Construction losses hit Colorado hard


Like a hammer driving down hard on the nail, the last few years of the recession have taken a serious toll on the state’s economy.

A new report just issued by Gary Horvath and his Broomfield-based company Business and Economic Research at www.garyhorvath.com examines the volatility of the construction sector, pointing out that its “peaks are often more exaggerated and the troughs more severe.”

Colorado’s construction businesses, including residential, commercial and non-building (infrastructure such as roads and utilities) now have suffered declines in employment from 2006 to 2009.

And when you realize, as Horvath explains, that even despite the recession’s effects, Colorado has a higher concentration of construction works (called the “location quotient” in economist speak) than other parts of the U.S., then the job losses have hit especially hard.

Colorado construction employment now has declined to 7.2 percent, or about 131,000 jobs in 2009, from 8.9 percent, or 167,647 jobs, in 2006.

Fewer construction jobs, of course, also smacked a number of manufacturing sectors that produce materials for builders and contractors. These include everything from asphalt to paint to HVAC equipment. Colorado actually has five seasons, Horvath reminds us. Winter, spring, summer, fall, and “cone” season.

The headlines of Colorado bank failures often fostered by a heavy reliance on commercial lending prior to the U.S. recession remind us that numerous professional services depend heavily on the health of the construction industry. The list of those losing high-paying jobs goes on with insurers, real estate agents, appraisers and mortgage loan brokers.

The category of financial employment related to construction has lost nearly 8,000 jobs since 2006, Horvath’s figure show.

One anomaly is that the category architects and engineers, “thought to be a leading indicator of economic activity,” Horvath says, actually remained fairly steady from 2006 to 2009, reaching a high of 44,593 jobs in 2008 before flattening out to 41,560 jobs in 2009. The pattern was similar for both interior and industrial design jobs.

Overall, Colorado suffered a net loss of about 105,700 jobs between 2007 and 2009, and construction workers and workers in related sectors accounted for about 56 percent of those losing their jobs with 36,700 jobs lost in construction and 22,200 jobs lost in related sectors. That’s a very hard hit.

So where do we go from here? Can a surge in construction business help save the day?

With a population of 5 million people and population growth forecast at 1.5 to 2 percent, Horvath says, the need is clear for a strong construction sector to support new homes and buildings as the economy begins to grow. Colorado, however, may finally be bringing the percentage of construction industry jobs (again it’s the location quotient) back into line with other states.

That location quotient stat, Horvath says, is down to 1.29 in 2009 from 1.44 in 2001, and may very well need to revert to 1.0 for a healthy balance in the state’s economic outlook.

Different economic forecasts for overall Colorado job expansion this year range from growth of zero to 2 percent or completely flat to 44,000 new hires.

In Horvath’s November forecast, he expected some 15,000 new employees to be added this year, based on real GDP growth of 2.4 percent. Both of those numbers, he now says, “are likely to be revised upward.”

And that’s good news for all of the unemployed waiting for the hiring to begin.

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