Colorado's economy will continue to shed jobs in the third quarter of 2009 before leveling off toward the end of the year, according to Richard Wobbekind, an economist with the University of Colorado at Boulder's Leeds School of Business.
“We think the Colorado economy will likely parallel or slightly follow the recovery of the national economy, which we see leveling off in the third quarter and growing in the fourth quarter,” Wobbekind said. “We think the rate of job losses will slow throughout the rest of this year, and potentially turn positive by the end of the year.”
However, even with job losses slowing or turning positive at the end of the year, Wobbekind said Colorado could expect to lose between 55,000 and 65,000 jobs for the year.
“In the first part of this year, we've more than lost the jobs created in the previous two years,” he said. “It's going to take at least the next two years to recover those lost jobs.”
Wobbekind, who gives the Leeds School’s annual Business Economic Outlook forecast each December, recently met with his research team from the Business Research Division and the forecast steering committee members, who represent the state’s major economic sectors, for a midyear update on Colorado’s economy.
The educational and healthcare services sector has been slightly positive in 2009 so far, Wobbekind said, mostly due to the backlog of employees such as nurses needed by the health care industry. The natural resources and mining sector is flat, but could potentially see some positive job growth if energy exploration in the state increases.
“There are some jobs being created, but pretty much across the board the sectors are taking a very hard hit,” he said.
The professional and business services sector was one of the unfortunate standouts. The sector is home to many high-paying jobs, including lawyers, engineers, architects, computer systems designers and scientific research and development groups.
“The single-most surprising area and the one that has had the largest job loss has been in professional and business services,” Wobbekind said. “It's been a very important category for jobs during the last several years as the economy has surged and it’s been one that has been hit surprisingly hard in this downturn, at least by our assessment and by many others.”
The leisure and hospitality sector saw weak retail numbers for the first four months of the year, especially in mountain resort towns. The rest of the year is expected to be weak but should improve compared with the first four months of the year.
“This is not going to be a great year for tourism by any means, but it probably will get a little better going forward than it was in the beginning of this year,” he said.
The question of which sector will lead Colorado out of the recession is difficult to answer, Wobbekind said. Nationally, most recovery periods have a significant housing component, and he said he doesn't see that in this recession. However, Colorado may fare a little better in that regard.
“I think you have to look to other sectors to lead us out of this recession, and one that you have to look at because of its sheer size and quantity of jobs it has lost is the professional and business services sector,” he said.
He added that natural resources and mining and agriculture will also play an important role in moving Colorado out of recession.
“It's hard to look at one sector and say this is the sector that is really going to get us going,” Wobbekind said.
Another economic gauge, the Leeds Business Confidence Index, showed an uptick looking forward to the third quarter. After plunging to a record low in the first quarter of 2009, the forward-looking LBCI surged upward, from 35.5 to 47.5 for the third quarter of 2009. All six index components posted steep gains, and two of the components, for the state economy and sales, passed the neutral mark of 50.
The improvement of individual LBCI components parallels improvements in other key national economic indicators. However, overall, the LBCI remains below 50 as leaders expressed continued concerns about profits, hiring and capital expenditures.
To listen to Wobbekind talk about the Colorado economy for the remainder of 2009, go to www.colorado.edu/news/broadcast.