ARCHIVED  January 1, 1997

Economy faces slowdown in ’97

Colorado’s economy continues on a positive course, but economists are predicting slower growth for 1997.

The state’s economy grew at a rate of 3.1 percent last year, in terms of new jobs created, but that will slow to 2.6 percent in this year, according to a study by the University of Colorado at Boulder.

But expect continued low unemployment, economists say. Northern Colorado’s rate now stands at roughly 3.5 percent. That’s at or below the state average, and both Northern Colorado and the state are expected to continue to beat the national average.

Contributing to the slower economic pace is a reduction in residential construction, a driving force behind Colorado’s economic resurgence of the past several years. That means fewer sales of furniture, appliances, carpet, landscaping and other big-ticket items.

The slowdown in residential sales can be attributed partly to less in-migration. The CU study forecasts a net gain of 30,000 people, down from this year’s 45,000. And, pent-up demand for new housing by current residents has been largely filled, thereby contributing to the expected reduction in home building, said Ken Ackbarali, senior economist with the Economic Development Corporation of Los Angeles who conducted an economic study for First National Bank of Fort Collins.

“There seems to be a pause in the demand, a period of digestion, if you will,” Ackbarali said.

Richard Wobbekind, a professor in the CU College of Business, offered a similar assessment.

“I think a lot of people will welcome that slowdown,” he said. “It’s going to be a welcome respite for most people because many of us feel the infrastructure has had a hard time keeping up with the growth.”

CU researchers predict that more than half of all new jobs created in 1997 will come in the service sector, ranging from low-paying janitorial jobs to high-end legal or health services.

The decline in residential construction is expected to contribute to a 2,000-person decline in that industry’s work force this year. That should hold true, economists say, despite an anticipated increase in the total value of construction. The reason is that residential construction is more labor-intensive.

Ackbarali predicted that Colorado’s economy will score a coup when the “Group of 7” economic summit of industrialized nations comes to Denver in June.

“The business development efforts and the prestige of the Mile High City and the state are likely to reap invaluable benefits from being in the international spotlight for about a week,” Ackbarali said.

As for Northern Colorado specifically, the economy is likely to have submarkets, with certain sectors doing well in Weld County while falling behind in Larimer County.

One example could be the apartment market, which most real estate experts consider to be overbuilt in Larimer County. While the vacancy rate there could reach 10 percent or higher this year, the apartment market in Greeley continues to experience demand.

One reason might be that Larimer County has already experienced the residential construction frenzy that Weld County is experiencing. Many Larimer County apartment dwellers became home owners during the last boom.

Additionally, Ann Garrison, an economist at the University of Northern Colorado in Greeley, predicts continued escalation in foreclosures and bankruptcies, as borrowers become over-extended by consumer debt and high mortgages.

“I have students who clean houses for a living to pay their way through college,” Garrison said during The Business Report’s Economic Roundtable ’97. “And they tell me that in Larimer County, Fort Collins specifically and in Greeley, that there are people who are buying new homes and they can’t afford to furnish them. And that’s a pretty scary thing for me to hear.”

Colorado’s economy continues on a positive course, but economists are predicting slower growth for 1997.

The state’s economy grew at a rate of 3.1 percent last year, in terms of new jobs created, but that will slow to 2.6 percent in this year, according to a study by the University of Colorado at Boulder.

But expect continued low unemployment, economists say. Northern Colorado’s rate now stands at roughly 3.5 percent. That’s at or below the state average, and both Northern Colorado and the state are expected to continue to beat the national average.

Contributing to the slower economic pace is a reduction in…

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