Colorado Springs economy is expected to remain flat in 2012, while the U.S. economy could face four to 10 years of economic uncertainty.
Economic growth in 2012 in Colorado Springs will remain stagnant, said Tom Zwirlein, a professor of economics at the University of Colorado at Colorado Springs and one of the directors of the Southern Colorado Economic Forum.
The economic indicators – increased consumer confidence, lower inventory and sales, lower unemployment, higher gas prices – all add up to not much change for the coming year, Zwirlein said.
El Paso County has suffered because of its loss of manufacturing jobs. The county relies heavily on the military bases for jobs, increases in personal income and the Gross Metropolitan Product. Even as the country is readying for a manufacturing renaissance of sorts; El Paso County may find itself falling further behind, he said.
“Southern Colorado’s economy is moving out of the recession at a slower rate,” Zwirlein said.
He joked to the full house at the annual Vectra Bank Economic Forecast breakfast meeting Thursday, that he was “supposed to the optimistic one.”
The global economic picture isn’t much brighter, said George Feiger, CEO of Contango Capital Advisors, a Vectra banking partner. Together Zwirlein and Feiger painted a sobering picture of both the local and global outlook.
“The problem with the global view is it’s not a happy one,” Feiger said.
The main reason for shaky ground is the Eurozone – with its 500 million people, the European countries are in the most trouble. They’ve got a banking system running out of capital; they’ve got exploding government debt; and they’ve got a widening gap among the countries like Germany and Greece that has caused a severe structural competitiveness crisis, Feiger said.
“It’s a danger zone,” Feiger said. “If things go wrong in Europe, we will move back into a recession.”
The Eurozone, he said, could head into recession by 2013.
“And, you cannot escape it in Colorado Springs,” he said. “And nobody can tell you what is going to happen in this context.”
“And, nobody can tell you what is going to happen in this context,” he said.
Meanwhile, the U.S. credit market debt is twice as high as it has ever been.
“Our society is totally and utterly saturated in debt,” he said.
The sad fact is that a house is about as good an investment as a treasury bill, he said.
Still, the U.S. is the still the best place to be, he said. Gains in job growth and in loans and manufacturing make it a better investment than Europe.
The S & P 500 is up to 1,300 for the first time – another bright spot in the U.S. economy. Industrial production continues to improve, because of good incentives for companies to write-off equipment costs.
“But, unfortunately in Colorado Springs, we lost too much manufacturing over the last few years,” Zwirlein said.
Citing the January report by the Denver-based Goss Institute for Economic Research, Zwirlein said that Colorado’s economic indicators advanced thanks to new orders, delivery lead time and employment. But the big issue is that companies are doing more work with less people, which has not helped the unemployment rate.
And although El Paso County saw some gains in personal income, it doesn’t mean a thing if you factor out the 61,000 military and military related personnel.
“You take out the military, and personal income growth had been non-existent for the rest of us,” he said.
With proposed Department of Defense budget cuts, Colorado Springs should not rely so heavily on the military for its local economy, Zwirlein said. For example, the Gross Metro Product in El Paso County is $26 billion. The military is responsible for $13 billion – that is 50 percent of the total output, he said.
“Right now there is a lot of money spent in El Paso County by the federal government,” he said. “I think we will see dramatic cuts in the military budgets – and the question is, how will that affect El Paso County?”
Zwirlein said the concerning issues for the county’s future are slow production growth, a shrinking federal budget, decline in real inflation, adjusted sales and use tax, and a low level of housing construction. But, the issue that shocked him is the anticipated population growth compared to the expected employment growth.
El Paso County is projected to create 23,000 jobs by 2019. Meanwhile, the population is expected to increase by 100,000.
“We need 43,000 jobs to keep unemployment at its current level,” he said. “We need 58,000 jobs to get it back to 5 percent.”
And that is the optimistic viewpoint.