Welcome to the new normal for the Colorado Springs economy.
In this new world, the rapid economic growth before the Great Recession is a distant memory and isn't likely to return anytime soon, said Tom Binnings, a senior partner with Summit Economics LLC, a local economic research and consulting firm.
That's the theme of a forecast Binnings plans to give next month to local customers of U.S. Bankat one of three upcoming economic forecast events in southern Colorado. On Wednesday, the Federal Reserve Bank of Kansas City will hold its event in Pueblo, and the Southern Colorado Economic Forum will have one in downtown Colorado Springs on Thursday, the only one of the three that's open to the public.
The events will include forecasts for the local, state and national economies, and should give attendees a clearer picture about where the economy is headed.
Binnings' forecast is less than rosy.
"While we are seeing accelerating job growth in the local economy, wages are just creeping upward. I just don't see a whole lot of improvement. Colorado Springs is lagging behind the rest of the state in both job and income growth, and that isn't likely to change in near future," Binnings said.
The new normal of slower economic growth is the product of two converging trends: more employers hiring part-time instead of full-time workers, and a growing number of baby boomers starting to trim spending as they prepare for retirement, Binnings said. That could mean higher unemployment rates, even when the economy has fully recovered, and a higher percentage of the work force working part time or becoming self-employed. Both scenarios mean they'd likely be earning lower wages than they had in the past, he said.
"If you're waiting for a 1990s level of recovery, I just don't see that in the cards during the next five years or so. The good news is that we are in a recovery and not a recession, but the bad news is that a slow recovery is about what we should expect," Binnings said. "Japan has been dealing with an aging society for 20 years and their economy has been sluggish during that entire time. In the U.S., this trend began with the Great Recession about five years ago. The next 10 to 15 years will define what the local economy will look like in rest of this century."
A forecast published last month by Wells Fargo Securities LLC echoes the same theme, noting that most of the state's growth has been focused on the Denver area and the northern Front Range. The forecast said the Springs area faces uncertainty from the effects of automatic federal budget cuts - sequestration - that began in March and will accelerate next month. Wells Fargo economists predict that Colorado's strongest economic gains will continue to be in the Denver area and northern Colorado, but improvement will spread across the state.
The Colorado Legislative Council also warns that further cuts from a second round of sequestration could slow improvement in the Colorado Springs economy, which has showed signs of strengthening in the job and real estate markets as well as consumer spending.
The council's forecast, released in June, cautions that despite continued improvements in statewide economic growth, federal spending cuts likely will be felt across the rest of the state and likely "will prevent the Colorado economy from accelerating beyond a moderate pace."
Although Colorado Springs lags most of Colorado's biggest metro areas economically, indicators for the city generally indicate improvement in most areas:
- The area's economic output last year increased 3.2 percent from 2011 to $28 billion, but when adjusted for inflation and population growth remained virtually unchanged.
- The Springs area's unemployment rate drifted up to 8.4 percent in June and July after falling to 8.2 percent in March, April and May, mostly because of more people returning to the job market. The area's jobless rate was 9.3 percent in July 2012; the number of people without a job has declined by nearly 3,000 since then.
- Area payrolls in July expanded 1.4 percent from a year earlier to 254,800, matching April as the highest monthly total since November 2008. And the local job market may be performing better than what is reflected in data from the U.S. Bureau of Labor Statistics. That's because the latest quarterly numbers from thestate show that local employers added nearly 6,000 jobs during the first three months of the year, a 2.5 percent growth rate compared with the same three-month period a year earlier. Nearly three-fourths of those jobs were added in the professional and technical services, tourism and health care industries.
- While job growth is accelerating, wages are not. The average weekly wage during the first quarter rose just $1, or 0.1 percent, from a year earlier, likely because many of the new jobs are part-time positions. Binnings believes that is because employers are replacing full-time jobs with part-time ones to get around requirements of Obamacare, the Affordable Care Act.
- Single-family housing construction during the first eight months of the year was up 35.7 percent from a year ago to 1,994 units, but declined in August from the same month a year earlier for the first time since December 2011, likely in response to rising mortgage rates.
- Housing sales were up 24.5 percent in the first eight months of the year to 7,641 and have risen every month, compared with a year earlier, since June 2012. The median price in August was up 4.5 percent from a year earlier to $220,000 and has increased every month since February 2012. The supply of homes on the market in August was up 10 percent from a year ago to 4,251 and has gone up for four consecutive months.
- Mortgage foreclosures filed in first eight months of the year were down 42.5 percent from a year ago to 1,369. Foreclosures have declined every month compared with a year earlier for a year and in August were at an eight-year low. If filings continued at the current rate, the number of foreclosures filed this year should hit a 10-year low.
- Sales tax collections by the city of Colorado Springs, adjusted to subtract one-time collections from merchant audits, are up 6.2 percent this year from the same period a year ago to $66.5 million. Sales tax numbers have increased every month compared with the same month a year earlier since December 2011 with sales of groceries, furniture, appliances, electronics and building materials leading the way.
- New vehicle registrations for the first eight months of the year were up 9.6 percent from the same period a year ago to 15,399, paralleling strong sales gains both in Colorado and nationally.
- Indicators for the tourism industry are mixed. Collections of the city's tax on hotel rooms and rental cars so far this year are up 4.2 percent to $2.33 million and have risen in nine of the past 10 months. However, hotel occupancy for the first eight months of the year is down to 62.6 percent from 63.8 percent compared with the same period a year ago. The average room rate during the same period is up 1.7 percent to $92.42.
Contact Wayne Heilman: 636-0234 Twitter @wayneheilman
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GET THE FORECAST
What: Southern Colorado Economic Forum
When: 7:30 a.m. Thursday
Where: Antlers Hilton hotel, 4 S. Cascade Ave.
How much: Open to the public; $75
Speakers: Jim Paulsen, chief investment strategist, Wells Capital Management; Fred Crowley, the forum's senior economist; Tom Zwirlein, the forum's faculty director and University of Colorado at Colorado Springs finance professor, and business symposium on "Working Together to Resolve Regional Issues."
More information: www.southerncoloradoeconomicforum.com