Shields Column: Economy’s Highs and Lows

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.

Heard the news? Northern Colorado likely won’t be adding any jobs in 2009.

That’s our prediction, anyway, based on some fancy statistical models. But they really just help quantify what we read in the papers. The country and the region are being rocked by layoffs, foreclosures, and declining consumer confidence.

Regional job totals will only grow 0.1 percent by year’s end, translating into about 230 new jobs in Larimer and Weld Counties. That’s down from the 1.9 percent increase we initially forecast in the midst of last fall’s financial market meltdown.

This past week, we saw yet more companies in the region laying off workers and either freezing salaries or asking for salary cuts.

Over the past year, the number of people out of work in the two counties has swelled to more than 15,700, nearly 4,450 more than a year ago.

Some expected low points in 2009:

-Performance in the manufacturing sector will continue to be uneven, with small, but widespread job losses.

-Companies will delay hiring and projects

-The unemployment rate will continue to rise

But don’t despair. While it may seem like an eternity ago, northern Colorado’s employment growth was relatively robust during the first half of last year. And the region is still in a good place with such clean-energy businesses as Woodward Governor, AVA Solar and Vestas, which have been steadily adding jobs.

Staying on the sidelines during the national housing boom helped ease the pain. Larimer County’s housing prices declined "only" by about half a percent between the third quarter of 2007 and 2008-the first decline in two decades. Over the same time US prices were down 4 percent. Places such as Naples, Florida and Las Vegas saw house prices decline 25 percent!

There are other reasons for optimism. Ours is a diverse economy, which helps dampen shocks to industries such as finance and autos. We are home to a strong educational system, with CSU an important economic anchor; though the downturn’s effects are hitting the university as well.

Further, the political winds nationally seem to be blowing in the direction of a stimulus package promoting industries, such as clean energy, that are real strengths in this area and Colorado.

Some other expected bright spots in 2009:

-Employment growth in health care will continue

-Some growth is predicted in the natural resources and mining industries

What next?

Everyone I meet wants to know when things will turn around. This is a really tough question, in part because the downturn has shaken consumers so badly, and our models don’t do a good job with emotion. All the signs point to a rough first six months for 2009.

And even when the economy turns the corner it will be a slow recovery. Just because we hit bottom does not mean we will quickly bounce back.

In these tough economic times immediate action is needed to put people back to work. And that means both the state and federal governments need to push forward stimulus packages.

But I urge policy makers to not act rashly. Despite substantial budgetary pressures that necessitate painful government cuts, economic stimulus plans can’t ignore the future. To this end, investments in education, workforce and infrastructure remain essential components for long term prosperity.