July 2009 Archives

This past summer the Colorado Workforce System released a report, Colorado Workforce Data Mining Project, which summarizes the industries, occupations, and economic factors that drive each of the state's 64 counties. The report, prepared by the BRD and peers at UCCS and CSU, provides a snapshot of similarities, differences, and challenges, as well as distinct competencies, between counties and regions of the state.

From an industry standpoint (based on two-digit NAICS codes), slightly more than half of the Colorado workers are employed in the following sectors:

·         Government

·         Retail Trade

·         Accommodations and Food Services (AFS)

·         Healthcare

·         Professional and Technical Services (PTS)

The largest sector, Government, employs about 18% of total workers, followed by retail with approximately 11%. Roughly half of the government workers hold positions in K-12 or higher education.

The retail trade sector is important to government organizations throughout the state because retail sales taxes are a significant source of revenue for the state and local coffers.

From an occupational perspective (based on two-digit SOC codes), slightly more than half of the state's workers are employed in the following occupations:

• Office Administrative Support
• Sales
• Food Services
• Construction and Extraction
• Transportation
• Education

The Office Administrative Support occupations cross a broad range of industries, whereas sales and food services job are closely tied to the state's retail and hospitality industries. Construction and Extraction jobs have been driven by the overall growth of the state, as well as the most recent energy boom.

Another way to evaluate the importance of an industry or occupation is to compare its concentration using location quotients. At the two-digit NAICS level, 6 of 19 sectors can be considered sources of primary jobs (i.e., they have a location quotient greater than 1.2). From a total employment perspective, they rank as follows:

·         PTS

·         Construction

·         Information

·         Real Estate

·         Arts, Entertainment, and Recreation (AER)

·         Mining

The 6 sectors account for almost 23% of total employment. These sectors are significant to the state for different reasons:

·         Together, the PTS, Information, and Manufacturing (which has a location quotient less than 1) sectors form the Advanced Technology cluster. Approximately 17% of total state employment can be attributed to these three sectors.

·         The combination of the AER sector and AFS (which has a location quotient of 1.16) is the foundation of Colorado's tourism industry.

·         The high concentration of the Construction and Real Estate sectors reflects the fact that the state population and workforce have expanded faster than most other parts of the country in recent years.

It is clear that different industries and occupations are critical to the state economy in unique ways. As the state moves out of the recession, it is essential that strong growth occur in industries and occupations that are primary in nature. In other words, these industries and occupations (or combinations of these industries and occupations) should have higher than average levels of compensation or location quotients above 1.2.

Each summer the BRD hosts an annual mid-year Business Economic Outlook (BEO) forecast update meeting to review its annual employment projections for the year. Members of the steering committees for the 2009 BEO convened in late June to share their thoughts about what they saw happening in their sectors of the economy and the factors that were driving industry changes.

The bottom line is that overall job losses for 2009 will be in the 3% range, or 60,000 jobs. This is update is substantially lower than the original forecast, presented in December 2008, that projected a decline of 4,300 employees. By year-end, job losses are projected for all sectors, except for Government, and Education and Health Care Services. Gains in both sectors will be driven by increased population.

It is anticipated that total employment for the summer months will average about 100,000 fewer jobs than 2008. Despite these steep declines, the rate of job loss is expected to slow during the third quarter and approach zero or turn slightly positive in the final quarter.

At the mid-year point, the greatest improvement has occurred in the housing market, which appears to have bottomed out in many parts of the country. On average, Colorado's home prices are slightly lower than a year ago, compared to an average decrease of 4% for the nation. At the same time, it looks as if the financial markets have stabilized, although credit markets remain tight and growth is unlikely to occur until credit becomes more readily available. On a positive note, consumer confidence most likely bottomed out in the first quarter; however, consumers remain overleveraged and are not in a position to lead an economic recovery in the short term.

A complete overview, including analyses for each of the sectors, is available in the most current issue of the Colorado Business Review. To stay on top of what is happening in the Colorado economy, business leaders are encouraged to become a panelist and participate in the quarterly Leeds Business Confidence Index. Finally, make plans now to participate in the 2010 Colorado Business Economic Outlook Forecast, to be held on December 7 at the Grand Hyatt Hotel in Denver.

The Leeds Business Confidence Index (LBCI), compiled by the Business Research Division, posted its second consecutive increase, moving from 35.5 to 47.5, after recording a record-low in the first quarter of this year. The forward-looking LBCI is comprised of six index components. For the third quarter, all six of the index components recorded gains, a sign of increased optimism.

The components measuring the state economy and sales outlook edged past the neutral mark of 50. On the other hand, business leaders expressed continued concern about profits, hiring, capital expenditures, and the performance of the national economy. These four factors were a drag on the overall indicator keeping it in negative territory.

Key points from the recent results include:

• The outlook for both the state and national economies are greatly improved.
• The prospects for the state economy remain more positive than the nation.
• Historically, business leaders have been most upbeat about sales.
• It is likely that companies will begin to experience measurable expansion in sales.
• Business leaders will remain in a cost containment mode as they continue to focus on the bottom line.
• Both hiring and expansion plans will remain on hold for as long as possible.

Check in again during the fall for the next release of the LBCI. Colorado business leaders are invited to serve as panelists for the September LBCI survey by clicking here. For those interested in following the economy by simply staying on top of the economy, click here.

Welcome to the BRD Blog!  The Business Research Division has been conducting research for Colorado businesses, organizations, and government agencies for nearly 100 years.  Since the mid-1960s the BRD has prepared an annual consensus economic forecast that serves as a foundation for other state-related research.