Research and the Real World

Leeds Business Confidence Index - Q3 2010

By Brian Lewandowski on July 20, 2010 1:00 PM

The Leeds Business Confidence Index, a quarterly survey of business leader in all sectors of Colorado, reported at 54.7 compared to last year's third quarter at 47.5. This is the second consecutive quarter the index has read above 50 (neutral) since Q3 2007, which points to growing optimism among the state's business leaders.

Five out of the six components that make up the LBCI showed growth in confidence. The indices for Capital Expenditures and Hiring Plans, at 53.7 and 53.3, respectively, passed the 50 mark for the first time since Q4 2007. These may be early signs of expansion as optimism grows for both labor and capital investments. Business leaders remained cautious regarding the U.S. economy, with the index at 49.5.

Be on the lookout for the next release of the LBCI, coming September 1, 2010. If you are a Colorado business leader, but not yet a panelist, please sign up for the September LBCI survey by clicking here. If you prefer to simply follow the status of the Colorado economy, click here. The entire process takes less than five minutes, and helps you stay on top of what other business leaders are thinking about the economic future of the state.

Midyear Business Economic Update: Leisure and Hospitality; Manufacturing; Other Services; and Trade, Transportation, and Utilities

By Brian Lewandowski on June 18, 2010 10:30 AM

Leisure and Hospitality

While overall travel to Colorado increased in 2009, overall spending decreased as visitors adjusted expenditures accordingly during the economic downturn. The state saw more leisure travelers in 2009, while the number of business travelers decreased some 13%. Passenger traffic through DIA is up for the year, showing a 3.7% increase compared to a year ago through April, and skier visits for the 2009-10 season were up. The local impact of United's merger with Continental remains to be seen. With moderated gas prices, a rise in consumer confidence, and a conservative return in business spending, tourism is expected to improve in 2010.

Manufacturing

Continuing its trend from the start of the decade, the Manufacturing Supersector is still shedding workers. Employment fell by 10% by the end of 2009 and, compared to last year, is already down an additional 7% through April 2010. The lack of demand in the construction industry has negatively impacted employment in the metal manufacturing sector, while scaled back investment in computer and electronics manufacturing have dragged down employment there as well. One source of optimism for the sector: renewable energy manufacturing. Manufacturing of renewable energy technologies, such as wind and solar, continue to draw investment and, subsequently, create jobs--though they are not enough to make up for losses in other subsectors.

Other Services

Average monthly employment through April 2010 for the Other Services Supersector--which includes companies that provide personal services and nonprofit organizations--is down about 200 jobs, or 0.2%, compared to last year. With continued improvement in the economy, the sector may post a slight employment gain for the year.

Trade, Transportation, and Utilities

The outlook for the Trade, Transportation, and Utilities Sector remains quite bleak. Employment remains 11.8% below its peak in December of 2007 and now stands at 393,000 jobs. While consumers are showing some signs of life--both retail sales and consumer confidence are improving--retail trade and wholesale trade have shed jobs in 2010. They are down 6.8% and 11.7%, respectively, from their pre-recession peaks. Year-over-year employment in the transportation sector is also 0.8% below its total at this time last year. However, with United Airline's acquisition of Continental and the improved passenger traffic data from DIA compared to last year, there are some signs of life in transportation and these could continue to improve in the second half of 2010. Regarding the utilities industry, employment is down 1.2% from last year.

Midyear Business Economic Update: Government; Natural Resources and Mining; Information; and International Trade

By Brian Lewandowski on June 17, 2010 10:30 AM

Government

The Government Sector has added more than 10,000 jobs this year in Colorado; however, many of these are attributable to federal temporary Census hiring, which will evaporate later in 2010. State employment, not including higher education, is flat, while local government employment is declining. Persistent budget woes continue to plague state government finances, caused by strong declines in sales tax and income tax revenues. Local governments have been slow to react to the budget crisis and are now playing catch-up, as evident in Colorado Springs with service cuts, and Adams 12 School District with $24 million in budget cuts in 2010.

Natural Resources and Mining

The activity in the Natural Resourcing and Mining Sector is positive but teetering on uncertainty regarding the future. Production of natural gas remained flat in 2009, but Colorado has added more rigs in the past six months than any of its neighboring states. Production may likely increase in the future--helping economies on the Western Slope. The uncertainty mainly revolves around the mineral productivity, demand, and prices. Molybdenum and gold prices are on the upswing, coal remains steady, but uranium is "asleep." Depending on the fluctuation of these mineral price points moving forward, we should see corresponding movement in employment in the sector as a whole.

Information

While the Information Sector performed better than expected in 2009, it continues its decade-long contraction. Print publishing continues to shed jobs as print moves online and publishers close and consolidate. Software publishing is part of Colorado's advanced technology cluster, which has been adversely impacted by the lack of business investment and declines in VC investments in the sector. Film is one bright spot in the industry, with indications of increased activity in the state in 2010--three film incentive deals have been submitted to the state, and three more are in the works. Productions bring outside investment to Colorado.

International Trade

International trade suffered from a 25% decline in 2009, despite more favorable exchange rates that were expected to spur sales of Colorado's goods. Trade was impacted by weak global economic conditions and a decline in commodity prices that decreased trade value. Goods showing the greatest increase in exports include computer products, medical and surgical equipment, and meat of bovine animals. Increases, albeit nominal, are expected in 2010, but they are projected to be off the 10% improvement that was forecasted at the end of last year. In 2010, problems plaguing the Eurozone (e.g., public debt, exchange rates) will hold back a full trade recovery.

Midyear Business Economic Update: Agriculture; Construction; Education and Health Services; and Financial Activities

By Brian Lewandowski on June 16, 2010 10:32 AM

In mid-June, Colorado Business Economic Outlook committee chairs got together to discuss and update the 2010 employment forecast drafted last December. At the time of the December forecast, the consensus forecast pointed to employment losses of 3,400 jobs, or -0.1%, in 2010 (compared to losses of 106,300, or 4.5% in 2009). Colorado's population continued to ratchet up in 2009, adding roughly 89,500 people to the state--48,000 from net-migration, or people moving to Colorado. Since most of Colorado's new residents are younger than retirement age, the question remains--what jobs are these people chasing? Following the meeting, the Business Research Division is sticking by the original December forecast, recognizing the potential for greater losses.

Over the next few days, this blog will provide brief sector-by-sector insights. For more detail, please visit the current issue of the Colorado Business Review.

Agriculture

Commodity prices as of June 2010 are 20% below the same period in 2009 and 50% lower than peak prices in 2008, which will translate to lower cash receipts for farmers in 2010. However, crops are healthy, and given the absence of inclement weather, yields should be strong for the year. Areas of ag-related growth include Colorado wineries, which have doubled in number in last five years, and farmer's markets, which now total 110 statewide as farmers market directly to consumers.

Construction

Construction was the hardest hit sector in the state last year, losing the greatest number and proportion of jobs compared to all other industries. Losses are expected in 2010. Nonresidential projects started at or near the recession are now facing completion, and the pipeline is bleak. Current activity is primarily driven by government-related projects. Residential sales recorded price stabilization in Colorado in the latest home price index reports; however, volume and price were likely driven by the home buyer tax credit, which ended in April. Residential permits recorded a slight uptick; however, the figures are far from the decade averages. Corporate home builders are beginning to close on land purchases, signaling promise for residential construction.

Education and Health Services

Education and Health Services has been a source of employment strength in the state, adding jobs year after year. The recession has driven many in the labor force to retool their skills, thus leading to strong growth in private education. Healthcare, too, has recorded employment advances in every subsector and stands to benefit from an aging state population for some time to come. As private education institutions grow in providing convenience to learners through online courses, as well as healthcare additions at the Anschutz-Fitzsimmons Medical Campus and St. Anthony Medical campus, EHS employment will continue to ratchet up.

Financial Activities

The Financial Activities industry has arguably been the cause, and suffered the effects from, the global economic meltdown. The industry has been rocked by the collapse of financial markets, failed banks, falling home prices, foreclosures, and an impending commercial real estate crisis. The Dow Jones Industrial Average is 59% higher from bottoming in March 2009 (it remains 27% below its peak in October 2007). While Colorado has not recorded a bank failure in 2010, the number of national failures is twice what they were the same time last year. The S&P/Case-Shiller and Federal Housing Finance Agency both recorded home price appreciation, year-over-year, in their latest data releases. Corporate builders are again making land purchases in anticipation of a growing market, and residential building permits are off their lows from 2009. However, commercial mortgage backed securities, which were originated roughly five years ago, will be coming due beginning this year, and refinancing opportunities are slim. Delinquencies are on the rise--especially in the West.

Leeds Business of Sports Certification Program Kicks Off

By BRD Staff on June 1, 2010 11:42 AM

After more than a year of planning, the Executive Education program at the Leeds School kicked off its inaugural session of the Business of Sports (BOS) Certification Program. BOS distinguishes itself by providing both classroom and experiential learning opportunities for the students. Research projects have been set up with the program partners: the Colorado Avalanche, Colorado Springs Sky Sox, Denver Broncos, University of Colorado Athletics, USA Rugby, and Vail Resorts.

In addition to providing invaluable learning experiences for the students, the projects are of significant value to the partners. The approximate value of each of the research projects is $8,000 to $12,000. Topics covered by the student research teams are

Prepare an analysis of registered players who either continue to play a sport after college or who stop participating after college
Determine the value of nontraditional media inventory and how that translates into ROI for the advertisers
Provide an analysis of how to increase fan support from a key constituent group
Prepare an analysis of how player identity impacts brand awareness
Conduct an analysis of how to increase brand awareness with the millennial generation
Identify how to capitalize and improve ROI, more effectively reach out to customers, and increase value of corporate sponsorships through social media
Determine how to further improve the fan experience at a sports venue

Student research teams will be supervised by Professor Jim Marlatt and Gary Horvath, Managing Director of the Business Research Division.

Colorado Employment - Are we out of the Rough Waters?

By BRD Staff on May 20, 2010 8:28 AM

Historically, Colorado has lagged the nation when entering and exiting recessions. If we look at the employment situation, or the seasonally adjusted monthly change in nonfarm payrolls, we see that this was true in both the 2001 and current recession.

U.S. employment began to show signs of weakness in mid-2000. Beginning in January 2001, the U.S. suffered job losses in 26 of the 32 months through August 2003. At that point, the tide turned and positive job gains occurred through July 2007.

In comparison, Colorado posted job gains through all of 2000. Beginning in January 2001, the state experienced job losses in 23 of the 32 months through August 2003. Sporadic job losses continued through July 2007.

The National Bureau of Economic Research officially identified December 2007 as the start of the most recent recession (An official end date has not been set, although it will likely be mid-2009). Between December 2007 and December 2009, the US economy lost jobs in 22 of 24 months. During the same period, Colorado lost jobs in 18 of the 24 months.

During the first four months of 2010, jobs have been added each month at the national level. However, Colorado added jobs only once during that period. If past trends are a precursor of what we can expect in the months ahead, sustained job growth is not likely to occur in Colorado until the third quarter or beyond. Given the sharp declines in Colorado's goods-producing sectors, negative job growth for the year remains the most likely scenario.

Population and Employment in the Lost Decade

By BRD Staff on May 10, 2010 11:14 AM

With the recent release of the 2009 non-farm employment data, we can see that the net employment gain for the past decade was 111,400 workers, or an average annual gain of 11,100. Approximately 81,200 of the total employees added were in 2000, illustrating how weak the economy was for remainder of the decade.

At the same time population increased by 867,100 people. About 396,300 of these people, or 46%, were added as a result of the natural increase, the difference between births and deaths. Clearly, this net difference is comprised of infants.

Net migration accounted for approximately 470,800 people, or 54% of the gain in population. (Net migration is the difference between in-migration and out-migration). On average, the net migration component of state population grew by 47,080 people every year, as Colorado continues to be an attractive place to live.

The good news is that the Colorado population posted gains every year. Population increased in 2001 and remained flat in 2008, years of significant employment declines. By comparison Colorado showed negative net migration in four of the ten years during the 1980s.

Over the past 10 years, net migration increased by almost 400,000, while employment added slightly more than 100,000 workers. By contrast, 650,300 net workers were added between 1990 and 1999 and net migration was 619,833. Total population growth for the decade was 931,447 people. In 2000, slightly more than half of the population was employed, this year it is expected to be about 44%.

Just as the composition of the workforce is changing, the breakdown of the population is changing. Many of these changes are subtle. It is likely that more non-workers or retirees are moving to the state. This includes parents of baby boomers who are taking up residence in Colorado to be near their children. People have stayed here even if they lost their jobs. Some of these folks may have started businesses which may fuel the next expansion.

The implications for Colorado are significant. Stay tuned.

Positive Sign - Temp Services Up

By BRD Staff on April 30, 2010 9:26 AM

The change in the number of workers in the temporary services sector is thought to be a precursor to changes in total employment. Demand for temporary workers often increases as companies expect greater sales in the months ahead. Temporary workers are also a hedge against a downturn. As well, companies will often hire temporary workers as a means of screening potential full-time employees.

The recent recession is a case in point. At the national level, temporary employment leveled off in the summer of 2006 and tapered off modestly throughout 2007. A sharp decline in temporary employment began in late 2007, in conjunction with the "official" start of the recession. The number of temporary workers remained in a freefall through September 2009. Sector employment has been rising since then, with seven consecutive months of increases.

On the other hand, total employment peaked in December 2007, and then plummeted until the fourth quarter of 2009. At that point, the number of total workers leveled off and remained flat for most of the first quarter of 2010. After recording gains through April, it appears that the downward employment pattern has reversed itself.

Check back in a few months to see if this reversal is truly a trend or simply an anomaly.

Colorado Construction - Coming Back?

By BRD Staff on April 20, 2010 3:36 PM

Construction was one of the sectors of the Colorado economy that was hit the hardest by the recession. In 2006, employment peaked at 167,800 workers, followed by no growth in 2007. Approximately 6,000 jobs were shed in 2008, with an additional decrease of 31,300 jobs in 2009. Average construction employment for 2009 was 130,500 workers. At the state level this represents a decline of 19.4%, compared to a drop-off of 15.7% at the national level.

Construction employment data for Q1 2010 show a decline of 29,400 jobs, or 22.0%, compared to Q1 2009. While this represents an improvement compared to Q3 and Q4 of 2009, it is likely that average construction employment will record a decline for the third consecutive year.

Architectural and engineering services employment is often considered a harbinger of things to come for construction employment. Last year, architectural employment declined by 3,200 jobs compared to 2008, with average annual employment registering 41,600 jobs. At the state level this represents a decline of 7.1%, while nationally sector employment fell almost 8.0%.

Architectural employment for Q1 2010 posted a decline of 2,400 jobs, or 5.6% compared to Q1 2009. More importantly, the gap between the 2010 and 2009 monthly values is decreasing each month. While there is no trend toward positive job growth, it appears that architectural employment MAY have bottomed out in Q4 2009.

Taking an optimistic viewpoint, if architectural employment has bottomed out, should we expect construction employment to bottom out in Q2 or Q3?

Labor Data for 2009 Revised Downward

By BRD Staff on April 10, 2010 12:55 PM

In March of each year the Colorado Labor Market Information research team provides the Bureau of Labor Statistics with an update of the CES employment data for the past two years. Last month, final monthly revisions were calculated for 2008, while initial changes were made to the 2009 data. The final 2009 revisions will be made in March of 2011.

Employment for 2008 was 2,350,300, an increase of 0.8%, or about 19,000 workers over the prior year. Data for 2009 reflected a downward revision to 2,244,000 workers, or a decline of 4.5%. A month-over-same-month comparison shows that declines peaked in August 2009. In other words, total state employment continued to show losses through the remainder of the year, but at a declining rate. If those trends continue, positive job growth is likely to return to the state in August or September.

In 2008, the goods producing sectors (Natural Resources, Construction, and Manufacturing) accounted for 14.2% of total state employment. Of the jobs lost in 2009, about 47%, or 50,000 workers, were shed in these three areas. By comparison, the much larger service producing sectors contracted by 56,300 jobs in 2009.

It appears that the highest level of month-over-same-month job losses occurred in October for the goods producing sectors, whereas the peak for services producing sectors was August. The services producing sectors will likely return to positive territory in August or September, while the possibility exists that the goods producing sectors will not return to positive territory this year.

The data suggest that the BRD's employment forecast, originally presented in December 2009 at the BEOF, is reasonable. That forecast projected job losses of 3,200 in 2010.