Tag: US economy

NABE Downgrade of Real GDP Bodes Ill for Colorado

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The National Association of Business Economists (NABE) released its fall consensus forecast in early October. NABE revised its outlook for output from 3.2% (in May) to 2.6% based on lower than anticipated economic activity during the summer months.

In addition, NABE indicated that modest growth in consumer spending is on tap through 2011. Consumers will remain cautious as a result of continued high unemployment and weak gains in employment. As well, minimal growth is expected in household net worth, i.e. small gains are expected in equity portfolios and home prices

Finally, NABE opined that the downward revision in the forecast reflects “a greater appreciation of the importance of stimulus policies in countering forces holding down the economy’s performance.”

While it is not surprising that NABE lowered its expectations for expansion of the economy, the amount of the decrease is reason for concern. In simplistic terms, the May forecast suggested that the U.S. would see above potential growth this year while the October forecast now says that growth will be well below potential.

Were the NABE panelists overly anxious to see a recovery or did the positive impact of the stimulus package on Q1 Real GDP cause them to be overly optimistic in their May outlook? Clearly panelists missed indicators of the summer slowdown in their May forecast; are there other factors, favorable or unfavorable, that panelists may have missed in their October update?

The revisions in the NABE forecast illustrate the challenges that economists and business researchers face in evaluating and forecasting the performance of the economy. Many of the econometric models that have worked well during periods of growth have proven to have limitations caused by the volatility of the economy over the past decade. This is not intended as criticism, but rather an illustration of the challenge our public and private sector leaders face when they are forced to make decisions without perfect information.

While Colorado is a great place to conduct business, the underlying message from the NABE forecast bodes ill for Coloradans. Lackluster growth at the national level translates into an extended recovery for the Colorado economy, i.e. there will be limited job growth on the horizon.

©Copyright 2011 by CBER.

Increased DIA Traffic Bodes Well for Economy

horvath

Amidst all of the bad economic news, there is a ray of hope from the transportation sector. Year-to-date passenger traffic at DIA, through July 2010, is stronger than last year. About 30.2 million passengers have passed through airport gates this year, or about 779,710 more than in 2009. This represents a healthy increase of 2.6%. This is a good sign because it means more people from around the world are traveling for business and personal reasons.

Typically, the DIA’s peak load occurs in July. The total number of passengers for July 2010 was 5,060,508. Despite the year-to-date increase, the monthly total for July is slightly off the pace of 5,109,342 for 2009.

The 2010 YTD passenger total is slightly below the same period for 2008. If this level of activity continues, approximately 51 million passengers will travel through DIA in 2010.

©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.