The Colorado economy is returning to its traditional growth mode, following 30 months of one of the weakest economic periods on record. We expect this positive growth pace to pick up speed over the balance of the year, with a return to more impressive growth in 2005.
Colorado’s emergence from its painful recession is consistent with similar moves by neighboring states, each of which is now out of its own recession or period of economic slowdown. The Intermountain region is expected to record its strongest performance in four years this year and next.
Colorado Springs also is enjoying renewed growth this year, due in part to the return home of thousands of troops to Fort Carson – even as other deployments are scheduled for later this year and next. The local economy should see an increase in consumer spending as soldiers have come home to El Paso County with money to spend. Area businesses will benefit from the more robust economic activity that has been missing since 2001 due to recession and local troop deployments. Additional military mobilizations from the area in coming months, however, could put a slight damper on the rebound.
Colorado and its neighbors are benefiting from the strongest U.S. economic performance in 20 years, while also benefiting from solid global growth. The weaker U.S. dollar, versus primarily the euro and the yen, will enhance the ability of Colorado companies to sell products and services across Europe and in Japan. The weaker dollar will also entice more European and Japanese tourists to the West and to Colorado than perhaps at any time in a decade.
The Colorado economy added an estimated 11,400 net new jobs during the most recent 12-month period, the strongest year-over-year gain in three years. We expect this meager 0.5 percent annual growth pace to give way to growth approaching 1 percent for calendar year 2004. We also expect growth to approach 2.2 percent to 2.5 percent (45,000-55,000 net new jobs) in 2005, the strongest employment gains since 2000. Job growth in Colorado Springs is likely to exceed statewide growth this year and next.
These projected employment gains will lag the more powerful job gains during the 1990s. However, such job additions are a major improvement when compared against the dismal performance between 2001 and 2003, wherein Colorado’s economy lost a net 62,000 jobs.
The state’s unemployment rate has declined in recent months, despite more people entering the Colorado labor force. The state’s jobless rate averaged just below 5 percent in recent months, a major improvement versus the 5.7 percent and 6 percent averages of 2002 and 2003, respectively. An estimated 123,000 Coloradoans are now out of work, down nearly 20 percent versus the 152,000 residents out of work a year ago.
Stronger Colorado job creation is followed by stronger gains in personal income. Income growth is obviously beneficial as it provides greater ability to spend and to save, while also helping those residents facing financial stress to avoid bankruptcy and/or foreclosure.
Growth in total Colorado personal income is expected to reach or slightly exceed 4.5 percent in 2004, the best performance since 2000. Stronger income gains are expected next year.
Keys to Growth
Three major factors will provide greater incentives for employers to expand Colorado operations or consider doing business in Colorado in coming years. The first is an expanding Colorado labor force.
Colorado is expected to see the number of high school and college graduates rise in excess of the national rate in coming years. The state will also see a continuation of net in-migration from other states, as it has for many years. Solid labor force growth will become increasingly important in coming years as U.S. labor markets return to the extremely tight conditions during 1998-2000.
The second major factor is the reasonable “cost of doing business” in the state.
Economy.com estimates the cost of doing business in Colorado at 104 percent of the national average. The cost of doing business is estimated at 99 percent of the U.S. average in Denver and at 95 percent in Colorado Springs. Such business costs will be attractive as Colorado competes aggressively with California and numerous East Coast states for high-value technology jobs in coming years.
The Colorado cost of living also is reasonable, especially versus both coasts. Economy.com estimates the Denver cost of living at 111 percent of the national average, with Colorado Springs at 102 percent. The ACCRA cost of living index for the Denver metro area was 105.5 percent of the U.S. average in 2004’s first quarter, with Colorado Springs estimated at 97.5 percent.
Fort Collins and Grand Junction were estimated at 102.4 percent and 100 percent, respectively. Greeley’s cost was estimated at 92.4 percent, with Pueblo at 91.8 percent.
The third factor is the state’s high quality of life and ability to take advantage of the current global technology rebound. A recent survey by the American City Business Journals ranked living conditions in all 3,141 counties across the nation. Colorado outperformed all other states, with nine of the top 50 counties ranked highest for quality of life, including Pitkin and Douglas counties, both ranked in the top four (Denver Business Journal).
In addition, the Milken Institute’s State Technology and Science Index ranked Colorado third as the state best poised to take advantage of the tech recovery (Investor’s Business Daily).
The Colorado Outlook
Colorado’s economic growth turned positive over the past six-12 months, with stronger performance expected during the next 18 months. More impressive job gains are also generating stronger income growth and overall spending, the lifeblood of Colorado business.
Growth in the state’s highly-educated labor force, reasonable business costs and costs of living, and a high quality of life will pay dividends for the state’s residents. Better days are ahead.
Jeff Thredgold is the corporate economist for Vectra Bank Colorado and president of Thredgold Economic Associates. He can be reached at (888) 847-3346 or firstname.lastname@example.org.