Economy divided among good and bad indicators

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El Paso County’s economy has reached a standoff between good and bad forces — and those in the business of making predictions cannot say which will win the showdown.

The local economy has certainly been slapped around this past year with meager job growth, declining wages and loss of primary jobs. And the county — home to four military installations — lives in fear of a possible $550 million a year in military cuts that could bear down on the local economy through sequestration from the Budget Control Act of 2011.

Employment in 2011 was 272,828 — only 266 more than employment in 2010. And as of July 2012, employment fell to 266,729. Per capita income increased slightly, by 1.2 percent. But real wages in 2011 went down nearly $850 from the previous year. And the county’s average wage is 11 percent below the state average of $49,088.

There is a continuing decline in primary jobs — jobs that contribute to production of goods sold outside the county. In 2001, primary jobs represented about 29 percent of all jobs and 39 percent of all wages. By 2011, primary jobs provided 25 percent of all jobs and 40 percent of wages.

“It’s kind of ugly out there,” said Tom Zwirlein, University of Colorado at Colorado Springs professor of finance and director of the Southern Colorado Economic Forum, which will present its annual economic forecast Sept. 28 at the Antlers Hilton.

For the past 16 years, the forum, which includes senior economist and UCCS senior instructor Fred Crowley, has been telling it like it is regarding the local economy. The forum examines and compiles the numbers that describe the economic landscape — past, present and future.

But even the forum’s fortune-tellers are having difficulty producing a 2013 forecast. There are too many international, national and local events in motion. The so-called “fiscal cliff” — spending cuts kicking in along with expiring tax cuts — could cause recession in 2013 or at least curtail consumer spending. But locally, rebuilding in the aftermath of the Waldo Canyon fire could create hundreds of jobs a year for the next five years and help make up for the losses in other job sectors.

“We aren’t giving a lot of tangible answers today but the forecast … it’s more difficult — so many things are changing right now with the potential of the Budget Control Act of 2011, the fire, the lease by Memorial Hospital, the stagnant economy in Europe and what impact that might have on the U.S. and Colorado — it just makes trying to come up with one forecast a real challenge,” Zwirlein said.

Positive data

It’s not all gloom and doom. People in Colorado Springs bought more cars, electronics, furniture and clothing in 2011, which helped increase retail sales by 8.5 percent, or $1 billion, to $13.8 billion.

There has also been some unexpected good rolling into Colorado Springs by way of new housing construction. By year’s end, single family permits are expected to be up 47 percent over 2011. In the first eight months of this year, there have been more housing permits issued than all of last year. The reasons vary from pent-up demand to the historically low interest rates of 3.5 percent. And apartment buildings are having their strongest year since 2002, expecting to end the year at 750 new units.

“It tells me we are definitely coming back,” Zwirlein said. “We are not near the heydays of 2004-05. I think many in the building profession don’t expect us to get back to that level. But, we are well on our way to a very healthy rebound in housing construction.”

Then there is the hope of a growing health-care sector around a University of Colorado branch medical campus at UCCS. University of Colorado Health, which takes over daily operations of Memorial on Oct. 1, has agreed to pay $3 million a year for the 40-year lease term to the University of Colorado School of Medicine, to be used to create a branch medical campus in Colorado Springs.

“Certainly one of the growth areas over the past 10 years has been in the health-care sector,” Zwirlein said. “We are very interested in seeing how having a university hospital in Colorado Springs will eventually pan out.”

In eight cities with university hospitals, job creation in the health care sector outpaced all other job creation, Crowley said. In those eight cities, health care jobs were 160 percent of all jobs created, meaning without health care jobs there would have been a decline. The health care sector, Crowley said, grows employment faster, grows wages faster and grows business faster then any other sector.

“What I hope happens — and it won’t happen this year, but maybe in 2014 — there will be health care expansion on some level. The health care industry — they do create jobs. We need to move in that direction and make it grow.”

The Anschutz Medical campus in Aurora was built in 2004 and is now home to six professional schools. “They’ve created jobs, jobs, jobs,” Zwirlein said. “That is now Aurora’s financial engine and it will be their financial engine for a long time to come.”

After the fire

The Waldo Canyon fire wiped out about 350 homes, damaging hundreds more, and tourism took a beating this summer when visitors were scared off by images of fire on national television.

But the after-fire building may prove to be a welcome addition to the local economy, Crowley said. Between new construction and refurnishing the homes, the post-fire activity could create 3,800 jobs over a five-year period — jobs that could generate $20 million per year in income and $790,000 a year in sales taxes.

“We know it won’t happen in one year,” Crowley said.

Initial insurance claims of $353 million suggest the economic impact of rebuilding could be significant, he said. And the refurnishing is not just for those homes that burned to the ground, but for the many homes that suffered severe smoke damage.

“That’s where these numbers just get mind-boggling,” Crowley said.

Mountain Shadows residents could spend $213 million to replace the items in their homes, Zwirlein said.

“I was amazed when you look at the insurance claims — the proportion that goes toward rebuilding the home and proportion that goes to restocking it — those restocking numbers are huge.”

One thing is certain in the El Paso County economic scenario: The good will continue its fight against the bad and the ugly. And, with unknowns on the horizon, it might be time to develop a regional economic strategy that includes Denver and Pueblo — a long-talked-about tactic, Zwirlein said.

In the meantime, the forum’s predictions for 2013 include more housing permits, reduced federal expenditures, continued low interest rates, expiring Bush-era tax cuts, and lowered economic activity due to large reductions in federal expenditures and increases in tax rates.

“There are two things the region needs,” Crowley said. “Jobs and high-paying jobs.”

If you go

What: Southern Colorado Economic Forum

Where: Antlers Hilton, 4 S. Cascade Ave.

When: 7 to 11:30 a.m. Sept. 28

Info: SouthernColoradoEconomicForum.com

Like a movie script

The good: Local jobs increased 1.5 percent, or 3,042 jobs in 2011 — a reversal of the job loss trend; 1,476 single-family building permits have been issued through August — more than all of 2011; foreclosures decreased 11.8 percent in 2011 to 3,620; retail sales increased 8.5 percent to $13.8 billion in 2011.

The bad: Unemployment rate in 2012 is trending up to 9.7 percent in July, higher than the state and U.S.; commercial real estate office vacancy rate is 14.9 percent, which worsened since December 2011; employment declined each year from June 2007 to June 2012.

The ugly: Real wages in 2011 averaged $42,153, down $836 from 2010; wholesales declined 18.3 percent to $3.6 billion even though wholesales increased 3.4 percent in the state; defense budget cuts could result in as much as $55 billion per year for the next nine years — as much as $550 million locally.

Sectors with job gains in 2011

Health care, 1,426

Accommodations and food services, 1,178

Retail, 848

Arts and entertainment/recreation, 322

Sectors with job loss in 2011

Wholesale, -1,080

Administrative and waste services, -532

Professional and technical services, -409

Construction, -407

Other services, -118