Colorado Springs economy limping along this year after highlight year in '13 [Gazette, The (CO)]
(Gazette, The (CO) Via Acquire Media NewsEdge) After a banner year in 2013, the Colorado Springs economy has taken a step backward this year and the prospect for improvement for the rest of 2014 isn't good.
The Business Conditions Index - an indicator compiled by the Southern Colorado Economic Forum - fell to 104.78 in March, its lowest level since December 2011, with six of its 10 components lower than they were a year earlier. (The index is calculated monthly, but published quarterly so the most recent statistics are from March.)
The index measures local housing permits, new car sales, employment, wages, foreclosures, sales and use tax collections, airport passenger traffic and national manufacturing and consumer sentiment, using 100 as its base to reflect how much the economy has recovered since the recession in 2009.
The index is down 5.1 percent from a year earlier, with most of the decline happening over the past six months as a result of weakening housing construction, airport traffic and car sales, which more than offset manufacturing gains.
The index reached its highest post-recession point in October 2012 - 116.85 - meaning the 10 components were nearly 17 percent higher than they were at the end of the recession. They have declined 10.3 percent in the nearly 1? years since.
"The frost of the recession should be melting a lot faster than it is. We are seeing a very slow defrost cycle," said Fred Crowley, a local economic consultant who retired in June as the forum's senior economist but still teaches economics at the University of Colorado at Colorado Springs. "We have definitely seen the local economy slow in the first half of the year along with the slowdown we saw in the national economy resulting from the unusually cold winter weather."
But the weakening in the Colorado Springs economy doesn't appear to be weather-related. Instead, it stems from job cuts by the federal government and military contractors, according to the latest employment data from the U.S. Bureau of Labor Statistics. Federal employment in the Springs area in May was down 900 from a year earlier, and the number of local workers in the professional, scientific and technical sector, which includes most defense contractors, fell by 500 during the same period.
Tom Binnings, a senior partner at Summit Economics LLC, a local economic research and consulting firm, said job cuts at local military installations combined with a shortage of skilled labor have prevented economic growth in the Springs area from keeping up with the Denver area and cities in northern Colorado. He doesn't expect further slowing the rest of the year but expects the local housing market to "bounce around" and largely remain flat through the November election.
"The national economy is gaining momentum and, in general, I expect the local economy will follow the national economy but will not be as strong as the rest of the state," Binnings said. "Consumer confidence nationally is rising with stability in the financial and housing market, but we will continue to deal with the impact of federal budget austerity measures on the local level. That will prevent growth in Colorado Springs from being as strong as we are seeing along the northern Front Range."
Even amid the slowing job growth, the area's unemployment rate fell to the lowest point since the end of 2008, but still remained the second-highest among Colorado's seven metropolitan areas.
In its latest look at the state's economy, published last month, the Colorado Legislative Council concurs that the economic recovery in Colorado Springs has been slower than in other areas along the Front Range, most notably metro Denver and the northern region. The council said job growth, housing construction and retail sales in the Colorado Springs area have slowed this year compared with 2013, and cited commercial construction spending as the sole bright spot this year in the local economy.
Crowley said he expects the local economy to get a boost from the tourism industry, which has benefitted from lower gasoline prices than a year ago and, thus far, no wildfires or floods to keep visitors away. The industry was hurt by the Waldo Canyon fire in 2012 and Black Forest fire in 2013, and flooding in August and September last year. Local hotel occupancy in the first five months of the year increased to 54.6 percent from 54 percent during the same period in 2013, according to the Rocky Mountain Lodging Report.
But Crowley said he doesn't expect a strong recovery until the Springs area attracts many more high-paying jobs in the private sector, such as those in the manufacturing, information technology, construction or energy industries.
Military cutbacks likely will remain a major threat to the local economy. Fort Carson could lose up to two-thirds of its 24,000 soldiers by 2020 under a doomsday plan developed by the Army to deal with budget cuts. While the plan, announced last month, presents a worst-case scenario, even smaller cuts at the area's largest military base would erode the local economy.
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