Federal spending cuts, including the next round of automatic budget cuts, will continue to slow the growth of the Colorado Springs, Colorado and U.S. economies next year, according to a forecast from local economist Tom Binnings.
Binnings' forecast is not as rosy as those recently issued by other economists, who predict that accelerating U.S. economic growth next year will boost both the local and state economies.
"Our forecasts tend to be more on the conservative side because we don't see the reasons for such great optimism about the national economy. The only difference between this year and next year in terms of drag on economic growth is there won't be another increase in the payroll (Social Security) tax," said Binnings, senior partner at Summit Economics LLC, a local economic research and consulting firm.
Speaking before 150 customers and guests of U.S. Bank on Thursday, Binnings said job growth in the Colorado Springs area is expected to slow from about 2 percent this year to something closer to the area's 1.6 percent population growth rate.
Much of the slowdown will related to the next round of cuts under sequestration - automatic federal budget cuts that were part of a budget deal reached in 2011 between Congress and President Barack Obama.
Those cuts will more than offset accelerating private-sector job growth, and will keep the area's unemployment rate from falling much below 8 percent next year, according to Binnings' forecast. They'll also keep local income growth flat after adjustments for inflation, he said.
He expects the housing and auto sectors to remain strong, largely because of people who are rebuilding houses destroyed or damaged by recent fires and floods. And retail spending will continue to increase at an annual rate of 4 percent to 5 percent, he said.
Binnings forecasts a similar slowdown in the state's job growth - 2.4 percent this year to 2 percent next year - because of federal budget cuts expected to hit the Boulder and Colorado Springs area the hardest, since federal laboratories and the military are major drivers of the two economies.
U.S. economic growth likely won't be much different next year than this year, he said. He expects the nation's economic output to increase by about 2 percent as federal budget cuts offset some of the expected improvement in private-sector growth and keep the jobless rate above 7 percent.
Norman Alvis, a senior portfolio manager in U.S. Bank's private client group in the Springs, also told the group not to expect a big drop next year in the nation's stock markets, since share prices for companies in the Standard & Poor's 500 index are near the average for the past 60 years when compared with earnings.
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