October 8, 1999

On the Economy: It’s the same story: Grow, grow, grow

The 1st Choice Bank/Northern Colorado Business Report Index of Leading Indicators is still flashing growth for the Northern Colorado economy through the end of 2000.

The strong rate of growth experienced in 1998 continued in the first half of 1999, with the index increasing at a monthly rate of over 14 percent in February, March and April. Construction, motor vehicle registrations and new tax accounts contributed strongly to this growth.

Construction growth continued strong in May, June and July, with new single family housing permits also contributing strongly. However, growth in motor vehicle registrations and new tax accounts was slower than in 1998.

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Notably absent from the sectors contributing significantly to growth in the first half of 1999 was employment. Employment growth, monthly year-over-year in January was 3.1 percent but had slowed to 0.9 percent in June.

These rates are down from the 5 percent to 7 percent range experienced early in 1998 but stronger than 1997 rates.

It would appear that 1999 will be the year that the local economy >=digests<= the strong employment growth of 1998. Employment growth is the basic driving force behind a growing economy. As an economy adds jobs, demand for housing increases. The new employees move their families into our economy, they buy cars and retail goods and new businesses open to accommodate their spending.

Institutional construction is currently contributing strongly to growth in the Northern Colorado economy. Peaks in institutional construction occur in multi-year cycles. As an economy grows, tax revenues lag by two to three years as the demand for government services builds. Eventually, state and local governments must provide the roads, schools, courthouses, and other services the population demands.

Because of the size of these expenditures, they tend to be discrete – occurring in big lumps. That’s what we’re seeing now in the institutional construction sector in Northern Colorado; it’s likely to last through 2000 and, perhaps, further into the next century.

Spending limits, such as TABOR, penalize fast-growing areas such as Northern Colorado, making it especially difficult for government to keep up with the growth in demand for services. The value of new construction in Northern Colorado is currently five times greater than it was in 1991.

Growth rates in employment in late 1997 and 1998 were mostly above the trend line. Those rates in 1999 will be mostly below the trend line, i.e., below the long-run average rate of growth.

The unemployment rate for 1999 is likely to be around 4 percent, up from 3 percent to 3.5 percent in 1998. Employment growth is now more than 30 percent higher than it was in 1991, which means that we are adding 30 percent more employees each month than we were adding to the local economy in 1991.

The number of new single-family housing permits in the region broke the 600 barrier in early 1999, only a year after breaking the 500 barrier, and doubling the rate of the 1994-1997 period.

However, warning signs exist. The Housing Opportunity Index, compiled by the National Association of Home Builders, lists Greeley as one of the 25 least affordable areas in the United States, primarily because of low median incomes for families.

Growth in the value of single-family housing permits is not increasing as quickly as the number of new permits, suggesting that new houses are being built in lower price ranges. New single-family housing permits are now being issued at a rate five times greater than in 1991.

Total motor vehicle registrations in 1999 appear to be peaking lower than in 1997 and 1998, after a surge early in the year. This is compatible with the slowing growth of employment. Total motor vehicle registrations are currently 75 percent greater than they were in 1991.

The rate of growth in new sales tax accounts is also slowing; the forecast for the last quarter of 1999 is very weak, suggesting the possibility of a weak Christmas selling season or, at least, fewer retailers to meet buying demands.

However, the monthly rate at which new sales tax accounts are being issued in Northern Colorado is now double the 1991 rate. Twice as many new businesses are being licensed to sell to the public as at the beginning of the decade. So it comes as good news that the forecast for retail sales shows little weakness, reflecting the same hike in fourth-quarter sales we’ve seen since 1996. My feeling, however, is that Christmas sales will be flat – much like they were during the 1996-1997 season – as we digest strong increases over the past three years.

Keep in mind that the agricultural sector had a very bad year in 1999 and Northern Colorado is a regional shopping center serving a largely agricultural region. Gains in the stock market and how wealthy we feel also affect Christmas buying plans; any weakness in the stock market will affect consumer sentiment.

New bankruptcy data for Northern Colorado is not available, but recent national statistics indicate a 2 percent slowing in personal bankruptcies, the first decrease since 1995.

The national trend over the past six months suggests that 1999 will fall short of 1998’s record pace. In addition, the Bankruptcy Code is currently undergoing a major overhaul. The House overwhelmingly passed legislation that would make it harder for individuals to file for bankruptcy protection, and the Senate is expected to do the same this fall. Bankruptcy trends in Northern Colorado are likely to follow national trends.

Overall, growth so far in 1999 has been stronger than expected. However, the region’s growth rate is expected to slow to 9 percent in the fourth quarter of 1999, dropping to 7 percent in the first half of 2000.

If weather conditions in the last quarter slow construction, the forecasted 9 percent rate of growth will not be attainable. But regardless of impediments, our economic growth continues, as attested to by the many favorable reviews we have recently received as a desirable place to live.

The 1st Choice Bank/Northern Colorado Business Report Index of Leading Indicators is still flashing growth for the Northern Colorado economy through the end of 2000.

The strong rate of growth experienced in 1998 continued in the first half of 1999, with the index increasing at a monthly rate of over 14 percent in February, March and April. Construction, motor vehicle registrations and new tax accounts contributed strongly to this growth.

Construction growth continued strong in May, June and July, with new single family housing permits also contributing strongly. However, growth in motor vehicle registrations and new tax accounts was slower than in…

Christopher Wood
Christopher Wood is editor and publisher of BizWest, a regional business journal covering Boulder, Broomfield, Larimer and Weld counties. Wood co-founded the Northern Colorado Business Report in 1995 and served as publisher of the Boulder County Business Report until the two publications were merged to form BizWest in 2014. From 1990 to 1995, Wood served as reporter and managing editor of the Denver Business Journal. He is a Marine Corps veteran and a graduate of the University of Colorado Boulder. He has won numerous awards from the Colorado Press Association, Society of Professional Journalists and the Alliance of Area Business Publishers.
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