TODAY’S ECONOMY:  A Colorado Viewpoint
November/December, 2009

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Global business confidence rose sharply in October, according to a survey of 6,200 companies by KPMG.  Among U.S. and BRIC manufacturers, 54% expect a rise in activity in 2010.  However, manufacturers in Europe and Japan expect to continue shedding jobs over the next 12 months.

Metro Denver Economic Indicators, prepared by Development Research Partners, showed improvement in six of 18 indicators for the month, but only two for the first ten months of 2009.  For Colorado Springs, fourth quarter indicators prepared by the Southern Colorado Forum showed the economy bottomed out in the fourth quarter of 2008.  The indicators stood at 81.3, up from a  February 2009 low of 68.4.

The Vectra Bank Small Business Indicator rose to 72.3 in October, from 70.9 in September.  The Front Range Manufacturing Index, prepared by the University of Colorado at Denver, rose to 57.9 in November from 51.4 in October.  An index above 50 indicates the majority of respondents believe their business is improving.  The Non-manufacturing Index fell to 38.2, from 45.9 in November, indicating a negative assessment of the service economy along the Front Range.  The Mountain Region Index, which covers Colorado, Utah and Wyoming and is prepared at Creighton University, fell to 47.0 in August from 51.5 in July.  The Colorado portion fell to 47.5 from 51.1 a month earlier and the Wyoming portion fell to 46.8, the ninth consecutive month forecasting no growth.

Colorado is the ninth healthiest state, according to the United Healthcare Foundation.  Along with being the least obese state, the state ranked high on prevention, environmental health, insurance coverage and vaccinations.  Nevertheless, the state has the seventh highest health insurance premiums.

A reported released by Development Research Partners for the Metro Denver Economic Development Corporation showed Colorado ranked high in some areas, but low in others, particularly in rankings related to education.

Colorado Rankings

Colorado has fallen from the eighth-highest to the 13th highest level of per capita income in the past three years.  Gross domestic product growth has fallen to 9th at 5.4%.  However, after adjustment for inflation, Colorado, at 2.9%, was behind only North Dakota, Wyoming and South Dakota between 2007 and 2008.
Colorado has 138,000 households, 6.9%, with little or no access to banking services, according to a report from the FDIC.  Another 307,000, 15.3 %, are considered under-banked.  Nationally, 25.6% of U.S. households use costly alternatives to traditional banks, 3.4 percentage points higher than in Colorado.

Employment

Colorado was one of 13 states registering unemployment rate declines in October, as the local rate fell 0.1 percentage point to 6.9%.  Most of the improvement was due to a 12,800 person decline in the civilian labor force.  The number of unemployed fell by only 3,200, while the number of people employed declined by 9,600, according to the household (CPS) survey.  Over the past year the civilian labor force has declined by 81,200, the number of unemployed has increased by 40,000 and the number of people with jobs has fallen 121,200. 
The workplace (CES) survey showed employment was down 3.8% through October, a loss of 100,600 jobs.  Educational/health services and government continued to be the only sectors posting job gains for the year.  For the month, there was a net gain of 1,000 jobs, including business/professional services (up 2,200) and leisure/hospitality (up 2,700).  The biggest losses, for both the month and the years, were in the construction sector.  Metro Denver and Boulder had the biggest year-to-date loss decline, -3.9% and    -4.0% respectively, while Grand Junction and Fort Collins had the smallest, - 1.4% and    -2.2%.

2009 Job Changes

SFrontier Airlines has laid off about 200 mechanics in Denver as it consolidated operations to Milwaukee.  Over the past year, United Airlines has eliminated 3,920 jobs at Denver International Airport, Frontier Airlines has eliminated 236 and Southwest Airlines has eliminated 761.

Sales and Income

Consumer debt fell for the eights straight month in October as consumers paid off credit card debt.  This was the longest consecutive decline on record.    
         
Sales at retail stores open a year or more increased 2.1% in October, according to the International Council of Shopping Centers.  September data were revised down.  For the first three quarters, consumer spending (BEA data) was down 8.9% after adjustment for inflation.  Preliminary data for the holiday shopping season were mixed.  Total sales over the Thanksgiving holiday weekend were unchanged from a year earlier, but sales per shopper declined 8%.  For the month of November, retail chain store sales declined 0.3, but internet retail commerce increased 11% on Cyber Monday.                                               
Retail sales data for Colorado are only available with a substantial lag.  Sales declined 13.6% through June and then were down another 17.1% in July.  More establishments filed returns in July than a year earlier, up 1.1%, but gross sales were down 16.7% and sales tax receipts fell 9.7%.  Pueblo was the only metro area in Colorado to post a gain in retail sales for the first half of 2009, up 3.3%.  Grand Junction has the biggest decline, down 24%.  The other metropolitan areas all posted double-digit declines.

Bankruptcies in Colorado rose 33.8% through October.  For the month of October, bankruptcies increased 24.3% to 2,604.  Nationally, the October increase was 25% to the highest monthly level since U.S. bankruptcy laws changed in 2005.  In Colorado, 85% of 2009 filings were Chapter 7 (liquidation) and 14.6% were Chapter 13 (repayment plan).  Chapter 11 filings, where a company plans to reorganize rather than liquidate, were at the highest level in over ten years.

Tourism

Hotel occupancy rates in Colorado averaged 58.0% in October, down from 58.6% a year ago, according to the Rocky Mountain Lodging Report.  The average daily room rate was up from September, but 0.9% below October 2008 at $114.92.  Occupancy rates ranged from 26.8% in the resort hotels to 65.4% in metro Denver.

Colorado 40 casinos enjoyed their fourth straight month of increased gaming revenues, up 9.7% to $61.7 million in October.  Revenues are up 8.6% since the passage of Amendment 50, which raised the maximum bet to $100 and lengthened hours casinos can remain open.  Gaming taxes totaled $8.6 million.

Denver International Airport reported a 1.3% decline in passengers for the month of October and a 2.4% decline year-to-date.  Cargo was down 2.4% for the month and 13.8% for the year.  United is relinquishing five of its B Concourse gates for six years.  DIA plans to lease them to US Airways and Continental Airlines, which will relinquish gates on Concourse C where Southwest Airlines requires additional capacity.

Housing

Housing permits in Colorado through October declined 54.5%, with a 42.7% drop in single-family activity and a 75.3% plunge in multifamily.  Pueblo had the smallest decline, 8.9%, thanks to strong multifamily activity.  Fort Collins, down 69.6%, Denver, down 58.5%, and Grand Junction, off 53.9%, posted the worst performance of the seven metro areas.

Sales of existing homes in metro Denver fell 7.6% in October relative to a year earlier, although they were up 2.9% from September.  The median single-family price increased 7.7% over the year, but fell 1.3% to $222,000 for the month.  The inventory of homes for sale fell below 19,000, down 18.1% from a year earlier.  Home sales have been boosted by the first-time homebuyer tax credit.  Nationally, 40% of all purchasers through August used the tax credit.  The credit was recently extended and broadened to include existing home owners. 

The statewide apartment vacancy rate fell to 7.4% in the third quarter, down from 9.1% in the second quarter but above 6.8% a year ago.  The metro Denver vacancy rate fell for the first time in seven quarters.

2009 Apartment Vacancy Rate

                                                                                     Source:  CO Dept of Local Affairs.
The average rent ranged from 48 cents per square foot in Sterling to $1.38 per square foot in Aspen.  Data are collected for only a subset of the market in the first and third quarters of the year.

Nonresidential

Commercial real estate prices have declined 41% since October 2007.  CB Richard Ellis expects retail stores, apartment buildings and industrial properties to set new vacancy records before the recovery takes hold, at approximately 13%, 8.1% and 16% respectively.  Office vacancies will peak at 18.6%, a half percentage point shy of the 1991 record. 

In Colorado, Frederick Ross reported that the office vacancy rate rose to 19.5% in the third quarter, up from 16.2% a year ago.  There was negative absorption in each of the first three quarters of 2009.  The industrial vacancy rate held steady at 7.6%, with modest negative absorption for the year.  The retail vacancy rate increased to 9.2%, the ninth consecutive quarter of vacancy increase.  In Boulder, the office vacancy rate rose to 12.5%, retail vacancy dipped slightly to 7.7% and the industrial vacancy rate was stable at 14.7%.