Colorado Economic Update

Transcription

1 Department of Local Affairs State Demography Office Winter 2014 Colorado Economic Update Summary: This reports reviews important economic data and trends in Colorado. Its focus is to identify how Colorado is faring vis-à-vis other states and how Colorado s industries, regions, and counties are performing, thereby providing context to headline economic statistics. Colorado Economy The Colorado economy continues to improve steadily and broadly, outperforming the rest of the nation. This trend is consistent with the state s economic profile. In past recessions, Colorado tended to enter the recession slower than the rest of the nation and exit from recessionary conditions faster. The evidence of Colorado s economic resurgence is apparent on a number of fronts. Starting with job growth, the most recent Quarterly Census of Employment and Wages (QCEW) report by the Colorado Department of Labor and Employment (CDLE) shows total wage and salary jobs in Colorado grew from 2,244,343 jobs in the 2 nd quarter of 2012 to 2,312,522 jobs in the same period of 2013, equivalent to 68,179 jobs and a solid rate of 3% year-over-year. After losing approximately 154,800 jobs between May 2008 and January 2010, a 6.55% overall job loss, Colorado has added more than 170,200 non-farm jobs through November 2013, a 7.8% gain in jobs, based on CDLE s Current Employment Statistics (CES) Survey 1. The job gains allowed Colorado to not only gain all of the jobs it lost between 2008 and 2010, but also record the highest number of jobs since pre-recession peak employment in May The state surpassed the 2008 peak employment number in June It is indicative of the depth of the economic recession that gripped the United States from and the subsequently slow economic recovery that it took a full five years for Colorado to post a job number that exceeded its May 2008 peak. While five years is an extended period of time to wait for a state to exceed its 2008 peak employment, Colorado should be counted among the more fortunate states. Of the 50 states, only 16 have posted employment totals through November 2013 that exceed its pre-recession peak employment in 2007 or Figure 1 illustrates the states currently below or above the pre-recession peak in percentage terms. 1 See for both the QCEW and CES data 1 P a g e

2 Figure 1 Data Sources: U.S. Bureau of Labor Statistics, State Labor & Employment Agencies Current Employment Statistics Survey From this map several observations stand out. First, the geographical discrepancies between those states that have exceeded pre-recession peaks and those states that have not. States faring the best from 2008 to 2013 have been in the central portion of the United States and Northeast. Second, the states that have registered the most lethargic rates of job recovery are those that experienced the greatest dislocations in real estate markets. The so-called sand states of Nevada, Arizona, California, and Florida, posted exceptional rates of home price appreciation from 2005 to 2008 but then dropped off drastically with the onset of the national recession. Third, the states that have exceeded the pre-recession peak by the highest proportions North Dakota, 121.3%, Texas 105.3%, and Alaska 104.1% are major producers of petroleum and natural gas. The rapid increase in energy prices from 2003 to 2008, coupled with major advances in petroleum and natural gas drilling techniques, fostered rapid increases in oil and gas production in these states. Despite a sharp drop in petroleum and natural gas prices from , the rapid recovery in world oil prices have accelerated petroleum production in these states and generated significant job growth. Colorado is 100.4% above the 2008 peak, one of the leaders nationally when it comes to job growth. As stated above, the state lost 6.55% of its jobs between 2008 and 2010, which puts Colorado in the middle of the pack nationally when it comes to peak-to-trough job losses. Figure 2 displays the peak-to-trough job losses by state. Many of the same trends observed in Figure 1 are mirrored in Figure 2. Those states that lost the most jobs in percentage terms are the sand states described above as well as Michigan, which was destabilized by crisis in the automobile manufacturing industry. Three major oil and gas 2 P a g e

3 producing states North Dakota, Louisiana, and Texas lost the fewest jobs in percentage terms, with North Dakota losing less than 2% of its jobs peak to trough, the lowest value nationally. Figure 2 Data Sources: U.S. Bureau of Labor Statistics, State Labor & Employment Agencies Current Employment Statistics Survey For the United States as a whole, the country achieved a pre-recession peak job total of million jobs in January The nation registered a low point in jobs two years later in February 2010 at million jobs. This is equivalent to 8.7 million jobs lost or a 6.3% peak-to-trough job reduction, which is less than Colorado s peak-to-trough job losses. As of November 2013, national employment stands at million jobs, which is only 99.1% of the 2008 peak. As such, Colorado is ahead of the nation in terms of job recovery. Job Growth by Industry Since the employment trough of 2010, Colorado has experienced relatively strong growth. The recovery has been broad based, symptomatic of a sustained recovery. Table 1 compares QCEW job data for the 2 nd Quarter of 2013 to the 2 nd Quarter of 2010 by 2-digit North American Industrial Classification System (NAICS) codes. 3 P a g e

4 Table 1 NAICS Industry Q Avg. Employment Q Avg. Employment Growth Percent Total 2,181,395 2,330, , % Agriculture, Forestry, etc. Fishing & Hunting 14,219 14, % Mining 23,796 29,925 6, % Utilities 14,138 13, % Construction 119, ,985 9, % Manufacturing 125, ,701 7, % Wholesale Trade 90,724 96,483 5, % Retail Trade 236, ,419 10, % Transportation and Warehousing 70,098 74,692 4, % Information 74,316 72,341-1, % Finance and Insurance 99, ,475 4, % Real Estate & Rental 42,150 43,422 1, % Professional & Technical 167, ,620 21, % Services Management of Companies 28,657 34,520 5, % & Enterprises Administrative & Waste 135, ,371 13, % Services Educational Services 199, ,474 5, % Health Care & Social 259, ,656 25, % Assistance Arts, Entertainment, & 50,371 53,078 2, % Recreation Accommodation and Food 217, ,361 25, % Services Other Services, Ex. Public 66,217 70,467 4, % Admin Public Administration 146, ,122-4, % Source: Colorado Department of Labor & Employment, QCEW The largest jobs gains were found in the Health Care & Social Assistance, Accommodation and Food Services, and Professional & Technical Services industries, each adding over 21,000 jobs from 2010 to 2013 or almost 1 out of every 2 jobs added during that period. Each of these industries is markedly different in terms of average compensation, skills and education requirements, and customer base, suggestive of significant and sustained job growth occurring across a wide variety of industries. The largest growth in percentage terms can be found in the Mining and Management of Companies & Enterprises industries. The mining sector, which encompasses extraction and production of non- 4 P a g e

5 renewable resources such as hydrocarbons and non-fuel minerals, rebounded quickly after the national and global recession, led by a rapid appreciation of world petroleum prices back to near prerecession levels. To that end, Colorado oil production jumped from 32.7 million barrels in 2010 to more than 50 million barrels in The robust growth of the Management of Companies & Enterprises sector, which is comprised of firms that undertake the strategic or organizational planning and decisionmaking role of the company or enterprises, speaks to Colorado s, particularly the Denver Metro Area, reputation as a desirable venue to establish regional or national corporate headquarters. Other Economic Indicators The relatively strong economic gains in Colorado are observable on a number of other fronts indicative of a broad-based recovery. Regarding housing, the Denver Metro Area experienced a much more modest rate of home price appreciation, a less drastic retreat in prices, and a quicker recovery relative to other major markets. The Case-Schiller Home Price Index (January 2000 = 100) for the Denver Metro Area reached in September 2013, the highest rate posted in the history of the Denver Metro index, which starts in From the year 2000 onward, the index initially peaked in March 2006 at a reading of or an increase of 39.6% from the year From that peak reading, the index dipped to readings of in January 2009 and in July 2011 an 11.5% reduction. Since that low reading in July 2011, the index has jumped 17.6% to the September 2013 high. Indeed, since April 2013 the Denver Metro home price index reading has exceeded its pre-recession high of 139.6, meaning the metro area has set new record readings for the home price index for six consecutive months. By contrast, real estate outcomes have been much more extreme in the major metro housing markets in the sand states of California (Los Angeles), Arizona (Phoenix), Nevada (Las Vegas), and Florida (Miami). From an index reading of 100 in the year 2000, each of the markets exceeded a reading of 200 by mid-decade, with Miami approaching nearly 300 at its peak in February Even the Case-Shiller 20-City Home Price Index, which includes Denver, the 4 markets above and 15 other metro markets across the nation peaked at a reading of in April From these peaks in 2006 and 2007, these indices fell precipitously, touching lows of in Las Vegas, in Phoenix, in Miami, and in Los Angeles. Since reaching those lows between 2009 and 2012, index readings have grown rapidly, as much as 43% in Phoenix. Nevertheless, as Table 1 and Figure 2 show, despite these strong gains through September 2013 none of these markets nor the 20-city index have approached, let alone exceeded, the pre-recession peak reading as the Denver Metro Area has. Table 2 Case Schiller Home Price Indices for Selected Cities Denver Los Angeles Phoenix Las Vegas Miami 20-City Index Pre-Recession Peak Recession Trough September Trough to Sept % 31.2% 42.8% 39.9% 23.7% 18.5% Growth Sept 2013 vs. Pre-Recession Peak 104.1% 76.8% 62.9% 53.6% 60.5% 78.5% Source: Case-Schiller Home Price Indices 5 P a g e

6 Figure 3 Looking at other indicators, the Office of the Colorado Secretary of State (SOS) 2 reported that during the 3 rd quarter of 2013 new entity filings, trademark filings, and entities in good standing all expanded. The SOS report shows statewide new entity filings increased by more than 10.1% over the prior year, or a total of 88,715 entities. Research undertaken by the SOS, in conjunction, with the Business Research Division of the Leeds School of Business at the University of Colorado-Boulder has found a positive correlation between business filings and employment growth. Based on the 3 rd quarter filing results, the SOS anticipates new employment peaks to be set in the 4 th quarter of 2013 and 1 st quarter of The Leeds Business Confidence Index (LBCI) 3, which measures the confidence of Colorado business leaders, posted a score of 59.6, the eighth consecutive quarter of positive expectations. The LCBI measures business confidence in six categories: national economy, state economy, industry sales, industry profits, hiring plans, and capital expenditures. While the LBCI decreased from 60.5 in Q to 59.3 in Q4 2013, panelists were more encouraged by the prospects for the state economy, which posted a score of 63.9 and eclipsed the 55.5 score posted for the national economy. 2 Secretary of State, State of Colorado. Quarterly Business & Economic Indicators. 3 rd Quarter Business Research Division, Leeds School of Business, University of Colorado-Boulder. Leeds Business Confidence Index. 4 th Quarter P a g e

7 Areas of Concern While the economic indicators for Colorado are trending in the positive direction, the figures and narrative presented above overshadows some negative trends that have not yet been reversed. As economic conditions statewide continue to broadly improve, more attention will need to be paid to these less-appreciated dislocations that have arisen on the heels of the national and global recession and the relatively sluggish economic recovery. Among other concerns a major issue stands out: a two-speed recovery where particular regions and counties of the state have grown quickly since 2010 while others have continued to languish in stagnant or declining job figures. This issue is examined below. Divergent County Trajectories To understand the two-speed recovery, one must start with two major recessions that acutely affected Colorado in the last decade. First, the 2001 dotcom bust induced recession acutely hurt technologyoriented firms along the Front Range and slowed growth statewide. Second, and more importantly, the Recession and subsequently sluggish economic recovery was much more expansive in scope than prior recessions and profoundly and disproportionately affected different counties across the state. Unlike the industry job classifications, which have shown indications of a broad-based recovery, the county total jobs estimates have been much more mixed in posting year-over-year gains relative to prerecession peaks. Comparing the QCEW jobs total between the 2 nd quarters of 2012 and 2013, despite a solid 3% rate of job growth statewide over that period, 20 counties, or nearly a third, lost jobs nevertheless. Of the nearly 68,200 jobs created during that period, 63,585 jobs was created in just 10 counties Weld, Larimer, the 7-county Denver Metro Area, and El Paso. This means nearly 19 out of every 20 jobs were created along the Front Range. By contrast, job losses were recorded predominantly on the Western Slope, including Delta, Mesa, Gunnison, Montrose, and Rio Blanco counties. To further illustrate this point, one can compare counties 2 nd quarter 2013 QCEW job total relative to the 2 nd quarter From Appendix A one can see that out of 64 counties, only 21 have exceeded the 2008 job total in Not only are 2 out of 3 counties below the 2008 job total, but the counties in that categorically similar. Virtually all of these are located in the Central Mountains, Western Slope, Southwestern, and South-central regions of the state. Among the hardest-hit counties include Rio Blanco, Garfield, and Pitkin, all of which are below 90% of the 2008 employment. On the other hand, 2013 job totals are higher than 2008 principally along the Front Range and Eastern Plains, albeit with the major exception being Denver County, which is alone among Metro Denver counties in having yet to top the 2008 job total. Major reasons for divergences in rates of job recovery across counties are as follows: For tourism-dependent counties, particularly in the Central Mountains, a full recovery is tied to the health of the U.S. economy. While the U.S. economy is steadily recovering, as explained in earlier sections of this report, Colorado is outpacing the nation. Consequently, until the U.S. economy grows further, tourism-dependent counties will lag behind other parts of the state. 7 P a g e

8 For counties that rely on a significant proportion of jobs and output generated in the energy sector, recovery has been slow, especially on the Western Slope. Natural gas and coal, the principal energy exports in these counties, has been slow to recover on account of only modest natural gas price increases and regulatory uncertainty, slackening demand, and mining accidents related to the coal sector. By contrast, oil prices have quickly rebounded from recessionary lows, allowing rapid resumption of new oil extraction activities in Weld County. See Figure 5. o Mining and Energy activity tends to create jobs in related industries particularly construction. Given the slow recovery in mining and energy production along the Western Slope the ancillary construction jobs have failed to return as well. Economic Diversification is associated with more stable and vibrant economies. Whereas large metro areas boast a great deal of diversification and can withstand the onslaught of a deep recession, smaller non-metro counties lack such diversification. Consequently, smaller counties more dependent on a handful of industries (tourism, energy, etc.) are taking longer to recover. Figure 5 8 P a g e

9 Summary The Colorado economy continues to improve steadily and broadly, largely outperforming the rest of the nation. This trend is consistent with the state s economic profile of entering recessions later than the rest of the nation and exiting faster than the rest of the nation. The evidence of Colorado s economic resurgence is apparent on a number of fronts, particularly in the latest QCEW jobs data, business filings, business confidence, and home price appreciation. Despite relatively robust job growth, Colorado is burdened by the legacy of two acute recessions in 2001 and that have caused divergences in job recovery rates between the state s metro, economically diverse, Front Range counties that are recovering faster than smaller, less economically diverse counties in the Central Mountains, Western Slope and elsewhere. The 3 rd quarter 2013 QCEW report will provide further indications of whether the gap between the Front Range and the rest of the state has closed or opened further. For more information about this report or other economic indicators, visit the SDO website at 9 P a g e

10 Appendix A Quarterly Census of Employment and Wages by Quarter 2008 & 2013 County QCEW 2008 Qtr 2 Jobs QCEW 2013 Qtr 2 Jobs 2013 Jobs as % of 2008 Rio Blanco County 4,061 3, % Huerfano County 2,153 1, % Las Animas County 6,227 5, % Garfield County 28,715 24, % San Miguel County 4,791 4, % Montrose County 15,272 13, % Eagle County 30,938 27, % Pitkin County 16,474 14, % Ouray County 1,818 1, % Grand County 7,141 6, % Park County 2,437 2, % Clear Creek County 3,418 3, % Bent County 1,277 1, % Gunnison County 8,177 7, % San Juan County % Mesa County 64,394 58, % Routt County 14,480 13, % Archuleta County 3,761 3, % Moffat County 5,516 5, % Prowers County 4,944 4, % Delta County 9,122 8, % Baca County 1,207 1, % Crowley County 1,159 1, % Custer County % Teller County 7,143 6, % Hinsdale County % Fremont County 13,986 13, % Yuma County 4,143 3, % Mineral County % Rio Grande County 4,277 4, % La Plata County 25,895 24, % Summit County 17,775 16, % Elbert County 3,505 3, % Cheyenne County % Alamosa County 7,799 7, % Logan County 8,534 8, % Otero County 6,190 5, % Denver County 451, , % Sedgwick County % 10 P a g e

11 Montezuma County 9,207 9, % Kit Carson County 3,034 2, % El Paso County 247, , % Pueblo County 57,659 56, % Lincoln County 2,114 2, % Total 2,304,890 2,312, % Jackson County % Chaffee County 6,946 6, % Saguache County 1,517 1, % Jefferson County 213, , % Arapahoe County 284, , % Larimer County 132, , % Lake County 1,970 2, % Costilla County % Adams County 156, , % Boulder County 164, , % Washington County 1,123 1, % Conejos County 1,299 1, % Weld County 84,479 89, % Kiowa County % Morgan County 11,199 12, % Gilpin County 4,869 5, % Douglas County 94, , % Phillips County 1,488 1, % Broomfield County 30,684 34, % Dolores County % Source: Colorado Department of Labor & Employment 11 P a g e