Despite layoffs and dampened consumer confidence, the Colorado economy will continue to grow in 2002, although at a slower pace than during the 1990s, according to CU-Â鶹¹ÙÍø economist Richard Wobbekind.
"We are optimistic about the economy turning around by mid-year and finishing strong in 2002," said Wobbekind, director of the Business Research Division at the Leeds School of Business. But the prior accumulation of layoffs and decreased in-migration to the state will constrain economic growth, especially during the first half of the year, he said. "I am confident that Colorado's economy will continue to outperform the nation's."
As in the past, the services sector will be the leading sector in terms of growth, adding 12,700 jobs in 2002. "The services sector was hit hard this past year and the effect will continue in 2002," Wobbekind said. "Areas that were hit hardest were tourism-related subsectors such as hotels and lodging. Business services also took a big hit as demand for outsourcing suffered as a result of the slowdown in manufacturing and telecommunications."
Average unemployment is expected to increase from 3.4 percent in 2001 to 4.2 percent in 2002. "Although the rate is above what we have become accustomed to, we will remain below the unemployment rate for the U.S.," Wobbekind said. "Colorado has a well-educated and versatile workforce. Fortunately many of our state's workers have job skills that are highly transferable. The positive side of the slowdown is that it will reduce wage pressures and allow companies to be more selective in hiring."
Wobbekind's annual economic forecast was delivered at Denver's Brown Palace Hotel on Dec. 17 at 1:15 p.m. His presentation was followed by a Q&A session featuring the state's top economists and a keynote presentation titled "The Future of Travel" by Bill Hannigan, president, chairman and CEO of Sabre. The program concluded with a series of industry discussion sessions on the following topics:
o Energy and Security
o Population, Labor Force and Personal Income
o Effects of Growth on City and County Sustainability
o Betting on Biotech
Sector-specific highlights include:
o Employment - The goods-producing sectors of the economy will remain stagnant or decline in 2002. These declines will be offset by growth in service-producing sectors. All service-producing sectors are expected to increase in 2002 except transportation, communications and public utilities. In 2002, 10,500 new jobs are expected to be added overall.
o Agriculture - Uncertainty overlies the agriculture sector. A decline in exports has resulted from softening economies among the United States' major trading partners, combined with international concern over livestock diseases.
For most of Colorado's major commodities, growth is not expected in 2002.
o Oil, Gas and Mining - The oil, gas and mining sector is expected to experience strong growth in 2001, leveling out at 13,600 employees in 2002. Growth will occur in coal and natural gas production while declines are expected in crude oil and carbon dioxide.
o Construction - The curtailing of activity in 2002 will result in a drop in the average employment level to 153,000 workers, a 6.1 percent decline from the average during 2001. While not a trivial adjustment, this will still place the 2002 job level above that for 1999 and earlier years.
o Manufacturing - The manufacturing sector failed to recover in 2001. Following a 1.4 percent decline in employment in 1999, the sector added 1,000 jobs in 2000 to record a 0.5 percent growth rate. However, deterioration in national and international economic conditions in 2001 made employment expansion impossible. The manufacturing sector will lose 4,700 jobs in 2001, the largest decline in employment since 1991. Sector performance is expected to improve in 2002, but will still suffer some additional job loss.
o Transportation, Communications and Public Utilities - Slower economic conditions have hurt the transportation, communications and public utilities sector. The telecommunications boom of the 1990s has fizzled, and the air and trucking subsectors also have experienced a downturn. This situation has been exacerbated by the events of Sept. 11. Employment is estimated to be 138,900 in 2001, down 4.3 percent from 145,200 in 2000. This loss of 6,300 jobs in 2001 represents the largest recorded decrease for the sector. More job losses in the telecommunications and transportation subsectors are anticipated in 2002, while other subsectors are expected to see only modest changes in employment.
o Finance, Insurance and Real Estate - The finance, insurance and real estate sector accounted for only 6.3 percent of total Colorado employment in 2000 but contributed 8.9 percent of total wages. In 2001 the sector was the sixth largest, moving ahead of the transportation, communications and public utilities sector. Overall, sector employment has been stagnant but employment during 2002 is expected to increase moderately by 1.4 percent or 2,000 jobs.
o Wholesale Trade and Retail Trade - The trade sector will continue to be a driver of the economy in 2002, adding 5,400 jobs, an increase of 1 percent. This lower rate of growth is a function of decreased consumer confidence and lower in-migration. Retail trade sales are projected to increase in 2002 by 3.9 percent.
o Services - Employment growth in the services sector has been strong over the past decade as total sector growth has increased at an annualized rate of 4.8 percent. The stock market bubble has burst, high-tech businesses are laying off employees and tourism has been devastated, which has resulted in much slower growth particularly in business and software services. The services sector is expected to add 12,700 jobs in 2002 or an increase of 1.8 percent.
o Tourism, Outdoor Recreation and Conventions - The terrorist attacks of Sept. 11 have negatively impacted tourism, both nationally and in Colorado. The tourism industry will recover slowly throughout 2002. However, overall activity in tourism is not anticipated to reach prior highs until 2003.
o Government - For the past 10 years, government employment grew 2.1 percent, well below the Colorado annual average. Growth in the government sector will increase by 1.6 percent in 2002, driven by an increase in local government employment.
o International Trade - The global economic downturn, evident throughout the first eight months of 2001, was compounded by the events of Sept. 11. Total Colorado exports are expected to remain flat at $6.4 billion in 2002. Agricultural exports, while facing uncertainty, may provide a bright spot in 2002.