After lagging the nation in job recovery from the recent recession, Colorado can expect job growth in every business sector in 2005, according to University of Colorado at Boulder economist Richard Wobbekind.
Wobbekind's announcement was part of the 40th annual Business Economic Outlook Forum hosted Dec. 6 by CU-Boulder's Leeds School of Business and KeyBank.
After losing jobs in 2002 and 2003, Colorado began turning it around in the second quarter of 2004, according to Wobbekind.
"We expect that the upturn that began in early to mid-2004 will accelerate into 2005 and that Colorado will experience job increases in all sectors," Wobbekind said. "The recovery is here, it just took it longer to materialize in Colorado."
Compared to job losses of recent years, the expected addition of 43,100 jobs in 2005 is strong growth, but when viewed over a 20-year period, the expected job growth is just slightly above the annual average for Colorado, according to Wobbekind.
Colorado's unemployment rate is expected to drop to 4.8 percent in 2005, from 5.3 percent in 2004. The national unemployment rate is expected to be 5.2 percent in 2005.
The outlook for income growth in Colorado also is brighter in 2005, as total personal income is projected to increase by 5.2 percent in Colorado and 4.6 percent nationally, after growing at a rate similar to the national rate between 2000 and 2004.
The gap between Colorado's per capita income and the national per capita income also is expected to widen as the annual averages will be $36,350 for Colorado and $32,431 for the nation, according to Wobbekind.
"The real measure of the strength of the recovery will not only be in the total number of jobs gained, but also will be determined by the number of quality jobs recovered, which includes those with higher-than-average wages or multiplier effects," Wobbekind said.
The leader of the recovery has been the professional and business services sector, which has wages that are about 22 percent above the state average. This sector, which includes engineers, computer systems designers and business-to-business service providers, among others, will lead Colorado employment growth in 2005, with an increase of 4.8 percent, or 14,800 jobs, according to Wobbekind.
For the first time since 1998, all goods-producing sectors, which include manufacturing, construction and natural resources and mining, are expected to grow. After losing about 52,400 jobs since 2000, the sector will add 3,400 jobs in 2005, according to Wobbekind.
With record high cattle prices carrying over into 2005, total farm and ranching production within the agriculture sector will produce a new high of $4.9 billion in sales, with total livestock sales accounting for $3.5 billion. Colorado can expect an increase in net farm income of 5.5 percent, or $868 million, according to Wobbekind.
Colorado's population is expected to grow at a rate of 1.2 percent, adding about 57,600 people in 2005.
Wobbekind's presentation at the Business Economic Outlook Forum was followed by a Q-and-A session featuring some of the state's top economists and keynote speaker John Caldwell, chief investment strategist for the McDonald Financial Group based in Cleveland.
Sector-specific highlights include:
- Agriculture - High but volatile cattle prices, low cattle numbers and rising fuel and fertilizer costs will be the driving forces behind profitability in Colorado's agricultural industry in 2005. Total livestock sales in Colorado will reach nearly $3.5 billion in 2005. After fielding bumper crops of corn and wheat in 2004, total crop sales should increase slightly in 2005. Total farm and ranching production is expected to reach a new high of $4.9 billion in 2005, resulting in an increase in net farm income of 5.5 percent, or $868 million.
- Natural Resources and Mining - Colorado's energy sector is experiencing a boom, despite increased volatility in the marketplace. Increased demand for energy products has resulted in growth in employment, output and total sales. This demand is expected to continue in most energy sectors through 2005. Seven hundred workers will be added in 2005, for a total of 14,700 jobs in the sector. This growth will be driven primarily by increased production of natural gas. Crude oil is expected to show a slight increase and coal production will remain at 40 million tons, with output growth constrained by limitations in Colorado's rail infrastructure.
- Construction - After losing about 20,600 jobs between 2001 and 2004, the construction sector will add 900 jobs in 2005. The total value of construction is expected to increase by 3 percent on the strength of residential and nonresidential construction. Gains in these areas will be offset by decreases in nonbuilding construction.
- Manufacturing - After losing 37,300 jobs between 2000 and 2004, Colorado manufacturers are expected to add 1,800 jobs in 2005. Nondurable goods employment is expected to increase by 200 positions, while 1,600 durable goods jobs will be added in 2005. About 500 of the durable goods jobs will be added in the manufacture of transportation equipment, such as aerospace equipment. Anecdotal evidence suggests that this growth is limited by the ability of companies to find appropriately trained engineers.
- Trade, Transportation and Utilities - Between 1994 and 2003, a total of 60,700 jobs were added to the trade, transportation and utilities supersector, with 43,500 being added in the retail trade area. In 2005, retail trade is expected to add 4,900 jobs. This employment growth is based on projected retail sales growth of 5.7 percent in 2005. In addition, 1,200 jobs will be added in wholesale trade. With an improving economy and record traffic at Denver International Airport, the transportation sector will add 600 jobs in 2005. The final sector, utilities, is expected to grow by 200 jobs in 2005. Overall, the trade, transportation and utilities sector will increase by 1.7 percent, or 6,900 jobs.
- Information - Employment in telecommunications, the primary sector within this supersector, decreased from 46,800 to 32,300 jobs between 2001 and 2004. Job losses are expected to bottom out in 2005, when only 200 additional jobs will be lost. The second largest sector, publishing, will add 1,300 jobs in 2005. About 1,000 jobs will be added in software publishing and related sectors, while growth in other smaller information sectors will offset the losses in telecommunications. Overall information employment will post a 1.6 percent gain, or 1,300 jobs.
- Financial Activities - Between 1994 and 2003, about 33,200 jobs were added in the financial activities supersector. A majority of recent growth has occurred in the credit intermediation sector. In 2005, about 800 jobs will be added in the finance and insurance sectors, with an additional 400 jobs being added in the real estate and rental and leasing sector.
- Professional and Business Services - Pent-up demand and growing confidence in the economy will increase the need for services such as engineering, computer systems design and other professional or technical business services. In 2005, 6,500 jobs will be added in professional and technical services, 7,400 jobs will be added in administrative and support services, and management of companies and enterprise will gain 900 jobs. This supersector will lead Colorado employment growth with an increase of 4.8 percent, or 14,800 jobs in 2005.
- Education and Health Services - This supersector added a total of 56,100 jobs between 1994 and 2003, driven primarily by growth in the health care industry. Declines in public education budgets should boost demand for services provided by private education organizations, increasing education employment by about 300 jobs in 2005. The larger health care sector is expected to grow by 4,300 jobs in 2005. Employment growth will continue to be limited by the supply of quality labor. Overall, the supersector will increase by 2.1 percent, or 4,600 jobs.
- Leisure and Hospitality - A number of indicators point to a recovery in the Colorado tourism industry. In many areas it is difficult to secure reliable data that reflects activity within the industry. For areas where data are available, such as casino revenues, ski lift tickets, park visits and DIA passengers, growth is projected for the upcoming months. From an employment perspective, this sector is expected to add 5,200 jobs in 2005, an increase of 2 percent. About 4,400 of these jobs are in food services.
- Other Services - This supersector is composed of private businesses that provide personal services such as auto repair shops, Laundromats and beauty salons. Because they fulfill many basic needs, growth often depends on population growth as much as it relies on the state of the economy. As a result, this supersector experienced slower growth during the recent economic downturn. Improved economic conditions will result in the addition of 2,500 jobs in 2005.
- Government - As the state's population has grown, so has the need for government services. As a result, all sectors of the government are expected to grow in 2005, adding a total of 3,100 jobs. About 300 federal jobs will be added along with 1,200 state jobs. As has been the case in the past, the largest growth will occur at the local level where about 1,700 jobs will be added. Most of that growth will occur in the K-12 education sector.
- International Trade - An improved global economy has led to increased U.S. and Colorado exports. In the coming year, a weaker U.S. dollar is expected to contribute to an increased demand for U.S. goods and services. Total Colorado exports are expected to show a 9.8 percent increase in 2004 with a slightly lower, but strong increase of 7 percent in 2005. Canada, Mexico, the Pacific Rim and Western Europe will continue to be Colorado's top trading partners. The outlook is favorable for both agricultural and manufactured products.
Regional and Area Economic Forecast Highlights:
- Across the West - Despite improved economic conditions in Colorado, the state is expected to rank ninth in population growth out of 10 Western states, ahead of only Washington. Similarly, it will finish in a three-way tie for eighth place in terms of employment growth for 2005.
- La Plata County - In recent years, events such as 9/11, state and local forest fires and drought have negatively impacted La Plata County's economy. The impact of these events has been partially offset by increases in construction as well as industrial activity, particularly in the energy sector. Throughout the downturn, La Plata County had a lower unemployment rate than Colorado and the national rate. Per capita income in the county is about 86 percent of the state level, and the gap is closing between the county and U.S. averages.
- Mesa County - Mesa County has felt the impact of the recent downturn less than other parts of the state because of its diverse economy. This stable rate of growth is expected to continue in 2005. Positive year-to-year growth has occurred in retail sales, construction, real estate, vehicle registrations and population. Over time, the structure of the economy has evolved into one with a greater emphasis on services and less focus on manufacturing, mining and agriculture.
- Northern Colorado - Northern Colorado lost more than 2,000 technology jobs between 2001 and 2003, and layoffs continued into 2004. Nevertheless, the Fort Collins/Loveland/Greeley area added about 2,500 new jobs between July 2003 and July 2004. The outlook is bright for the future as approximately 5 million square feet of new commercial, industrial and mixed-use construction projects are under way in the region.
- Pueblo County - For the first nine months of 2004, Pueblo's unemployment rate averaged 6.9 percent, down from 7.3 percent for the same period in 2003. Job growth for the Pueblo area is expected to be 2 percent in 2004, an indication that further improvement is expected in the months ahead. Growth has occurred and is expected to continue as a result of construction for significant chain retail facilities, St. Mary Corwin Hospital and the proposed Xcel Energy Comanche power-generating facility. The housing market remains robust, with the median sales price of existing homes remaining under $120,000.
- Southern Colorado (El Paso County) - Aggregate and specific economic evidence points to March-April 2003 as the turning point in El Paso County's economic recovery from a two-year downturn. The average unemployment rate for El Paso County dropped from about 6.4 percent in 2003 to 5.7 percent in 2004. A modest improvement is expected in 2005 as the rate will drop to 5.5 percent. Additional gains in employment are expected as the economy continues to strengthen, particularly among technology-based, primary employers. In 2005, gains also are expected in finance, health care, retail and construction.
National Economic Forecast Highlights:
- Gross Domestic Product (GDP) - The GDP is expected to register 3.6 percent growth in 2005, a rate comparable to the growth of the late 1990s. This represents a drop from 4 percent in 2004. The GDP deflator will remain stable, registering 2 percent growth in 2004 and 1.9 percent growth in 2005.
- Consumption - Nationally, growth will be driven by a 3.1 percent increase in real personal consumption and an increase of 5.2 percent in retail sales. Light truck and auto sales, a major component of retail sales, will remain flat as a result of "spent-up" demand from creative financing programs of the last three years.
- Investment - Strong real business investment is expected to continue in 2005, at a rate of 8.9 percent, as replacement investment and expansionary investment drive growth. This increased investment, at least in part, will result in increased industrial production rates, at 8.9 percent.
- Government Spending - The federal deficit is expected to drop from $425 billion to $369 billion in 2005. The annual deficit represents just 3 percent of the GDP, and adds to the total U.S. federal debt, which will be $7.8 trillion at the end of 2005.
- Net Exports - The trade deficit is expected to stabilize in 2005 going from $575 billion to $577 billion. A weaker dollar will lead to an increase in the demand for U.S. goods and services in markets throughout the world.
- Prices - Moving into 2005, neither inflation nor deflation appear to be a concern. Nationally, the change in the Consumer Price Index is expected to be 2.7 percent in 2004 and fall slightly to 2.4 percent in 2005. Inflation rates for Colorado are projected to be 0.1 percent for 2004, and grow to 1.6 percent in 2005. Producer prices, as measured by the Producer Price Index, are expected to increase only 1.8 percent in 2005 as energy prices stabilize or decrease slightly. Employment costs grew at a rate of 3.8 percent in 2004 and are forecast to remain at that level in 2005.
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