University of Colorado economist Richard Wobbekind sees modest growth for Colorado in 2011 as the state continues to deal with high unemployment.
It was economic forecast déjà-vu this week as the University of Colorado’s top economist addressed Boulder business leaders.
I covered the same event – the Boulder & Beyond Economic Forecast organized by the Boulder Economic Council – a year ago and wrote about how Colorado’s population continues to grow despite continuing job losses and an “unemployment number that isn’t improving much.”
So as 2011 kicks into gear, what’s here to great us?
- A state unemployment rate that just inched up a notch to a record-matching 8.8 percent in November. A year ago we worried when it was 7.5 percent. Colorado hasn’t seen unemployment this high since the early ‘80s.
- A slow housing market that keeps dragging on, with foreclosures saturating the market and holding down both new construction starts and prices. The high-end market for homes above $1 million is especially tough.
- State and federal deficits that politicians seem unable to deal with as the slower economy puts a stranglehold on tax revenues. Colorado, with a projected $1.5 billion budget gap forecast for 2011, joins a crowd of other states in the same boat. Colorado now has debt of nearly $25.7 billion. Only four states, Alaska, Arkansas, Montana and North Dakota, predict they’ll be in the black. That’s almost peanuts, however, when compared to the U.S. debt, which just crossed the $14 trillion mark for the first time.
Go to www.usdebtclock.org to really see some scary numbers. When I clicked it, the debt level equals $45, 125 for each citizen. Of course the numbers constantly click higher.
So one has to wonder? Why does everyone seem so happy and optimistic at these 2011 forecasts when charts and graphs – and even a 9-Inning Scorecard that CU Economist Richard Wobbekind presented – still show all of these plunging red bars?
Wobbekind wasn’t alone this year with a fairly upbeat forecast. On another event panel, Denver economist Patricia Silverstein presented a study by metro Denver economic developers that listed 100 measures that keep Colorado competitive. On the list, the state’s 67 “strengths” easily outweighed the 33 “challenges.”
Turns out, Silverstein said, Colorado continues to rank very high in everything from venture capital investments, stock IPOs, renewable energy sources, number of patents filed, high school ACT & SAT scores and finally, the lowest level of obesity in the country. Smiles all around.
And it’s reports like these that continue to get people packing their U-Hauls or jumping on the next flight (another stat is that Denver International Airport hit a record-breaking 52 million passengers last year) for the “gold” in them thar Colorado hills.
Only one small problem. Colorado lost 140,000 jobs in 2009 and 2010, and although Wobbekind is now calling for “moderate” growth, that translates into only 10,000 new jobs this year. The recession essentially gave Colorado a zero net gain in jobs for the past 10 years, Wobbekind pointed out.
So you ask, where’s the good news? With cheap capital, businesses are busy making investments, but mostly in equipment, computers and software – not new employees. Economists see an 8 to 9 percent increase in business fixed investment for 2011, a good long-term sign.
Consumers, the real engine behind the GDP, somehow have finally reduced their debts and saving rates look stable at around 5 percent. As a result, retail sales are actually getting back to pre-recession levels. Consumer spending on cars, clothes, food and other items now accounts for about 70 percent of gross domestic product.
Wobbekind is calling for U.S. GDP growth of about 3.5 percent in 2011, but he admits the majority view among economists is closer to 3 percent or lower.
Both businesses and consumers seem to be a pretty confident bunch all of a sudden. The CU Leeds Business Confidence Index just got back to 54.8 in the first quarter – just a little under the 54.9 in the second quarter of 2007 and up from 48.6 percent last quarter. U.S. consumer confidence hit an 8-month high this week, according to the Conference Board.
While some job recovery is taking place in the private sector, Wobbekind said it’s offset by a loss in federal jobs – not your typical scenario. “There’s an awful lot of repair that needs to be done at this point,” he said, describing the job picture.
Boulder itself, Wobbekind said, is faring better than most of the state. The latest unemployment rate for Boulder and Broomfield counties dropped a bit this week to 6.5 percent. Colorado home price appreciation turned negative in 2010, down 1.7%, but that beats Nevada’s downturn of 10 percent. Boulder may end up a percent or so.
Construction jobs in both residential and commercial sectors have taken “the biggest pounding,” Wobbekind said. Manufacturing jobs, in a slow decline for many years, will continue to shrink. On the upside, Wobbekind is forecasting a 15.7 percent growth in professional, scientific and technical services jobs. Depending on if your in an up or down jobs sector, wages might actually begin to increase this year.
So are economic forecasters just putting a happy face on rather dismal economic figures that still look much better when compared to the past few recession years? Or will 2011 surprise everyone with a better turnaround than expected. The real answer, you see, will come at the 2012 economic forecast.
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