2012 Economic Forecast for Metro Denver

The Metro Denver Economic Development Corporation (Metro Denver EDC) and the Denver Metro Chamber of Commerce presented the 2012 Metro Denver Economic Forecast on Jan. 18, 2012, at Vectra Bank's 19th Annual Economic Forecast Breakfast.

The Metro Denver EDC's Chief Economist Patty Silverstein highlighted Metro Denver's economic progress in 2011 and outlook for 2012 as the region continues to make its way out of the national recession.

"As the national economy struggles out of the recession, so will Metro Denver's economy," explained Silverstein. "Employment growth and other key economic indicators will slowly improve, but will largely hover around the national average."

According to Silverstein, industries expected to perform the best in the Metro Denver region in the coming years are those with an emphasis in education and health services and professional and business services; jobs in construction, energy, healthcare, and aerospace to some degree will increase in 2012. The outlook for jobs in manufacturing, information, and transportation, warehousing, and utilities is less optimistic.

Metro Denver job growth in 2012-like growth in 2011-will likely be too slow to reduce the area's unemployment rate dramatically. Employers are still battling uncertainty and a majority of employers (70 percent) indicate they will maintain current staffing levels in the first quarter of 2012. According to Silverstein, employment growth in Metro Denver is forecast to be 1.1 percent, again mirroring national employment growth predictions.

While Metro Denver faced several obstacles to strong growth in 2011, the region maintained its characteristically high ranks for cost of doing business, labor force quality, and other key indicators that attract companies. Business news website MarketWatch.com, for example, ranked Denver sixth among the "Best Cities for Business" in 2011. In a different ranking of the "Best Places for Business" released by Forbes, Metro Denver ranked ninth among the top 50 metro areas. Metrics for the rankings included job and population growth, concentration of Fortune 500 and other large companies, costs of doing business, and educational attainment. Metro Denver's population will also grow at a faster-than-average pace this year, which will boost housing construction and help the regions' overall housing market.

"Clearly, Metro Denver has weathered the worst of the recession and has still managed to maintain the features that make the region a favorite among businesses and new residents," said Tom Clark, CEO of the Metro Denver EDC. "The region's economy will perform like the national economy in 2012, and Metro Denver should continue to rank among the nation's strong business centers."

The 2012 Economic Forecast reviews the events of the past several years and examines emerging trends. The forecast begins at the national level and then discusses the economy in Colorado and Metro Denver, which is the region comprised of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson Counties. Forecast numbers for key economic indicators in 2012 are available on metrodenver.org.

Notable indicators from this year's forecast report include:

National Economy 

• Economic recovery in many non-European countries is proceeding, but the slow pace of growth in the United States and other developed nations has made them vulnerable to setbacks. These countries are also victims of their own dysfunctional politics, which have left businesses and households frustrated and confused about taxes, healthcare, and other behavior-shaping policies.
• In the United States, 2012 growth in gross domestic product will remain below trend. This slow growth partly reflects challenges still facing the household sector: wage growth is sluggish, real estate and other assets have not boosted spending as they did before the recession, and households are still limiting their debt. Low interest rates; however, will be a major advantage for households willing and able to borrow in 2012.
• Rock-bottom interest rates have also helped support more business purchases, particularly purchases of equipment and software. While these purchases suggest businesses are well funded and poised for a rebound, they also suggest many business owners feel more comfortable buying equipment than hiring new workers. Business uncertainty and the economic paralysis it creates has made for a painfully slow labor market recovery, and many business owners are planning for still-slow hiring activity in 2012. As long as job growth remains sluggish, the nation's unemployment rate will stay high.

Colorado Economy

• Some economists say the recovery in Colorado has lagged the recovery nationwide, but underlying data suggest that may not be true. Colorado job trends-which have historically amplified national trends-have grown somewhat less volatile, and an upcoming revision to statewide employment could show Colorado job gains in 2011 were relatively consistent with gains reported nationwide.
• Ultimately, Colorado's economy is maturing and may begin looking more like the U.S. economy as a whole. As a result, Colorado's labor market will experience the same slow job gains and gradual reduction in unemployment expected nationwide. Colorado employers will likely add jobs in sectors including professional and business services, education and health services, and natural resources. Long-awaited job gains are also likely in construction as the undersupplied for-sale housing market triggers more residential building activity.
• While Colorado's economy will not outperform the national economy this year, the state's unique assets-a good quality of life, low business costs, educated workforce, and others-will continue to attract new companies and residents.

Metro Denver Economy 

• Metro Denver was a standout region in pre-recession economic performance, but the area has struggled to gain momentum during the recovery. The region is certainly not alone: many of the metros that have performed best during the recovery have large concentrations of government, education, or manufacturing-related employment, and recovery in the other metros has occurred at an average or below-average pace.
• While Metro Denver job growth in 2012 will be slow from an historic perspective, the pace of growth should match that reported nationwide. The industry sectors likely to add jobs this year include education and health services, professional and business services, and-at long last-construction.
• Metro Denver's population will also grow at a faster-than-average rate in 2012, and this growth-combined with tight inventory of existing homes-will boost housing construction this year. The mix of new homes may include more multifamily and small-scale properties than it did in the past, but more activity will be a welcome change for homebuilders. As the region's housing market continues to recover, home prices-which have weathered the market's recent weakness much better than prices nationwide-will rise modestly.

A full report is available to Metro Denver EDC investors.