Over the course of the Great Recession, attention has been paid to the U.S. economy as a whole.
However, it is necessary to see what is going on in the local Colorado economy as well.
Overall, the Colorado economy is doing better than the national average on several fronts. It’s enlightening to spend a little attention on the current situation in the Colorado economy as compared to the U.S. economy.
In terms of the unemployment rate in Colorado, the state’s 7.3 percent unemployment rate is well below the national average 9.8 percent and is dropping faster than the U.S. average.
However, a concern is Colorado’s employment growth. In the second quarter of 2008, U.S. employment growth turned negative, which did not happen in Colorado until 2009. But the speed of job loss is notable. Colorado’s employment is now shrinking faster than in the U.S. The “jobless recovery” will be a lot more jobless than “recovery” until the end of 2010.
Though employment growth is slowing, personal income is higher in Colorado than the national average, through 2008, the latest data available. And though U.S. income fell from 2007 to 2008, personal income was still growing here in Colorado. However, given recent data on employment growth, it is hard to see that the state’s income growth will remain positive.
According to data available from the Bureau of Economic Analysis, quarterly average personal income growth in Colorado was about 1.5 percent. The sectors with the fastest average income growth between 1990 and 2009 were education, management, information, arts, professional services and mining. The biggest loser was farm earnings, which contracted.
Over the last five years, inflation has, more or less, mimicked the national average. As of the first half of this year, deflation in both the U.S. and Colorado was about minus 1 percent. As with employment, Colorado prices lag the national average by a couple of quarters.
One of the features of the Colorado housing market is a strong statewide market early in the decade was not accompanied by a price spikes. Housing starts and construction employment grew steadily from 1990 to 2004, but these were not accompanied by a price bubble. In fact, statewide housing prices trended downwards since 2001 – though there was a slight recovery in 2004-2006. In the second quarter of 2009, housing prices fell about 1 percent from the previous year.
Given the importance of natural gas, particularly in state tax revenues and grants, we should consider prices. Adjusted for inflation, the price of natural gas is now the same as it was in mid-2001, about $2 per million BTU. Low gas prices are a state concern as they shrink the tax base to pay for services.
Colorado is in better shape than the rest of the country. However, the data suggest the state entered the recession after the nation. Unemployment will remain lower and income will stay higher than the U.S. average, but if history is any lesson, we may be stuck in a very slow recovery. Lower than normal tax revenues, from all sources, will restrict state and local government spending on many public services and goods.
Robert “Tino” Sonora is an associate professor of economics and co-director of the Office of Economic Analysis and Business Research at Fort Lewis College.