Colorado's economy will experience slow, steady growth in 2011, according to economist Richard Wobbekind of the University of Colorado at Boulder's Leeds School of Business.
Wobbekind's announcement was part of the 46th annual Colorado Business Economic Outlook Forum hosted Dec. 6 by CU-Boulder's Leeds School of Business and BBVA Compass Bank.
"I think the overall economic picture for Colorado in 2011 is slow, steady growth much like the national economy," Wobbekind said. "We would all like a more rapid recovery, especially in terms of jobs, but we're just not going to see that yet."
Overall, the forecast calls for a gain of 10,100 jobs in 2011, compared with the more than 140,000 jobs the state lost in 2009-10. Most sectors of the economy will return to growth in 2011, except for the construction, manufacturing, information and government sectors, which will shed jobs, according Wobbekind.
The strongest sector for projected job growth in Colorado in 2011 is the professional and business services sector, which is home to many high-paying jobs, including engineers, computer systems designers and scientific research and development groups. The sector is expected to add 7,000 jobs in 2011, a far cry from the 16,100 jobs the sector added in 2007.
In addition, the leisure and hospitality (3,000), education and health services (3,300 and trade, transportation and utilities sectors (3,500) will lead those sectors adding jobs in 2011, with a total of 9,800 new jobs. Unfortunately the job growth in these major sectors will not be enough to make much of a dent, according to Wobbekind.
"All the job growth in these sectors is still subpar in a historical context," Wobbekind said. "It will not be enough to bring down the unemployment rate in any meaningful way or create great momentum in the state economy, but at least it's moving in the right direction. It is just moving at a slower pace than we would like."
The two sectors expected to lose the most jobs in 2011 are construction and government. The construction sector will shed 7,000 jobs. The government sector will lose 1,800 jobs in 2011-the sector's first job loss since 1990..
"Every year since 1990 the combination of state, local and federal employment combined has added jobs," Wobbekind said. "One piece might be down, but the total has been positive. That is not the case next year."
In 2010 Colorado didn't experience the recovery that had been anticipated by many economists. From an employment perspective the state lagged the nation in recovery.
"We went in thinking we would be in the top 15 or states for job growth in 2010, but came out in the bottom 10," Wobbekind said.
Several components are leading to slower job growth as the state struggles to come out of the recession. First and foremost, the recession was a financial recession, according to Wobbekind. Typically, a "real economy recession" is the result of the normal business cycle where the economy becomes overheated due to too much investment, which leads to a downturn and then a recovery.
"This recession was very much a financial recession, and there are only a handful of these on record," Wobbekind said. "The financial markets exploded, bubbles burst and we went into a deep downturn that was not just the real economy - housing and jobs - but also the financial economy."
It takes much longer for financial recessions to heal, because the whole finance sector needs to get healthy and start lending again before the economy can return to full health.
"As we've seen, we're out of the recession a year and a half now and we're still not seeing lending back at pre-recession levels," Wobbekind said.
The other part of the recovery is structural in nature. During a downturn businesses try to figure out how to do more with less until they are sure their profits are up and their balance sheets are shored up. Productivity then surges and until productivity goes down and companies need to hire more workers, there won't be much hiring.
"We've seen tremendous investment in capital in the economy in the last year and a half," Wobbekind said. "Companies are buying machines as opposed to hiring people. In the long run this is great for the U.S. economy, but in the short term it is very painful in terms of unemployment rates."
Another major industry in the state, tourism, is going to be in "recovery mode," in 2011, with most of the categories rising or staying level, including hotel occupancy rates, room rates, casino revenues and skier visits, according to Wobbekind.
"Unfortunately, there remain a number of concerns in the tourism sector, ," Wobbekind said. "The hassle factor is coming up to the top of the list. It's not only driving to the high country, but in terms of flying, between security issues and rising ticket costs, a lot of people just don't know if they want to take it on anymore. But, overall, we're expecting a pretty good year for tourism."
Colorado's unemployment rate for 2011 is expected to increase from 8.2 percent at the end of 2010 to 8.8 percent, compared with a projected national unemployment rate of 9.6 percent.
Compiled by the Leeds School's Business Research Division, the comprehensive Colorado Business Economic Outlook for 2011 features forecasts and trends for 13 business sectors prepared by more than 90 key business, government and industry professionals.
Prairie Gateway re-branded to Victory Crossing {Commerce City}
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