As far as post recession recoveries go, the country is right on track.
Never mind the screaming headlines that predict the end of the world, said Jim Paulsen, Wells Capital Management chief investment strategist.
“I just think there are high odds that (the world) won’t end,” he said.
Paulsen, who has been named a top economic forecaster by Businessweek, brought his economic insight to the 16th Annual Southern Colorado Economic Forum Friday morning. His analysis of the national economy is much rosier than that of the local economy, as outlined by economists from the Southern Colorado Economic Forum.
But, Paulsen said a look back at the post-recession economic recovery shows that it takes about four years for things to bounce back. When a recovery begins, jobs go up, unemployment goes down and consumer confidence races like a jack rabbit out of the chute.
The pattern is easy to follow, he said. Post recession, CEOs tighten the belts and become concerned about overspending. They push the limits of the workforce until it takes a toll – typically about three years following a recession. Then, the only option is to hire and expand.
“I would argue that is happening now,” he said.
He calls it the “gear year” – when things start cranking up and panic subsides. It won’t be explosive growth, he said. But, he is forecasting 3 percent growth in the coming year.
Already, the stock market is posting its highest return now than in any other recovery since 1945, he said. In the past year, new jobs have been added at a faster rate than the previous two years. Unemployment has gone from 9.1 percent to 8.1 percent and he is forecasting a drop in unemployment to 7.7 by year’s end.
“Consumer confidence is at a four-year high now,” he said.
Much of the “crisis” stories are pounding away at the fact that this is a presidential election year and the future is uncertain and the looming expiration of the so-called Bush tax cuts, he said. He waves it off. He points to the jump in housing and auto sales and the improving job market. State revenue is up; household net worth is up; debt is down; lending is up – all huge changes from one year ago, he said. And, all of it tracking the same as it has in past economic recoveries.
“This is the brass ring of elections,” he said. “Whoever wins will be a hero. The next four years will be so much better than the last four years.”
The good news in the local economy that mirrors national trends: more spending on new cars and houses. 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.
And, 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 and expected to end the year at 750 units.
However, Colorado Springs’ unemployment is higher than the country and the state. And while manufacturing jobs have grown in the state, they have declined in El Paso County, said Fred Crowley, senior economist with the Southern Colorado Economic Forum.
The county showed meager job growth, declining wages and loss of primary jobs. And the county – home to four military installations – faces possible cuts in military expenditures that could bear down on the local economy through the Budget Control Act of 2011.
Employment in 2011 was 272,828 – only 266 more than employment in 2010. And as of July, employment fell to 266,729.
“That’s terrible – there is no other way to describe that,” Crowley said.
Per capita income saw a slight increase of 1.2 percent. But, real wages in 2011 went down nearly $850 from the previous year. And, the average wage in El Paso County 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 of 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.
In the next 10 years, El Paso County is projected to add 10,000 new jobs. At the same time the population is expected to increase by 125,000. Job growth is not keeping up, Crowley said.