Ho-hum: Springs economy staying the same

What difference does a year make?

When it comes to the Colorado Springs economy: very little.

At this time last year, the city was optimistic about the path forward. Fred Crowley, professor of economics at the University of Colorado at Colorado Springs and principal of the Southern Colorado Economic Forum, predicted steady recovery.

And he was right — until December. Half way through 2011, Crowley reports that the economy had come to a screeching halt. It’s exactly where it was this time last year — and the updated forecast has more weeds than flowers.

“Very little has changed,” he said. “The index for the local economy is unchanged. We’ve gone no place in the past year.”

Crowley set the economic index at 105.34 in December 2010, a very respectable index — showing growth in service jobs and in other economic factors.

But since then, he says, “We’ve seen pervasive, across the board declines.”

The Springs’ economy lost every bit of the recovery in the last half of 2010, he said.

“Unemployment, job growth is completely stagnant,” he said.

And if that news wasn’t bad enough — it gets worse.

“It won’t take much to push us into another recession, because we just don’t have the jobs and new businesses needed to weather it,” he said.

There is some good news. President Barack Obama has pledged to bring home troops from Iraq and Afghanistan. That means about 8,000 more people spending money in the Springs.

“That’s the bright spot,” he said. “They’ll come home, and they’ll buy cars and televisions. They’ll improve their houses. That means money moving around the economy.”

But, he said, the Springs has too long depended on the military to keep its economic boat afloat. Instead, the area needs more private industry to create both primary and secondary jobs.

Unemployment

Job growth in El Paso County trails other Colorado counties, as does wage growth. While the rest of Colorado seems to be recovering, according to figures from the Bureau of Labor Statistics, the Springs seems to be stuck.

About 274,000 people in El Paso County have jobs, and wage growth is slightly higher than the national average — 3.1 percent growth in the past year. The number of people with jobs in the county hasn’t changed much, according to the BLS — it’s up by only 100 jobs.

But the average wage in El Paso County is $975, lower than the $1,100 weekly wage average for the rest of the state.

And unemployment, as figured by Crowley, is unchanged from last year. His tally puts the unemployment rate at 9.51 percent, seasonally adjusted.

“About 6,200 more people don’t have jobs this year from last year,” he said. “And some of those people have just fallen off the radar. They’re no longer looking; they’re discouraged.”

For this time period in 2010, Crowley puts the unemployment rate at 9.58 percent. It’s a different figure from the state, because Crowley removes Teller County’s statistics from the figure.

But even Crowley admits that figure doesn’t reflect the entire picture.

“I think if you took under-employment into account, or people who have stopped receiving benefits, that number would be more between 10.5 percent to 11.5 percent,” he said.

The bright spot in the unemployment picture: professional and technical workers.

“Health care workers, attorneys, military consultants — those people have jobs,” he said.

Real Estate

A comparison between 2011 and 2010 is difficult to make in single family home purchases, but there is some good news for construction permits.

This time last year, President Obama’s tax credit program for first-time homebuyers was winding up — and there was a flurry of closings trying to get in under the deadline.

“We’re down around 20 percent,” Crowley said, “because of that program. We had an artificial spike last year.”

Fewer people are building houses, according to the Pikes Peak Regional Building Department. Single-family construction permits are down 14.9 percent for the first six months of the year.

Statewide, multifamily permits are up 32 percent, according to the Colorado Division of Housing. Permits for single family construction are down 11 percent from last year, figures show.

There have been 1,013 multifamily permits issued in Colorado and 3,489 issued for single family.

“There has been much optimism within the multifamily industry about rent growth, which in turn will lead to new construction,” the state agency reports. “Year to date totals for 2011 are now at a three-year high, but growth in new construction has been small.”

Tourism

Despite hosting the U.S. Women’s Open, tourism numbers are also likely to be flat for the year, said Steve Ducoff, executive director of the Pikes Peak Lodging Association.

“Occupancy is up a little bit,” he said. “But only moderately up. The room rates are down about 2 percent from last year, in some cases.”

The city’s lodging and auto rental tax — or LART, the bulk of which pays for the Convention and Visitors’ Bureau — is up about 1.7 percent from the same period last year, reports Chelsy Murphy of the CVB.

But the city’s hotels are still hoping for a busy summer, counting on events like the USA Pro-Cycling Challenge to fill rooms.

“We have some optimism,” she said. “Of course, hotels like the Broadmoor are doing pretty well, thanks to the Women’s Open. But others are counting on the rest of the summer to get more people here.”

Room rates but Ducoff says properties are hoping for seasonal increases.

“We’re hoping the average daily rate will be creeping up as well this summer,” he said. “That will help local hotels with their margins.”

The average rate in Colorado Springs is $76.08, which is down 3 percent from a year ago. Statewide, the average room rate is $130.50.

Areospace/Defense

In the past month, Colorado Springs companies have received $108.5 million in government contracts — and that’s good news.

However, Crowley points out that not all the work is done here — nor are all the jobs here.

“Some of those contracts are local companies performing work here, and that means they’re hiring people,” he said. “And some of those are contracts for jobs in the Middle East — and that’s where those jobs are.”

The military and defense sector have bolstered the Colorado Springs economy for years, making up 40 percent of local businesses. But with talks of deep cuts to the DoD budget, the flow of federal dollars could slow to a trickle.

Colorado still has the highest average space wage in the nation: $118,207 annually, according to the Space Foundation, located in Colorado Springs. The industry is taking a pragmatic approach to the Washington budget talks, said Micah Walter-Range, director of research and analysis at the Space Foundation.

“Companies are aware that federal spending is under intense scrutiny and are focusing their efforts on educating members of Congress on the benefits of the programs,” he said. “In response to some heavy cuts by the House, companies are talking more to the Senate, seen as less inclined to make deep cuts.”

Aerospace and defense companies are hoping that funding will be protected in the Senate and during the conference process between House and Senate.

“Companies are also keeping a closer eye on non-space legislation,” he said. “Recently, Rep. Weiner added an amendment to a law-enforcement bill that transferred $300 million away from NASA.”

Job cuts from the end of the space shuttle program won’t affect Colorado much, he said. And NASA’s budget for research is growing — slightly.

Sales tax revenue

The city is reporting increases in sales tax revenue above 2010 for the same time period, but Crowley said consumer sentiment probably will erode those gains.

The city’s 2011 mid-year financial report shows sales and use tax revenue — which accounts for 80 percent of the general fund — was $36.5 million as of June 1. That’s roughly $1.5 million higher than in 2010, the year that put the city back on firm financial footing. In May, the city collected $9.6 million, up from $8.9 million during the same month last year.

Overall, sales tax revenue is 3.25 percent higher so far this year, despite a dip in February and March that had collections lower than a year before.

“I don’t see how they can keep it up,” he said. “We’ll see a spike from the U.S. Women’s Open, but we won’t know those numbers until September. But after that — the confidence just isn’t there.”

High gas prices will keep people from spending money in the city’s retail shops, he said. And that could lead to layoffs in the service sector.

“We’re still seeing the summer spike in gas prices, so we’ll have to see what happens in September, but for prices to drop at the pump, we’d have to see oil at $80 a barrel, and I don’t think we’re going to see that happening.”

Look ahead

Looking forward, Crowley said El Paso County needs to make major changes to keep up with job and business growth in neighboring counties, like Denver and Boulder counties.

He believes the city needs to identify what makes it unique, and capitalize on that uniqueness.

“For instance, we could grow pineapples here,” he said. “All we need is a multi-million dollar, climate-controlled dome to grow them in. But we’re never going to compete with Hawaii or Puerto Rico — they have the natural environment. We need to identify what we have that is unique to us.”

Manufacturing jobs are what’s needed, he said. Those jobs — making a product, selling a product — create more secondary jobs.

“But that’s a sector that saw a brief increase, but is once again in decline,” he said. “It’s very volatile.”

Another item on Crowley’s wish list: a $100 million venture capital fund for El Paso County.

“If we had that, we could attract that young genius working in his garage,” he said. “We’d need the call centers to field phone calls from young geniuses around the country — wanting to be part of Colorado Springs and receive some of that venture capital money.”