May 2009
Consumer confidence, housing trends, and employment outlook improving in Metro Denver
Consumer confidence, housing trends, and the employment outlook are improving in Metro Denver according to data compiled by the Metro Denver Economic Development Corporation (Metro Denver EDC) in its Monthly Economic Summary for May 2009.
The Colorado Business Leaders Confidence Index rose from 30.6 in the first quarter of 2009 to 35.5 in the second quarter. While the index remains below the growth-neutral point of 50, the increase suggests Colorado business leaders have marginally better expectations for the second quarter.
Similarly, the U.S. Consumer Confidence Index rose considerably between March and April as consumers’ expectations for the next six months improved. The Consumer Confidence Index is now at the highest level reported so far this year.
Analysts also say Colorado’s better-than-average venture capital trends are also evidence of a competitive economy. According to the PricewaterhouseCoopers MoneyTree Report, 16 Colorado companies completed deals for $77 million in venture capital funding in the first quarter of 2009.
March employment data suggest that labor markets remain weak. Metro Denver employers added only a fraction of the jobs they typically add at this point in the year, and year-to-date employment totals are down from 2008 in all but three of the region’s 11 industry supersectors.
While these figures are bleak, observers should note that employers tend to add jobs when their overall confidence in business activity increases. Given that observation, early signs of improvement in some economic indicators may be promising.
“Although the data show that job growth in the first few months of 2009 is abysmal, I believe job losses will not reach the record annual average low we had in 2002 – a loss of 3.1 percent,” stated Patty Silverstein, chief economist for the Metro Denver EDC.
The results of the most recent Manpower Employment Outlook Survey suggest companies may moderate their job cuts in the coming months. A majority of survey respondents said they planned no staffing changes for the second quarter, and analysts say the trend reflects business attempts to balance cost reductions with the need for a solid staff base. More specifically, 73 percent of Denver area employers and 66 percent of Boulder County employers plan no staffing changes for the second quarter.
Also, home sales activity in some areas – including Metro Denver – has recently improved. Data from the National Association of Realtors show the West is currently the only U.S. region where home sales have risen above 2008 levels. Home sales remain below 2008 levels in the South (-10.9 percent), the Midwest (-11.1 percent), and the Northeast (-22.5 percent).
Denver ranks among five housing markets that are likely to recover quickly, according to a forecast developed by John Burns Associates and published in Builder magazine. The forecasting model – called Housing Cycle GPA – uses historical data on local housing supply, demand, and prices plus data on national influences. Analysts say improvements in Denver’s housing affordability and foreclosure trend will help the market recover more quickly.
Contrary to the national trend, home sales in Metro Denver rose 29.1 percent between February and March. The number of homes under contract also increased over-the-month, and the region’s total unsold inventory was down almost 20 percent from the 2008 level. Metro Denver average home prices are still falling on an over-the-year basis, but the pace of decline for both single-family homes and condominiums has slowed.
Foreclosure filings in Metro Denver increased between February and March, but the total count of filings through the first three months of the year remained more than 20 percent below filings from the same months in 2008.
While improvement for many indicators still means slower declines, a continuation of these trends could indicate that the nationwide recession is nearing bottom. Locally, eight indicators improved over-the-month and only two indicators increased on an over-the-year basis.
The Monthly Economic Summary provides a snapshot of metro area economic activity, as well as its relationship to national and regional economic trends.