DENVER—Despite forecasts for slow economic growth, Colorado and some Midwest states are in a stronger position than other parts of the country, the president of the Federal Reserve Bank of Kansas City said Wednesday.
While the housing market has been weak in Colorado, it has not been as dramatic as in southern California or elsewhere, Thomas Hoenig said. Midwest states’ economies meanwhile have been oriented toward energy and agriculture, two booming sectors of the economy.
The Federal Reserve Bank of Kansas City oversees a region with portions of seven states including Colorado, Wyoming, Kansas, Nebraska and Oklahoma. Hoenig also is a member of the Federal Open Market Committee, which controls monetary policy for the U.S.
Earlier Wednesday, the Labor Department reported a 4.1 percent jump in consumer prices in 2007, the biggest increase in 17 years.
The Federal Reserve said the country’s economic growth lost speed from mid-November through December, as credit problems and housing troubles worsened. Its report said retail merchants are cautious about the outlook for this year.
Some experts have raised concerns about a recession.
“I’m less pessimistic about that than some are, but I don’t want to take it for granted,” Hoenig said.
He said that despite the housing crisis last year, real gross domestic product still grew, consumers continued to spend, the job market grew and real personal income grew. The weak dollar has helped boost demand for U.S. exports.
He expected slow growth in the first quarter of 2008. Though the nation’s unemployment rate grew to 5 percent in December from 4.7 percent in November, Hoenig said, 5 percent is still a favorable level.
“The consumer is not going to panic, but they’re going to be cautious,” he said.
He expected growth to pick up as the country works through the crisis in financial markets and as cautious businesses and consumers see what happens with the economy. He acknowledged his view may be optimistic but said it was a “reasonable case to make.”
Hoenig said his projections could still be off if the credit crisis worsens, or if energy prices grow high enough to stifle consumer spending.
The University of Colorado Leeds School of Business has forecast a 1.9 percent increase in jobs in Colorado this year and 1.1 percent growth nationally.
Economist Tucker Hart Adams has forecast just a 0.5 percent increase in Colorado jobs for 2008.
