Expect more of the same - gradual improvement - from the Colorado Springs economy during the rest of this year and into 2016, say economists who follow the local economy.
The four economists - Tom Binnings of Summit Economics LLC, Tatiana Bailey of the Southern Colorado Economic Forum, Fred Crowley of the University of Colorado at Colorado Springs and Natalie Mullis of the Colorado Legislative Council - all forecast somewhat faster growth in the local economy next year. Binnings and Bailey see the Springs economy as the strongest it has been since the recession, but Crowley and Mullis are concerned that workers are leaving the local job market, which limits how much the economy can grow.
Their forecasts come as the area's economy dodged what could have been a major setback - the Army said Thursday that Fort Carson would lose about 365 soldiers, or about 1.5 percent of the troops stationed there, as part of plans by the service to reduce active-duty personnel by 40,000 over the next two years.
But another threat remains - the Army is expected to cut 30,000 more troops this fall if automatic federal budget cuts, called sequestration, happen as scheduled Oct. 1.
Binnings, a senior partner of Summit Economics LLC, a local economic research and consulting firm, said Springs-area employers are adding jobs at the fastest rate since the beginning of the recession, resulting from new breaks that have lured aviation-related companies to the Colorado Springs Airport and booming growth in the Denver area expanding to the south.
"We are seeing a good trajectory in our economic base that is generating a decent wave that I hope we will be able to ride through the end of the year and into next year," Binnings said. "The local economy is producing about 5,000 new jobs a year, and while the population is still growing faster than that, job growth is coming the closest to keeping up with population growth since at least 2000."
Binnings said local economic development efforts are starting to pay dividends, especially exemptions and credits for sales and use taxes paid by businesses on equipment and supplies used in maintaining, retrofitting and upgrading aircraft. Those tax breaks were a major factor in persuading Sierra Completions to build an $88 million hangar complex at the airport that will employ more than 2,100 people within five years to turn wide-body aircraft interiors into flying offices for high-end customers.
The threat of more troop cuts by the Army is the biggest threat to continued improvement in the Springs economy, Binnings said.
"The coming cuts at Fort Carson will continue to be a drag on the local economy. We should anticipate some cuts there, but I am not expecting a major cut," said Binnings, who co-wrote a state study on the importance of the military to the Colorado economy. "I'm bullish on Fort Carson; it is a strong facility for the Army."
Bailey, director of the Southern Colorado Economic Forum, said the local economy is benefiting from strengthening U.S. economic growth, especially in the housing and job markets, that should continue into 2016. She expects the election of John Suthers as mayor and his efforts to build a good relationship with City Council members to help efforts to bring new businesses to the Colorado Springs area and persuade local employers to expand.
"We are seeing high consumer-sentiment numbers, a relatively strong real estate market and strong job growth, so I'm feeling confident about the national economy. I expect the local economy will follow with new (political) leadership, a large new employer, more economic development prospects and the number of new businesses starts ticking up," Bailey said. "That translates into a solid recovery and sustainable growth."
The only clouds in Bailey's forecast - a decline in exports and manufacturing from the rising value of the U.S. dollar that makes the nation's exports more expensive and more troop cuts at Fort Carson. She believes the post could benefit from a round of military base closings expected in 2017 because of its large training area and other advantages that make the Pikes Peak region attractive to the Department of Defense.
Fred Crowley, a UCCS finance instructor who retired last year as the forum's economist, isn't quite as optimistic as Binnings or Bailey about the local economy. He expects slightly stronger job growth this year and in 2016, compared with 2014, but well behind the Denver area. Job growth in the Springs averaged 1.9 percent last year, while employment grew 3.7 percent in the Denver area. The unemployment rate in the Denver area also is a full percentage point lower than the local jobless rate.
"While the unemployment rate in Colorado Springs has been falling from a year ago, it is more because people are leaving the job market than finding a job," Crowley said. "Still, improving consumer confidence is driving both the local and national economies. That has resulted in strong vehicle and housing sales as well as healthy gains in retail sales overall."
Crowley forecasts a 10 percent increase in housing construction this year and in 2016, mostly because of a dwindling supply of existing homes on the market and mortgage rates that remain near the lowest levels in decades despite recent increases. Some of the housing growth is coming from buyers who work in Denver but are drawn by more affordable prices to look for homes in the Springs area.
Natalie Mullis, chief economist for the Colorado Legislative Council, echoes Crowley's less optimistic forecast for the local economy. She said last month in a quarterly economic and revenue forecast for state government that the Springs area "continues to add jobs, albeit at a slow rate."
The area's slow growth is a result of military budget cuts and the loss of workers to jobs in the Denver area, Mullis said in her forecast. The exodus of workers has kept local wages from increasing much, which will hold back consumer spending growth for the balance of the year, she said.