A happy and bright economic picture with only a few foreboding shadows was painted for the nation and the state at the 2018 SW Economic Outlook held Thursday at the Community Concert Hall at Fort Lewis College.
However, a more somber view comes into focus when viewing the regional portrait of the Four Corners.
The hit San Juan County, New Mexico, has taken for several years with the drop in price in natural gas and the consequent decrease in employment and economic activity continues to act as a drag on La Plata County’s economy, said Robert “Tino” Sonora, an economics professor at FLC.
A crowd of about 200 gathered to hear presentations from Sonora; Richard Wobbekind, executive director of business research at Leeds School of Business at the University of Colorado; and Tim Quinlan, vice president and economist at Wells Fargo Securities.
San Juan County was described as the “fastest shrinking county” in New Mexico. And New Mexico itself is not in great shape – only beginning to see population growth in 2017 after its population declined in 2016.
“We are affected by the population drop-off,” Sonora said. “There are a lot of economic exchanges between the two areas. People from northwest New Mexico come up to La Plata County. La Plata County residents go to Farmington to shop. There is a symbiotic relationship, and the counties are integrated,” he said, calling the two regions a “microplex.”
At 2 percent, La Plata County’s unemployment rate was below Colorado’s 2.9 percent unemployment rate in November 2017. But in San Juan County, New Mexico, the unemployment rate of 6 percent is well above the national average of 4.1 percent and roughly equal to New Mexico’s 6.1 percent unemployment rate.
Additionally, Sonora noted the long-trend rate of growth in personal income in San Juan County had been 7 percent or 8 percent. But in the past few years, personal income growth in that county had fallen by 7 percent or 8 percent.
Housing and wages Housing values in La Plata County have not yet recovered from their peak just before the Great Recession, compared with the Front Range, where the pre-recession peak in home values was surpassed six years ago.
In fact, high home prices along the Front Range are harming the state’s economy, Wobbekind said, as they have discouraged business relocations to the Front Range because business owners worry about affordability issues for their workforces.
“We are the most expensive home market in the nation that is not on water along the coasts,” Wobbekind said of Front Range home prices. And he said escalating housing costs well beyond the rate of inflation are a concern for the Front Range economy.
Although Wobbekind expects the state’s economy to slow a bit in the coming year, it is slowing from a high rate of growth, with Colorado ranking third in overall gross domestic product growth in the past year. In addition, he noted Colorado had the second lowest average unemployment rate in the country in the last year.
Wage growth is one area where La Plata County and the state as a whole have failed to see increases that would be expected given the low unemployment rate, Wobbekind said.
In the last year, Colorado ranked only 35th in the nation in average annual pay growth, he said. One factor cushioning anemic wage growth is the state already ranked 10th in the nation for average annual pay.
Demographics – with lower-paid, less-experienced younger workers replacing higher-paid, more-experienced retiring baby boomers – was cited by Wobbekind as one factor behind the paltry rate of wage growth in Colorado.
In addition, he noted two-thirds of job growth in Colorado comes in relatively low-wage sectors such as tourism-hospitality, health care aides, food service and education, while higher-paid jobs in the oil and gas fields are shrinking.
Visits to public lands in Colorado were up in the past year, but skier visits were down in 2017, and Wobbekind expected the poor snow across the state this year to again lead to a decrease in skier visits in 2018.
How long will expansion last? The nation is entering its ninth year of expansion – already far longer-lived than the average expansion of just over 56.4 months, said Quinlan, the economist from Wells Fargo. “Gosh, you have to ask yourself, ‘How long do these things last?’”
He added: “We’re already a few years into overtime. By any reckoning, we’re late in the cycle.”
And he noted the country is enjoying the second-longest economic expansion on record, and the longest economic expansion, at 10 years, is within sight.
Despite the relative length of the recovery from the Great Recession of 2008, Quinlan said Wells Fargo expects GDP growth of about 2.5 percent to continue for 2018.
Relatively low numbers of people entering the labor force and low productivity growth, Quinlan said, keeps Wells Fargo from predicting economic growth at the 3 percent rate cited by President Donald Trump in the wake of GOP-authored tax cuts and tax reforms.
The tax cuts, which go into effect this year, Quinlan said, present “a mixed bag for the economy.”
“The consumer will have more money to spend and changes to depreciation will offer a boost to the economy, but you have to ask yourself at what cost,” he said.
The increase in federal government deficit spending stemming from the tax cuts, Quinlan said, will be “pretty severe.” He added: “This will, over a long period of time, make our budget deficits worse.”
Quinlan said as budget deficits get worse, the interest paid on Treasury bills and bonds are likely to go up, making them a more attractive investments and competing for money that otherwise would go into business investments rather than government bonds.
Eliminating and lowering regulations, Quinlan said, should help economic activity, and he said, “This is one area where the Trump administration has delivered on its promises.”
He also noted job openings are currently at an all-time high, and a failure to fill the positions indicates the labor force has a skills mismatch that fails to meet the needs of employers.
In addition, he noted people are quitting their jobs at the highest level since 2001, and this actually indicates confidence in the economy.
“It takes a lot of confidence to leave your job and take your chances elsewhere,” he said.