From NCBR
Without a doubt, Northern Colorado’s economy is looking up.
But people out of work and seeking a job may not agree quite yet. Keep in mind that employment is a lagging indicator; employers don’t start hiring again until it is clear that the economy is recovering and that it won’t fall back into recession.
Nationally, the economy may well fall into recession again. Or, alternatively, we may have two or more quarters of non-consecutive negative GDP growth which won’t meet the official definition of a recession. Recovery from this recession is definitely weaker than recoveries from past recessions.
Economic conditions in Northern Colorado are not that uncertain. We have large employment additions on the horizon from Leprino Foods, Vestas Wind Systems, Abound Solar and other employers, including in the tech sector. There are many smaller businesses that are growing their workforces, as well, and the secondary employment impacts will be at least as great as the primary workforce additions. The basic driver of any economy – employment – looks bright in Northern Colorado.
Let’s take a look at how 2010 is shaping up, compared to 2009, in Northern Colorado.
Employment
Employment (by place-of-residence, through May, the latest available data), the lagging indicator, is still below 2009 levels: 270,800 versus 274,400. This is 3,600 fewer employed persons, a 1.3 percent decrease from 2009. But looking at year-to-date through May, Northern Colorado has 7,587 more employees this year compared to a 2,636 increase during the same period in 2009. The January-through-May change in employment has been 188 percent greater in 2010 than in 2009. This is a very positive sign for the economic vitality of our economy. I expect greater employment growth to continue into the fall and the winter slowdown to be much less drastic than in 2009.
Construction
Although through July residential construction was up from 2009, the total value of construction put in place in Northern Colorado is down 20.7 percent in 2010. This is primarily because of a decrease in large commercial projects and expensive residential homes. The decrease in the value of this statistic is a big drag on economic recovery in Northern Colorado.
Motor vehicles/sales tax accounts
Motor vehicle registrations are up 1.7 percent through July: 382,941 this year compared to 376,661 for the same period last year. This increases the demand for fuel, maintenance and repairs and provides other secondary boosts to our economy.
New and renewed sales tax accounts through July are 6.7 percent higher in 2010 than in 2009: 3,036 compared to 2,845. Small business entrepreneurs are decidedly more optimistic about economic conditions in Northern Colorado than they were in 2009. This is a very strong indicator of the future health of the retail sector and the outlook for holiday season sales.
Housing permits
Single family residential housing permits issued through June in Northern Colorado were 47.8 percent greater in 2010 than in 2009: 751 compared to 508. This was primarily due to the federal government’s homebuyer tax credit, indicating that the program was very successful. The secondary effects on retail sales were also probably significant as many buyers spent most of the $8,000 credit on furnishings, landscaping and other expenses related to moving into their new home.
The danger, however, is that the tax incentive just borrowed sales from the future; sales that occurred sooner rather than later just because of the tax credit. Recent discussions I have had with real estate agents indicate that the tax credit probably did borrow substantially from future sales since home sales have declined rapidly in the last three months. The quicker boost, however, may have saved some bankruptcies as the spending effect worked its way through the economy.
Lower interest rates are also encouraging homeowners to refinance their mortgages. Some of these mortgage savings will be spent, further boosting the retail sector of our economy and, perhaps, staving off some foreclosures and/or bankruptcies.
Retail sales
Retail sales through May were 4.8 percent higher in 2010 than in 2009: $4,778,677,000 versus $4,561,926,000. Thus, many of the positive changes delineated above are being observed in retail sales, an effect I think will continue through the rest of 2010.
We can safely say that economic conditions are improving in Northern Colorado. The rebound from recession is progressing steadily, faster than the national economy but not fast enough to revive dangers of another bubble. Inflation will not be a problem for another couple of years and home prices should continue a slow recovery after the post-incentive slowdown in sales activity.
John W. Green is a regional economist who compiles the Northern Colorado Business Report’s Index of Leading Economic Indicators. He can be reached at jwgreen@frii.com.