Data points to an improving local economy
Regional Economist November 4, 2011
The news about the Northern Colorado economy is definitely improving.
Companies in the local alternative energy industry are announcing new orders, new startups, new funding for research and new mergers. The health care industry continues to be recognized as having the best facilities in the U.S., and CSU and Fort Collins continue to receive "Best of" recognitions. These awards will encourage even more businesses and retirees to relocate to Northern Colorado.
The data reinforces this good news. More than 5,200 more workers in Northern Colorado were employed in September than in the same month in 2010. The unemployment rate has dropped from 7.8 in September 2010 to 7 this past September. Residential housing permits issued in 2011 through August increased to 1,017 from 966 in the same period in 2010, a 5.3 percent increase. Retail sales through June were 19.7 percent higher in 2011 than in 2010. All these statistics suggest the Northern Colorado economy is recovering much faster than the U.S. economy.
So, what does this mean for the construction industry, the main driver of the Northern Colorado economy?
A little context is important in answering that question.
Construction spending added more than $1.7 billion to the Northern Colorado economy in both 2004 and 2005, the best years since I started collecting data in 1987. The total in 2010 was just under $500 million, less than one-third the amount in 2004 and 2005. The total through August in 2011 is already over $528 million, though still much less than in 1998.
If we assume a reasonable multiplier effect of 2, then construction has already added over $1 billion to the Northern Colorado economy in 2011. It seems reasonable to assume that the construction sector will have a $1.5 billion impact on our economy in 2011, a 50 percent greater impact than in 2010 but still only about one-third its impact in 2004-2005. It will probably be four or five years before the construction sector reaches levels attained in the mid-2000s.
Still, the recent data is good news for home builders and their subcontractors, from surveying firms to appliance retailers. And news that local employers are adding jobs and local workers are finding employment in even greater numbers bodes well for further increases in activity in the construction sector.
In addition, Denver and its northern environs have recently attracted several major national companies, alternative energy-related entrepreneurs are doing well and several small businesses have announced expansions. And the health care sector continues to grow.
The future is definitely looking brighter for the Northern Colorado economy.
John W. Green is a regional economist who compiles the Business Report's Index of Leading Economic Indicators. He can be reached at firstname.lastname@example.org.