The Colorado economy entered the 21st century with a thud. The decade saw continuing population growth, while net employment remained virtually flat. Today, the downward spiral of job losses appears to have bottomed out, and Colorado is poised for a recovery in 2011.
Efficient growth will occur if the alliances between economic developers, the private sector, state and local governments, workforce development centers, and P-20 education are further strengthened. Each is equally responsible for creating jobs that will drive state output (GDP) and establish Colorado’s competitive position.
With the exception of health care, job gains are not occurring in key basic service areas such as finance, real estate, construction, government, retail and personal services.
This is significant because basic services account for over half of Colorado’s employment. Government efforts to stimulate growth in these areas will likely be ineffective because job creation is driven by increased consumer spending.
Currently, consumers are focused on improving their financial stability by increasing their savings and reducing debt — not spending.
Historically, many economic developers have focused on the retention and attraction of primary jobs to efficiently stimulate growth and develop or maintain a region’s competitive advantage. Primary jobs typically pay higher wages and have a greater multiplier effect than other sectors, i.e., they are responsible for the creation of other jobs and the attraction of outside spending. Manufacturers are the best example of primary job creators and include such companies as Lockheed Martin, Miller Coors, and Woodward Governor.
Currently, about 13 percent of Colorado companies are goods producers. From 1997 to 2008, they accounted for about 4 percent of the increase in state employment and 12 percent of the change in state output. During that time, service producers contributed more to employment and output growth than their goods-producing counterparts.
Certain service sector jobs will become as important as traditional primary jobs in maintaining competitiveness and fostering growth in employment and output. Examples of such companies are architectural or engineering services, scientific research, and telecommunications.
Digital Globe, a Longmont company, is a service-producing company that provides imagery and information for worldwide commercial markets and the U.S. government. As Digital Globe captures global and domestic market share, it will add jobs. Its satellites are manufactured at Ball Aerospace and launched by Lockheed Martin and they work with Microsoft, Google, Oracle, and other companies with offices in the metro area — an example of how job creation and increased output extend to the supply chain and customer base.
The Governor’s Office of Economic Development and International Trade (OEDIT) has recognized the value of service-producing companies to Colorado. OEDIT can foster the addition of service-producing jobs by continuing to create greater awareness of their contribution to the economy and by providing assistance that will help them more efficiently export their services.
Job creation will also occur in evolving industries, such as renewables. There will be demand for weatherization and insulation replacement, which will create jobs on a statewide basis. The growth of renewables will initially rely heavily on government subsidies, much as was the case in the 1980s.
It is not possible to take a “one- size fits all” approach when developing evolving industries, such as renewables, environmental sciences, or homeland security. Strategies must be based on the needs and markets of the particular industry.
Film and television production is a case of a niche industry that is poised to create jobs. Legislation took effect on July 1 that makes it easier for the Colorado Film Commission to bring increased production to the state. The revenue-neutral tax credits approved by the legislature have the potential to create jobs in all 64 counties and reinvigorate the industry.
As state leaders speculate about how to stimulate job growth, it is beneficial to reflect on past economic-development successes. Consider a public-private partnership, the Colorado Advanced Technology Institute (CATI). During the late 1980s, CATI was established to guide the development of science and technology and the growth of a handful of high-tech clusters.
One of its many success stories resulted from providing a financial match for CU-Boulder and CSU to secure a National Science Foundation Engineering Research Center (ERC) grant. About 20 Boulder County companies were spawned out of this center, along with the Colorado Photonics Industry Association, and a follow-up foundation center located at CSU.
There are a lot of “ifs” on the horizon. If there is not a double-dip recession; if inflation/deflation is sidestepped; if consumer confidence improves; if the proposed amendments and ballot initiatives are defeated; and if the key public-private stakeholders can strengthen their alliance, then Colorado is on track to add 25,000 to 35,000 jobs in 2011.
Gary Horvath (gary_horvath@yahoo.com) is a Broomfield-based economist.
