enter the job market.

Historically, LASP has had a strong value proposition for students, faculty, sponsors, and its private sector partners.

Also consider the value proposition of the Leeds School of Business at CU-Boulder.

About a year ago, the Denver Business Journal published the results of national rankings for 111 business schools. The DBJ listed rankings for CU, CSU, and DU.

The Leeds School can point with pride to their ranking in sustainability:
• Sustainability: CU/Leeds, 19th; CSU, 36th; DU/Daniels, 40th

The Leeds ranking in the core areas of a business education make Dan Hawkins look like an All-Star:
• Accounting: DU/Daniels, 27th; CSU, 74th; CU/Leeds, 78th.
• Ethics: DU/Daniels, 3rd; CSU, 85th; CU/Leeds, 91st.
• Financial management: DU/Daniels, 50th; CSU, 84th; CU/Leeds, 89th.
• Strategy: DU/Daniels, 55th; CSU, 82nd; CU/Leeds, 105th.
• Operations management: CSU, 45th; DU/Daniels, 57th; CU/Leeds, 109th.
• Marketing: DU/Daniels, 31st; CSU, 73rd; CU/Leeds, 111th.

If the perception exists that Leeds students are not taught the basics, does it really matter if CU/Leeds has a solid sustainability program?

A more recent ranking of MBA programs shows that Leeds provides a solid MBA experience. However, a look at the average GMAT scores suggests that a Leeds MBA falls in the third or fourth-tier.

Why haven’t previous deans and associate deans who oversaw the MBA program been held responsible for not seeking “flagship status” for a Leeds MBA.

Let’s look at the cost of producing these results for Leeds undergraduates and graduates. The faculty pecking order ranges from senior instructor to full professor (tenured), with annual salaries varying from $100,000ish to $300,000+. The directors of the various centers receive salaries in this same range. Many of the higher paid professors have minimal “real-world” experience and often teach fewer students than the lower paid instructors. The leader of the group is the dean, with at salary of $400,000+ per year.

LASP can send a satellite to Mars and incorporate students in the process and the Leeds School can claim that their marketing program is ranked 111th out of 111. It doesn’t take a rocket scientist to see that there is a difference in programs and the accountability of their leaders.

Will the Leeds dean be held accountable for improving the performance of the business school in exchange for the $1+ million he will receive for his brief layover in Boulder? (The life expectancy of a Leeds dean is about 2.5 years). What steps is he going to take to ensure that a Leeds education includes a strong foundation in the basics (marketing, accounting, strategy, operations, and ethics). What is going to be done to make the Leeds School as meaningful and relevant as LASP?

While these two examples focus on CU-Boulder, this isn’t just about them. Every institution of higher education has a number of programs and value propositions. Some are like LASP, some are like Leeds, and others are in between.

Every dean and faculty member at these institutions must be held accountable for efficiently and effectively training our country’s current future workforce.

During the Lost Decade, higher education employment increased and workers received greater wage increases than the private sector. It is now up to higher education to demonstrate and justify the dividends that have been generated because of that investment. If that dividend cannot be confirmed, then higher education has an obligation to reduce employment, eliminate programs, and seek the efficiencies that were gained by the private sector in the last two recessions.

Just as Hawk was held accountable for his team’s performance, stakeholders (state policy makers, parents, business leaders, alumni, and students) must hold higher education leaders accountable for the performance of their system. Colorado deserves a higher education system that pays greater dividends.


Large advertisement at Denver International Airport for CSU’s business school.

©Copyright 2011 by CBER.

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 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.

REO – Bright Light in the Down Economy

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Although Colorado’s high tech cluster has been hit hard during the “lost decade” there are some bright spots. On November 17 the Colorado Photonics Industry Association (CPIA)  recognized Research Electro-Optics, Inc. (REO)  as one of those bright spots when it named it the 2010 Colorado Photonics Company of the Year.

REO is a precision optics and thin film coating company founded in Colorado in 1980. It services small to medium to high volume OEMs including manufacturers of defense and aerospace systems, laser systems, semiconductor tools, medical systems, life sciences instrumentation and telecommunications equipment.

In recent years REO has expanded its staff and increased its new manufacturing and technology assets. REO officials indicated that they have been profitable for all of the past six years, with double-digit growth in several of those years. The company is privately held, with 2010 annual sales projected to be in the neighborhood of $40 million.

The Colorado photonics cluster received a boost during the mid-1980s, around the time REO was started. At that time, the Colorado Advanced Technology Institute (CATI) provided a small matching grant for at National Science Foundation Center of Excellence at CU and CSU. That grant ultimately led research that was commercialized to form 20 companies.

As an enabling technology, photonics touches many industries, such as aerospace, renewable energy, homeland security, biomedical devices, telecommunications, and defense. This allows companies, such as REO to diversify their product line and clients, thus insulating them from turbulent economic times.

Congratulations to REO!

©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.