Jan
27

Is there a ‘new normal’ emerging in Colorado’s economy?

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Boulder leaders, left to right, Cindy Schmidt of UCAR, Boulder City Manager Jane Brautigam and Chamber President Susan Graf joined Rick Porreca, CU senior vice chancellor, on a panel looking at Boulder's economy.

Boulder is following Colorado’s lead in making good headway out of the recession, local leaders said in a 2012 Economic Forecast, but both state and local economies still have several years to get back both jobs and revenues lost in the last four years.

Some of the numbers, especially new home building permits and perhaps even total jobs, may not be coming back at all as “significant” structural changes throughout the state’s economy take hold, predicted Richard Wobbekind, the University of Colorado economist who has tracked the state’s economic health for years at the university’s Business Research Division.

We might be starting to see the “new normal,” Wobbekind told local business leaders at the event organized by the Boulder Economic Council. And he cited several examples of what that “new normal” might look like.

As Colorado’s economy turns the corner, and already it’s ahead of other states tackling much tougher jobs losses, budget challenges and steep losses in home values, the state now is adding anywhere from 100,000 to 150,000 jobs a month. But the caveat is that Colorado, where in-migration from other states is on the rise again, needs around 125,000 new jobs just to absorb new workers in the marketplace. As a result, any reduction in the overall unemployment rate comes slowly.

There’s no “magic wand” out there, Wobbekind said, to repair damage inflicted by the deep U.S. recession. It could be at least 2015 or 2016, four years from now, to see Colorado get back to its “peak” employment numbers.

Another view of the “new normal” is reflected in the ongoing loss of actual manufacturing jobs. Boulder over the years has lost 35 percent of manufacturing employment as companies consolidate and jobs move overseas. But, Wobbekind noted, manufacturing output by GDP is now higher. The same is true for employment in the high-paying information sector, where employment across the state is down, but output is higher.

Technology is allowing fewer people to do more work, Wobbekind said. Employees may be working longer hours, he told me during the event’s networking, but many of those jobs simply are never coming back.

Many of the same phrases heard in forecasts of the last few years are still around: housing doldrums, lack of credit, and now “world economic slowdown.”

CU economic forecasters, Wobbekind said, “refuse to believe” that the current European debt crisis will spin into a new worldwide recession. The morning after the Boulder forecast, European economists said sharp slowdowns in December bank lending confirmed that a Euro-zone credit crunch was indeed under way.

If the European economies do stumble further, Wobbekind said trade patterns of the Western U.S. states like Colorado are more closely tied to Asian markets, and the Northeast is more vulnerable to Europe’s woes.

Anther “new normal” in Colorado’s economy will be a healthier but lower level of new building activity, especially in residential construction.

Wobbekind doesn’t expect the state to return to its building boom years, such as the 45,000 new home permits in 2005. Even in a much better economy than now, permits could total around 25,000, or maybe 30,000, he said. Through November, Colorado posted 12,758 single-family and multi-family permits, up 10 percent from all of 2010, the Census Bureau reported. Nationally, new home sales in 2011 tumbled to the lowest level in the 50 years that records have been kept.

A panel of four local Boulder leaders gave a fairly upbeat view of the city’s present and longer-term economy but emphasized that likely state and federal budget cuts hang over everyone’s head, from CU’s Boulder campus to the city’s base of nearly a dozen national research laboratories.

CU-Boulder has grown its enrollment some 15 percent over the past decade to nearly 30,000 students and overall revenue of $1.22 billion, said Rick Porreca, senior vice chancellor. But in an environment of dwindling state support, which “might go to zero in the next few years,” and the threat of federal cutbacks, graduate student fellowships and research faculty could be hurt. The university, which has cut about $35 million in operating cots, including 200 positions over the past four years, has to maintain “efficiency and self sufficiency.”

Lack of decisions on the U.S. budget and federal deficit reduction, especially in an election year, will keep all of Boulder’s research labs in cost-saving modes, said Cindy Schmidt, director of the Office of Government Affairs for the University Corporation for Atmospheric Research, or UCAR. “Flat is the new increase,” she said of budget decisions for 2013.

The good news is that R&D is still viewed as a long-term economic driver, she said, and the U.S. must keep up with other countries, including China, where research budgets have been increasing 20 percent a year.

Boulder recently landed the new National Solar Observatory, making it one of the best research locations in the country and attracting the higher-paying scientific jobs the labs create. Boulder’s labs, including the National Renewal Energy Laboratory in Golden, now contribute some 16,000 direct and indirect jobs, Schmidt said.

Boulder had a good year, said City Manager Jane Brautigam.

Boulder City Manager Jane Brautigam and Susan Graf, president of the Boulder Chamber of Commerce, both said the city has been fortunate with a local economy that was ahead of council expectations in 2011. Through November, the city’s sales and use tax rose 6.7 percent, Brautigam said. “We had a really good year last year,” she said.

The local economy’s strengths, Graf said, is directly tied to the high level of education of local residents and the region’s need for qualified employees in new high-tech and professional services ventures. Even the city’s accommodation, food, entertainment and recreation jobs, where salaries are not as high as technical positions, saw better numbers in 2011. Some 7,000 people now work in tourism-related jobs, Graf said.

“Quality of life” and residents’ love of the outdoors for hiking, biking, climbing and other sports still rank high for why some 2.2 million people visited Boulder last year, Graf said.

Helping put the city on the national business “map,” Graf added, have been tech giants like Google, which bought @Last software, and Microsoft, which bought Vexcel Corp., both online mapping technologies, and then continued to keep and grow operations in Boulder to hang onto skilled employees and attract new ones.

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