No slam dunk, but jobs poised for '06 rebound

Forecast: Colo. will return to 2001, pre-recession levels

David Milstead, Rocky Mountain News

Tuesday, December 6, 2005

The Colorado rebound is complete.

Above-average job growth in 2006 will lead to record employment, bringing Colorado back to its 2001, pre-recession employment levels. This is the forecast of the Colorado Business Economic Outlook, a project of the Leeds School of Business at the University of Colorado.

The forecast predicts 52,100 new jobs, or 2.3 percent growth, giving the state 2.28 million jobs. Colorado employment last hit 2.25 million in 2001, before a national recession, a drop in tourism and the telecom crash whacked 75,000 jobs.

"It has taken us four years to get those jobs back," said CU economics professor Rich Wobbekind, the coordinator of the outlook.

A key part of the forecast is what Wobbekind calls "a surprising increase" in construction employment. That sector, buoyed by home-building and a new $1.3 billion Xcel Energy plant in Pueblo, is expected to contribute 9,500 new jobs.

Professional and business services, a category that includes high-paid workers such as engineers, computer systems designers and scientific researchers, will add 11,700 jobs, the outlook predicts.

The information sector, which includes telecom and printing and publishing, is the only sector out of 11 predicted to shed jobs, with a loss of 800.

This job mix will help push Colorado per-capita personal income to $39,917, the second consecutive increase of more than 5 percent. Personal income dropped in 2002 and rose 1.5 percent in 2003.

The outlook, presented at an event Monday at the Marriott City Center in Denver, is developed over several months. More than 80 business and community leaders and economists participate on industry- specific committees. The outlook combines historical data with fresh surveys and expert opinion.

It is, however, often inexact. Because the outlook did not predict the Sept. 11 terror attacks, huge Colorado forest fires or the WorldCom scandal, its forecast was off by tens of thousands of jobs during the recession.

A panel of economists who took audience questions Monday spent much of their time worrying about the things that might make the outlook wrong.

Tucker Hart Adams, a noted pessimist on matters of housing prices and consumer credit, was joined in her concerns by Bill Kendall of the Center for Business and Economic Forecasting.

"I'm concerned about the additions to the housing stock," he said, noting that while Colorado added no jobs over nearly five years, there were 210,000 new housing units available. "There's some question as to who's going to fill those."

Adams, who said her own 2006 forecast has the state "muddling through" a period of increasing interest rates, repeated her prediction that "it's not a question of whether we face a day of reckoning, but when."

"The hope," Kendall added, "is that it'll be an orderly process, rather than a precipitous (downturn)."

Tim Sheesley, an Xcel Energy economist, said he believed the Federal Reserve will increase interest rates at least twice more in coming months. "They'd rather put us into a recession" than watch higher energy prices contribute to increased inflation. "Inside their halls they're more concerned about inflation than anything else."

Wobbekind disagreed, saying he believed the Fed was conscious of the large number of consumers who have adjustable-rate mortgages or high credit-card balances and would be painfully squeezed if rates continued to rise.

The forecast

• Healthy growth in the construction and business services sectors will help drive the Colorado economy toadd 52,100 jobs in 2006, a yearly outlook has predicted.

David Milstead is finance editor of the Rocky Mountain News. He can be reached at milstead@RockyMountainNews.com or 303-892-2648.