On the economy: Economy continues its downward slide

The Northern Colorado Business Report Index of Leading Indicators has been very weak so far in 2003. The economic growth trend line has decreased to zero. Little improvement is seen for the rest of 2003. The growth index was -8.8 in March, the month of the big snowstorm, its weakest level since late in 1996.

A high level of uncertainty permeates the national and local economies, preventing investment that would stimulate the economy. The tax cut put more investment money into the accounts of people able to invest but they are not yet willing. Small business depreciation incentives will stimulate investment by them but it will be far less than needed to jumpstart the U.S. economy. Foreign investors have pulled their money out of the U.S., depreciating the dollar as they sell. They are not likely to reinvest in the U.S. until interest rates go up and the economy shows substantial signs of life.

Structural changes are occurring in the Northern Colorado economy. The Fort Collins area is losing tech jobs, many of them permanently. Will they return when the U.S. economy recovers? Residential growth is shifting to Weld County where housing is cheaper. New manufacturing jobs are locating along the U.S. Highway 85 corridor to DIA and along Interstate 25 and E-470 in Weld County. Higher income and wealthy retirees are locating west of I-25 from Fort Collins to Longmont. The result is that most of Northern Colorado’s new growth, when it returns, will be in southern Weld County.

SPONSORED CONTENT

Answers to your commercial solar frequently asked questions

Navigating the complexities of a solar capital energy improvement can be challenging, so we’ve answered some of the most common questions.

The trend line of economic growth in Northern Colorado has decreased to zero. The economy of Northern Colorado may contract further during the second half of 2003, something not seen since at least the 1980s. The March snowstorm took about 10 percent out of economic activity for that month, although it probably stimulated construction in the months following.

Employment growth is not holding up. May and June were probably dismal months for high schoolers looking for summer jobs and college graduates in the market for their first career positions. The employment mix in Northern Colorado may be changing away from high tech towards manufacturing and lower-paid service jobs. The unemployment rate is hovering around 6 percent and will probably go higher.

The total value of new construction in Northern Colorado has dropped drastically. It will get a boost from snowstorm repair and new small business investment. However, overall business investment is weak and state and local government budgets will not support new institutional construction.

The number of single-family housing permits issued in 2003 is consistently below 2002. The construction sector that has been supporting growth in the Northern Colorado economy over the past two years is no longer doing so. Mortgages are being refinanced to take advantage of lower interest rates but lower rates are not supporting as much new home construction. Remodelers are still benefiting from refinancing as homeowners upgrade existing residences. The value of new housing is still increasing, although more slowly than in recent months.

Motor vehicle registrations have peaked. New car sales are lower, fewer retirees are moving to Northern Colorado, new jobs are not being created, and some high tech employees are moving to greener pastures.

The number of new sales tax accounts issued by the state for retail businesses is still increasing. Not all of these businesses will be successful as the Northern Colorado economy continues to contract. Retail sales, however, continue to increase, even after adjusting for inflation. Mortgage refinancing provides cash that consumers spend for remodel furnishings and other retail items.

The outlook for the rest of 2003 does not look bright. Growth in Northern Colorado will continue near zero and the economy may even contract in some months. The stock market is forecasting improvement in the U.S. economy late in the year; this will help the local economy as jobs are created, retirees relocate and consumers spend. Hopefully, the stock market is not sending out a false signal and any recovery in economic activity will continue through 2004.

John W. Green, PhD, is a regional economist and can be reached at (970)484-6463.