Colorado’s economy continues to improve but challenges lie ahead, economists for Wells Fargo said in a report issued Friday.
The 15-page report said the state’s labor market is recovering at a pace slightly ahead of the nation and a budding housing recovery is driving solid gains in construction payrolls and helping the financial services industry regain its footing.
But the report said job losses in newspaper publishing and landline telecommunications continue to weigh on Colorado’s key information services sector, while weakening national and global economic growth are curbing increases in parts of the tech sector.
In fact, said the report, high-tech is starting to sputter.
For the better part of 2011, high-tech employment was growing faster than overall employment in Colorado. But now, not only has job growth in high-tech industries slowed noticeably but it has also dipped below the growth of overall employment.
“It is clear that the weakness is coming from telecommunications and computer systems design. The continuing consolidation in the telecommunications sector is fueling layoffs and prolonging the slump that the industry has been in for the past several years. Meanwhile, computer systems design has flat-lined,” said the report.
However, on the positive side, Wells Fargo said oil exploration has supported robust growth in mining and natural resources, although the recent slide in natural gas prices has cut into natural gas exploration and development. Also, export growth rebounded in the first quarter of 2012, but exports to the Euro Zone were down from their year-ago level.
The report said that employment conditions in Colorado have improved slightly faster than they have nationwide.
Nonfarm employment has risen 1.8 percent over the past year in Colorado, compared to 1.4 percent growth nationally.
Wells Fargo said in its previous reports, it had noted Colorado’s employment growth was lagging the nation.
“Revisions show that job growth was better than previously estimated over the past couple of years,” said the economists.
As far as housing, the report said the Colorado housing market is showing signs of life.
“Colorado’s housing market turned around sooner than many other areas. Home prices in Colorado fell just 15 percent from their peak, based on CoreLogic’s home price index.”
That drop is less than half of the 33 percent decline seen nationwide. And home prices in Colorado bottomed sooner, reaching their nadir in March 2011, whereas prices only bottomed a few months ago nationwide.
Another bright light is that the state budget is in better shape than it has been in the past few years due to a strengthening economy.
But the report warned that balancing the budget remains a “constant challenge,” and the “outlook (is) rife with uncertainty.”
Steady economic gains have fueled stronger individual and corporate income tax collections, leading to improvement in Colorado’s fiscal position.
But the outlook for fiscal 2012-2013 is a bit less optimistic.
The General Fund revenue is only expected to rise 1.0 percent from fiscal year 2011-2012. The government forecasts a 0.6 percent decline in individual income tax collections and a much smaller increase of only 3.2 percent in corporate income tax collections over the next fiscal year, as job growth and economic activity slow.
In summary, the report said that Colorado’s economy appears to be losing a bit of momentum going into the second half of the year.
But it added that growth should remain stronger in Colorado than in the country as a whole, which has less direct exposure to the Euro Zone financial crisis and a slowing global economy in general.
Job growth has been stronger in Colorado and the unemployment rate has fallen a little further reflecting the better mix of faster growing industries located in the state.
“Over the long term, Colorado’s favorable mix of high paying industries, the state’s well-educated workforce, diverse energy industry and vibrant tourist trade should sustain Colorado’s position as one of the leading growth states in the West and the nation,” said the report.
Howard Pankratz: 303-954-1939, hpankratz@denverpost.com or
