Flood called mostly bad for economy

LONGMONT – Economist Richard Wobbekind acknowledges some of the new economic activity being created in the state by last month’s devastating flooding, from cleanup to infrastructure repairs to home construction and rebuilding.

He’s afraid, however, that the negative effects on tourism and the fact that so many homeowners who suffered damage were uninsured or underinsured will far outweigh any positive effects that disaster recovery efforts might have on the economy.

Wobbekind – executive director of the University of Colorado-Boulder’s business research division and senior associate dean for its academic programs – was speaking Wednesday at the Longmont Area Economic Council’s investor series breakfast at the Plaza Convention Center.

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All of those underinsured, Wobbekind said, will end up paying for many of their losses out of their own pockets if they’re able to rebuild at all, meaning less disposable income. Worker productivity could drop in many instances. Damaged businesses could lead to an overall drop in the state’s level of business output and thus reduced employment.

“If I had to do a cold, calculated cost-benefit of this thing, not accounting for the stress that all these people went through, it’s really going to be questionable because of how many people appear to be uninsured or underinsured,” Wobbekind said. “I think that could easily wind up being a really big negative in terms of the overall effects.”

Wobbekind referred to the flood as a tragedy, and said it’s not something he’s even fond of talking about in economic terms, although he said it’s something he’s been asked about frequently lately.

He said the number of tourism jobs lost could eclipse 1,000 depending on the decline in visitors to places such as Rocky Mountain National Park. The tourism industry could take a $90 million hit in spending, equating to a loss of $5.8 million in state revenue.

“I am just hopeful that they get the road open to Estes Park and they get their business back in shape,” Wobbekind said. “I think places like Estes Park have probably the most to lose. I know Lyons took a huge hit. But in terms of getting back to business, for (Estes Park) it’s very much tourism. So they’ve got to be back up and running really by the spring. They can’t afford to really miss out on the whole business angle or it will be a really tough road.”

Wobbekind was mostly upbeat, however, about the economies of Boulder County, the state and nation.

While the nation is still working its way back to pre-recession employment levels, Colorado and Boulder County are both at record high levels, with 53,000 new jobs forecast for the state this year. That type of growth would be the largest for Colorado since the late 1990s, Wobbekind said. The professional business-services sector is driving much of that growth in Boulder County.

Total nonfarm wages in Colorado are at a record high, and Boulder County in 2012 rose to the top of the Colorado heap as the metropolitan statistical area with the highest wages.

While population growth in Colorado is much slower than 1990s levels, it still is among the top five states in the nation for percentage growth, one of several metrics Wobbekind outlined in showing that Colorado is outperforming the nation in the economic recovery.

One significant indicator of future growth, Wobbekind said, was that new-business entity filings with the Colorado Secretary of State’s office have been running at historic rates recently, predicting more employment growth going forward. He said the pre-recession downward trend of business entity filings turned out to be a solid predictor of the recession.

Through 2019, unemployment in the state is expected to keep gradually declining to below 5 percent.

“We have a pretty optimistic view of where we’re going,” Wobbekind said.

Nationally, Wobbekind said, he sees the federal budget deficit widening this year and next and continuing to be an issue. He held little back in assessing what he thinks of the political motivations behind the government shutdown.

“I don’t get what point it makes to shut the government down and then announce you’re paying everybody for all the work they didn’t do,” Wobbekind said. “I don’t know if that bothers anybody else. I don’t get the logic of that. It’s obviously not saving any money, so you’re basically just trying to paralyze the economy. … It’s frustrating to me.”