Region’s growth rate turns positive, barely

‘The Northern Colorado Business Report Annual Monthly Growth Rate was barely positive in April, the first month since January that it was positive. The first four months of 2011 have generally been weaker than the same period in 2010, indicating that growth from the 2008-09 recession is slowing.

The Index of Economic Growth for Northern Colorado has been bouncing around the 200 level since 2008, setting a base roughly twice the 1991 base on which the Index is calculated. That means we will start our economic expansion with an economy that is roughly double the size of our economy in 1991. We can only hope that our economy will double again in the next 20 years.

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Growth in the U.S. economy is also slowing. The stock market averages are signaling continuing slowing growth in GDP. Some analysts are talking about a double-dip recession, much like the twin recessions early in the Reagan presidency of the 1980s. I think there are many similarities between current economic conditions and those of the 1970s: food price increases, energy price increases and, eventually, much higher inflation.

Employment

The employment situation for residents of Northern Colorado is no longer deteriorating, but it is not improving very rapidly. At this rate of increase, my model suggests it will take four years to attain the employment peaks of 2007-08. The unemployment rate is likely to remain high.

A close look at the data suggests that many of the unemployed, especially in Weld County, do not have the needed skills to find a job in the “new economy.” The employment index shows that the new base employment level, against which we will grow, is about 1.65 times the employment base of 1991.

Construction

The total value of construction being put in place in Northern Colorado is at roughly 1994 levels. There has been no clear trend since mid-2009. Multi-unit apartment construction is currently the strongest portion of the construction sector. The construction sector growth index is roughly twice its level in 1991, setting a new base on which to build the next economic expansion. The index briefly reached a level 12 times the 1991 base late in 2004.

The number of single family detached housing permits being issued each month is at about the same level they were in 1987-91. The downturn reached its low point in late 2008 and the next economic expansion will start from that base, which is about the same low reached in early 1990. The value of these housing starts, with inflation factored out, is also about the same level as in 1987-91. Thus, the housing permits growth index is at about the same level as in 1987-91.

Motor vehicles, sales tax accounts

Total motor vehicle registrations took a big jump in April in Northern Colorado and the increase carried through in Larimer County in May. May data for Weld County was not available at press time. The April data pushed the forecast up to unreasonable levels. The growth index for motor vehicle registrations is nearly double its 1991 level, indicating that there twice as many vehicles traveling our roads as in 1991.

New and renewed sales tax account numbers are still not available from the state. The department of revenue indicates that, with budget cuts, reprogramming the new system to get them is not high on the department’s priority list. This lack of data hampers every county and municipality that must cross-check local sales tax permits and collections with state sales tax licenses and collections. State government budget cuts are reducing the quality of data available to track local conditions.

Retail sales

Retail sales data is slowly being updated using the new state system. Data is now available for January, back to a 130-day delay from the 65-day delay before the state updated its revenue collection data reporting. The December data indicates that we had a very strong Christmas selling season in Northern Colorado, putting us back on track with 2002-07 increases; 2008 was level with 2007 and 2009 was much lower. Retail sales were probably strong in April when new car sales were factored in. The retail sales growth index is currently about four times its level in 1991.

So, economic growth in Northern Colorado is slowing from 2010 levels but is still positive. The base of the recent recession was roughly twice the level of the 1987-91 trough and our new economic expansion will grow from that level. The expansion of our economy will be very slow. The expansion in residential construction will not start until well into 2012. There will also be skills problems with the existing workforce as the economy expands.

John W. Green, Ph.D., is a regional economist who compiles the Northern Colorado Business Report’s Index of Leading Economic Indicators. He can be reached at jwgreen@frii.com.