Note to Editors: Martin Shields is an associate professor of economics at Colorado State University. His research on Northern Colorado’s economy is sponsored by a partnership between the Northern Colorado Economic Development Corporation and CSU’s Office of Economic Development.
The gloomy national economic outlook raises concerns about the region’s economic health. Although Larimer County’s unemployment rate is relatively low, 600 more local residents were unemployed in December 2007 than a year earlier.
County job growth remains modest, with preliminary numbers showing a 2.1 percent increase for 2007. Meanwhile, inflation-adjusted wages are barely budging. While the country may not officially be in a recession, there is no denying that the region’s economy is sluggish.
People often ask me "how bad is it going to get?" My pat answer is that it could be worse. Although my colleague David Keyser and I predict a further slowdown this year, we still expect the region to add jobs at a faster rate than the nation or the state.
Four factors underlie our guarded optimism. First, our economy is diverse considering its size. This helps insulate against collapses in any one industry, as one sector may grow while another declines.
This is most apparent in manufacturing, which is usually at greatest risk to downturns. In the aftermath of the 2001 high-tech collapse, Larimer County’s electronics manufacturing sector shrunk by more than 3,000 jobs. Yet these losses were balanced by growth in the health care and social assistance sector, which added nearly 2,700 jobs.
Of course, we can’t lose sight of the fact that many families who lost good jobs five years ago continue to be affected, either through lower wages or the inability to find new work. But with reduced reliance on particularly vulnerable industries, the region as a whole is better positioned to handle downturns.
The steadying effect of Colorado State University is a second reason for hope. With more than 6,400 workers, the university is the county’s largest employer. Additionally, nearly 25,000 CSU students create significant local economic impacts through their spending on housing, food and entertainment.
But the institution’s influence runs deeper. Through technology spinoffs, licensing and other forms of business assistance, CSU fosters economic activity in a variety of sectors. Examples include AVA Solar, Heska Corporation and Solix Biofuels. The university’s new supercluster initiatives – created to help speed research to the marketplace – should build on this.
The region’s educated workforce is the third stabilizing force. Economic research shows that employment and income tend to grow faster and are less volatile in places with high human capital. Almost half of the county’s adult population has at least a 2-year college degree – an important competitive advantage in the knowledge economy.
The fourth reason for optimism is that the local housing market is on firmer ground than much of the United States, meaning less exposure to the nation’s credit market woes. Although recent sales numbers are down and prices are stagnant, Larimer County did not fully experience the price run-up witnessed elsewhere during the U.S. housing boom. Accordingly, any national market "correction" may not be as harsh locally.
A national downturn will undeniably be felt here. However, the region benefits from certain fundamental strengths that should help us weather the storm.