TODAY’S ECONOMY:  A Colorado Viewpoint
June 26, 2009

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Colorado was featured in a May 23 article in the Economist, which pointed out that the state is healthier than many others.  It ranks third in its ability to use to use science and technology assets for economic development according to a Milliken Institute study (ahead of California), unemployment is below the national average, and wind-energy production has quadrupled in the last two years, although less than 3,000 workers are employed in the entire renewable-energy sector.  On the negative side, libertarian anti-tax laws and spending restrictions will make it difficult to return to pre-recession budget levels after the current economic downturn.

The Vectra Bank Small Business Index fell to 77.1 in May, down from 79.4 in April.  The Manufacturing Business Conditions Survey for metro Denver prepared at the CU Denver College of Business decreased at a faster rate in April, to 28.5 from 38.7 a month earlier.  The Non-Manufacturing Business Conditions Survey also decreased at a faster rate, to 39.8 in April.  An index below 50 indicates a contraction in that sector.  The CU-Boulder Business Confidence Survey rose slightly in the second quarter, to 25.5 from a record low in the first quarter.

Colorado will receive as much as $3.5 billion in direct funding, benefits and services from the stimulus bill, according to Carolyn McIntosh as quoted in ColoradoBiz magazine.  The largest recipients are medical ($830 M), education ($760 M), transportation ($500 M) and energy ($175 M).  Federal funding to research labs and locations in Colorado could increase the total to $7 billion. 

Colorado’s state-chartered banks and thrift institutions lost $47 million in the first quarter, as the loan delinquency rate rose to 3.61%, up from1.36% a year ago.  Total loans and leases rose (26.9/23.4) to $26.9 billion. There are 149 FDIC-insured financial institutions in the state.

Graduation rates at Colorado high schools declined 1.1 percentage points to 73.9% in 2008.  The dropout rate improved to 3.8%, however, from 4.4% in 2006-2007.

Employment

Colorado’s unemployment rate rose two tenths of a percentage point in May to 7.6%.  Employment declined 4.0% for the month and was down 3.1% year-to-date.  The state has lost 104,300 private sector jobs relative to May 2008, with declines in every major sector except education and health services, up 8,300, and government, up 6,700.  The government gains are primarily at the local level. 

Colorado will receive about $12 million in federal stimulus funds to boost summer employment among teenagers and young adults up to age 24.  The jobs will go to young people from low-income families and will help to reduce the state’s teenager unemployment rate of about 20%.

2008 Job Changes

DaVita Inc., a kidney-dialysis provider, will move its corporate headquarters to Colorado from California.  Initially, about 20 corporate employees will join the 800 DaVita workers already in Colorado.  Over the next several years, the company expects to hire several hundred workers in Colorado.

The Army has officially cancelled plans to add a fifth combat brigade at Fort Carson in Colorado Springs.  This eliminates expected job growth of 4,800 active duty military and civilians and $187 million in construction contracts. 

Gross State Product

Colorado’s gross domestic product increased 5.4% to $248.6 billion in 2008, according to preliminary data from the Bureau of Economic Analysis.  After adjustment for inflation, this was a 2.9% gain, the fifth strongest in the U.S.  Neighboring Wyoming enjoyed a 4.4% increase, the nation’s second highest.  Nationally, growth slowed in 38 states, averaging 0.7%.

 Colorado’s biggest gains were in professional and technical services (up 9.0%), information services (up 7.2%), health care and social assistance (up 6.4%) and government (up 4.4%).  The largest sectors of the state’s economy were real estate, government, professional and technical services, information and manufacturing.

2008 Colorado Gross Domestic Product

                                                                                                                                  Source:  BEA.
Both nominal and inflation-adjusted GDP data for the state were revised down going back to 2003.

Sales and Income

Retail sales in Colorado fell 0.1% in January, after increasing only 2.6% in 2008.  More current sales tax data indicate that the contraction is continuing.

Colorado personal income rose 0.4% in the first quarter, to an annualized $207.4 billion.  For the nation, personal income was up 0.8%.  Earnings by place of work accounted for 71.6% of the total; dividends, interest and rent for 17.1%; and transfer payments (such things as social security, welfare, disability and unemployment payments) for 11.3%.

Tourism

The hotel occupancy rate in Colorado rose slightly in May, to 52.4%, but remained almost eight percentage points below May 2008.  The average room rate has declined 7.9% to $103.97 in the last year.  Year-to-date, the occupancy rate has averaged 52.1% relative to 59.9% in the first five months of 2008, according to the Rocky Mountain Lodging Report. 

May gaming revenues in Colorado’s 40 casinos were $63.3 million, up 20.7% from April but 2.6% below May 2008.  Year-to-date, revenues have fallen 3.7%.  Gaming taxes paid to the state in May were $10.9 million.

Passenger traffic at Denver International Airport fell 3.3% in April relative to a year earlier and was down 5.1% for the first four months of 2009.  Cargo traffic declined 14.2% for the month and 17.4% year-to-date.  The Colorado Springs Airport reported a 10.5% decline in enplanements for the month and is off 13.9% for the year-to-date.  Walker Field in Grand Junction reported a 2.7% increase in enplaned passengers. 

The 22 ski resorts that are members of Colorado Ski Country USA reported a 6.9% decline in skier visits, to 6.79 million.  Vail Resorts, which is no longer a member of Colorado Ski Country, reported a 3.5% drop in skier visits at its four Colorado resorts at Vail, Breckenridge, Beaver Creek and Keystone.  They accounted for 40% of Colorado skier visits in the 2007-2008 season. 

Housing

Housing permits in Colorado plunged 61.0% through May, with single-family construction down 51.6% and multifamily down 74.5%.  No metropolitan area in the state posted a gain.

Home prices fell 19.1% in the first quarter from a year earlier, the biggest quarterly decline in the 21-year history of the S&P/Case-Shiller national home-price index.  Prices are back to their level in the fourth quarter of 2002.  Metro-Denver had the smallest decline in the 20-city index, down 5.5%, while Phoenix had the largest, down 36.0%.

The Denver Board of Realtors reported a 4.5% gain in existing single-family home sales in April from the previous month.  However, sales were down 15.9% year-to-date and were 19.3% below a year ago.  The median home price was 5.6% below a year ago, at $210,000.  On the positive side, the inventory of homes for sale was 22% below April 2008, although up fractionally from March.  Multifamily sales rose 11% relative to March, but were down 22.4% for the year.  The median price of $130,000 was 3.3% below last year and the inventory was declined 17.2%.

Nonresidential

The value of commercial real estate transactions dropped 75% (1.5/6.2) to $1.5 billion in metro Denver in the 12 months through March, according to LoopNet, a commercial real estate services provider.  Office volume declined 76.5% relative to 71.5% nationally, while multifamily was off 70.1% versus 69.9%  Denver outperformed the nation in retail, down 48.7% versus 71.5% and industrial, down 38.6% versus 66.1%.