December 2008
Local economy has distinct advantages for weathering the economic downturn
As the national financial crisis continues to impact Metro Denver's economy, rebounding foreclosure trends and housing statistics in addition to a diversified economy will help the region perform better than many areas of the country, according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for December 2008.
The National Bureau of Economic Research recently announced that the U.S. economy has been in a recession since December 2007. For many, the announcement was a foregone conclusion given the growing weakness in employment, output, and other measures of economic health. While the difficult conditions are affecting businesses in every industry, retailers are concerned as the critical holiday sales season continues.
Since there is not a similar method for measuring recessions at the state level, employment growth is generally regarded as the key indicator. The state’s over-the-year employment growth rate has slowed throughout the year but remains positive, indicating that Colorado’s economy is on slightly stronger footing.
Metro Denver employers cut 6,100 jobs between September and October as the impacts of the financial crisis and weak national labor markets reached the local level. Employers reduced their staff levels in each of the 11 industry supersectors except wholesale and retail trade, education and health services, and government. Across all industries, Metro Denver’s over-the-year job growth rate slowed to 0.3 percent in October and fell behind the comparable rate at the statewide level (0.5 percent), but exceeded the nationwide rate (-0.9 percent).
"While these economic indicators reflect the growing influence of a national recession, the local economy has several distinct advantages for weathering a downturn," explains Patty Silverstein, chief economist for the Metro Denver EDC and president of Development Research Partners. "Metro Denver's foreclosure trend continues to improve, the overall housing market is likely to rebound more quickly than markets in other areas, and the region's diverse industry base will help cushion impacts of the national recession."
The hiring outlook of Metro Denver employers remained stable between the third and fourth quarters of 2008. According to the Manpower Employment Outlook Survey, the share of Denver area employers planning to hire in the fourth quarter remained unchanged from the third quarter at 32 percent. The hiring outlook was slightly stronger in Boulder County, where the share of employers planning to add jobs rose from 20 percent in the third quarter to 33 percent in the fourth quarter.
Metro Denver employers overall have more robust hiring plans than their peers nationwide. The Manpower survey showed 22 percent of U.S. employers planned to add jobs in the fourth quarter, down from 26 percent in each of the prior two quarters. The results show weaker hiring patterns in more than half of the nation’s industry sectors, although the outlook is stable for jobs in construction and public administration and improving for jobs in mining. Denver area and Boulder County employers reported similar industry-level outlooks.
Recently, Denver ranked No. 7 among the top 10 cities Americans would like to relocate to, according to a survey of employees and entrepreneurs by the Human Capital Institute for BusinessWeek. Respondents noted climate, park space, affordability, and image among Denver's best attributes.
National economic conditions are unquestionably influencing local economic activity. Only one (home sales) of the 18 indicators for Metro Denver moved in a positive direction for the month, compared to three indicators in the prior release. Longer-term trends remained more stable, with four of the 18 indicators showing positive annual trends.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.
*A full report is available to Metro Denver EDC investors.