Mixed forecasts tied to past numbers on job growth, wages

By Wayne Heilman Updated: December 23, 2013 at 8:03 am • Published: December 22, 2013 | 12:00 am 0

One step forward, a half-step back.

That's the picture of El Paso County's job market, painted by the latest data from the Colorado Department of Labor and Employment, which showed strong job growth but declining wages in the second quarter when compared with the same quarter a year earlier.

The data - based on information included in unemployment insurance reports filed by most employers - mirrors the scenario from the first quarter.

The second-quarter data show local payrolls growing at a 2.4 percent rate compared with the same quarter in 2012, or just slightly below the 2.5 percent growth rate in the first quarter.

Those are the strongest two quarters of local payroll growth since the first half of 2006, and while they're still slower than the state's 3 percent rate during the same period, they're faster than the rates for Boulder, Denver, Mesa (Grand Junction) and Pueblo counties.

What it means for hiring in the near future, however, depends on whom you ask. Two of the area's top economists offer mixed forecasts, with one seeing more robust hiring on the horizon, while the other anticipates slower growth.

No matter where the local economy is headed, the recent past showed promise. The payroll growth rate reflected in the state's second-quarter data bested the 1.5 percent growth rate reported by the U.S. Bureau of Labor Statistics for the same period, based on its monthly survey of employers.

That likely will mean a revision in the federal government's estimates for the area's employment numbers that would increase the job growth rate to 2.2 percent, said Alexandra Hall, the department's chief economist.

"The Colorado Springs economy is still trying to recover the jobs lost in the last recession. We are seeing signs that modest growth has returned to that economy. Job growth there has been solid, but at a modest pace that lags the rest of the state," Hall said.

Much of the growth in the second quarter came from the restaurant and "professional and technical services" sectors, industries, which accounted for more than half of the county's overall payroll growth, compared with a year earlier.

Job growth also was strong in the construction, finance and health care industries.

The manufacturing sector lost more than 1,400 jobs during the same period, but Hall said that number resulted primarily from a year-end reclassification of employees from the "manufacturing" to "professional and technical services" sectors.

The good news on the job-growth front is tempered by less than stellar data on pay. The average weekly wage in El Paso County during the second quarter fell nearly 1 percent from a year earlier to $835, after barely increasing during the first quarter.

The second-quarter decline also marked the first year-to-year drop since the third quarter of 2012.

Wage growth in the Springs area was hampered by a onetime payment last year of about $50 million on a contract from an employer Hall declined to identify. Without the one-time payment, wages would have increased.

Statewide, wage growth was weak in the second quarter, increasing 1.6 percent from a year earlier and rising less than 1 percent in Denver, Larimer (Fort Collins), Pueblo and Weld counties.

Fred Crowley, senior economist for the Southern Colorado Economic Forum, believes local wages are declining because low-wage jobs are fueling most of the county's employment growth.

"We are not going to grow the local economy . with minimum-wage jobs," Crowley said. "What this economy needs is more basic manufacturing jobs because each of those high-wage jobs creates another two-and-a-half jobs in the local economy from suppliers, vendors and at retailers and other businesses where employees spend their wages."

He also said the wage data may point to a drop in the payroll numbers.

"I expect the slow wage growth in the second quarter may mean slower job growth going forward" because lower-paying jobs circulate less money through the local economy.

The Southern Colorado Economic Forum's business conditions index reflects a slowing in local economic growth, declining from a high of 117 in May to 108 in September. The index is a composite of 10 economic indicators that include local housing construction, sales tax collections, new vehicle registrations, employment, wages, regional manufacturing and national consumer sentiment. It uses 100 as its base to reflect how much the local economy has improved from the recession that ended in 2009.

Crowley said many of the indicators have softened in recent months, especially housing construction, but he expects the improving U.S. economy to keep the local economy growing.

He also said he expects the local housing market to remain strong because the Springs continues to attract baby boomers who have either retired or who are still working but no longer have children living with them.

Tom Binnings, a senior partner with Summit Economics LLC, a local economic research and consulting firm, has a somewhat rosier forecast. He said the payroll numbers show that employers who were reluctant to hire additional workers during the recession or early in the recovery are now in a hiring mode. The downside, however, is that many of the jobs employers have added pay part time at wages well below the county's average, which may help to explain why job growth isn't quite as strong locally as it is in the rest of the state.

"Some of the slowdown in wages is likely due to sequestration and furloughs of federal workers that began late in the first quarter. The federal government shutdown in October likely will have a similar or greater impact on the fourth-quarter numbers," Binnings said.

But, he added: "I still expect robust hiring and strong retail sales growth to continue for the next six months because people are more optimistic that the economy is recovering and will continue to do so."


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