Checking the state's 2008 economic pulse

David Milstead and James Paton

Published February 2, 2008 at 12:05 a.m.

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Photo by Barry Gutierrez © The Rocky

Frontier's Jessica Mills doesn't believe the "doom and gloom" she's been hearing about the airline industry.

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What will happen now? What are the bright spots in Colorado's economy that may make things easier for us this time? Where are we vulnerable?

The Rocky Mountain News asked these questions of economists from across the state.

*Martin Shields, regional economist for northern Colorado sponsored by CSU and the Northern Colorado Economic Development Corp.

What will help insulate Colorado's economy from a national slowdown (or recession)?

The thing that's going to help is the diversity of the economy. When things shook out in the 2001 downturn, all our growth had come from an industry that was particularly hard-hit (high-tech/telecom), and we were left with an economy not dependent on any one sector. Now, if a particular sector at the national level gets hit, it's not going to pull the state down with it.

What industries are the best ones in Colorado to be working in this year? What are the worst?

We're still going to see growth in health care, as long as the population continues to grow, the population continues to age, and insurers are willing to pay for it. The renewable-energy sector is in its infant stage, but it's research-driven, so it's not going to particularly drive job growth right now.

The worst -- housing and the residential construction sector.

In the previous recession of 2001, Colorado went into recession later than the national economy and stayed in longer. What will be the pattern this time?

Our models say there will be a national slowdown, and in later '08 we'll see the effects here. This downturn may be a little different than previous ones: It's not a manufacturing or high-tech-based downturn, but a housing or finance-sector slowdown, and there's less delay in how the capital markets react. However, our population continues to grow, and as long as you're adding people, that'll be a mitigating factor.

What's going on in your area of the state?

Our forecast is more optimistic than the U.S. and the state. We expect a slowdown, but faster employment growth than the state. You can't ignore the stabilizing force of CSU up here. It's a human capital-based economy, and those tend to do better in a slowdown.

What will you do with your stimulus check?

I guess we'll just put it in a new home stereo. In-ceiling speakers.

*Robert "Tino" Sonora, assistant professor, Fort Lewis College

What will help insulate Colorado's economy from a national slowdown (or recession)?

First and foremost is the energy sector, as well as agriculture. Ag is the constant -- everybody has to buy it. On the Front Range, there are defense contractors. These are the things that will insulate us -- the diversity of our economy and our foreign exposure, through exports.

What industries are the best ones in Colorado to be working in this year? What are the worst?

Worst is probably going to be construction. Tourism could go either way, but with the slide in the dollar, people will be turning inward and not traveling abroad. High-tech, as well as defense, will be strong. And ag, since prices will be rising. The energy sector will do well.

In the previous recession of 2001, Colorado went into recession later than the national economy and stayed in longer. What will be the pattern this time?

It depends on how far-reaching the housing problem will be. The liquidity problem will be pretty much national, and that will impact housing markets.

What's going on in your area of the state?

In the Four Corners region, agricultural ranchers are being pushed out. We have a lot of emerging growth companies with global clientele, including Department of Defense stuff. The gas industry is large. But housing prices have fallen substantially and starts have dropped 20 percent. Up near Grand Junction, there's a lot of natural gas, and Mesa State is doing very well - they're having to house students in hotel rooms. And the Ute Indian tribe is pumping a lot of money into the economy.

What will you do with your stimulus check?

Buy something from China. No, I'll probably buy down my debt.

*Fred Crowley, associate research professor, University of Colorado at Colorado Springs

What will help insulate Colorado's economy from a national slowdown (or recession)?

A limited benefit will be the terrible value of the dollar and how it'll positively affect tourism and our agricultural exports. But these areas' jobs don't pay that well. Also, the military installations -- we have a number statewide, but most here in the Springs.

What industries are the best ones in Colorado to be working in this year? What are the worst?

Worst, anything that has a vestigial organ related to tech. It's still susceptible to outsourcing. The good news is we've lost so many jobs that there aren't many left. And teens looking for summer jobs -- the economy is slowing and we'll be having another increase in the minimum wage, so they'll be the first to get cut. The best are professional, technical jobs that require professional degrees or certification -- accountants, attorneys, physicians.

In the previous recession of 2001, Colorado went into recession later than the national economy and stayed in longer. What will be the pattern this time?

We've had a decline in aggregate industry here in Colorado Springs in the last 12 months, so we may already have been in a soft recession. Statewide, it's a little bit stronger. We don't have the tech jobs to lose this time. It may keep us from getting hit as hard and slow the rate at which we're hit.

What's going on in your area of the state?

In Colorado Springs the housing market has been a significant component of our economy and (permits) have dropped by 60 percent compared to 2005. For each housing unit we lose or gain, it's four jobs. Our unemployment is now 5 percent, a very sharp increase. And we've had the military gone -- with so many deployments, it's been an economic drain on our community.

What will you do with your stimulus check?

The last time, my wife deposited it before I knew we got it. I'm more likely to save it than spend it.

*Rich Wobbekind, associate professor of business, Leeds School of Business, University of Colorado

What will help insulate Colorado's economy from a national slowdown (or recession)?

The energy industry will keep certain regions far from a recession and still on a growth path. The effect of ancillary employment in law and accounting because of the energy industry will give Colorado growth rates above the national economy. Agriculture will grow at a pretty hefty rate again, some of it fueled, no pun intended, by ethanol. Tourism could have another solid year.

What industries are the best ones in Colorado to be working in this year? What are the worst?

Professional and business services -- a lot of computer and technical jobs, accounting, law. Also alternative energy. Construction will lose some jobs but not a tremendous amount. Manufacturing will continue to struggle. Some products, disc drives and chips, are now being produced in other parts of the world. I don't know if those recover.

In the previous recession of 2001, Colorado went into recession later than the national economy and stayed in longer.

What will be the pattern this time?

We were higher in the '90s and deeper and longer in the 2002 and 2003 period in terms of being down. Right now we have Colorado staying above the national growth rate and we will stay there. Our scenario is slow to very slow growth in the next couple of quarters but it stays substantially above the U.S.

What's going on in your area of the state?

The Front Range is an enormous percentage of the state's economy, in population and employmen. We would take the biggest hit with high-tech electronics, business to business products. We are less optimistic about growth in the metro Denver area. Employment is high quality, high wage, but much more susceptible to the business cycle. Also a slowdown in retail sales. Some of the hot spots of housing are in the Aurora and Denver area.

What will you do with your stimulus check?

If I did get a check, I'd buy a new suit. It always pays to look good.

Real Estate

ROCK BOTTOM

The bad news is that overall Denver-area housing market could see a slight drop in prices this year, as record foreclosures grow and lenders continue to tighten credit. The good news is that Denver is poised to out-perform the nation as a whole.

Denver, unlike formerly hot metro area such as Las Vegas and Phoenix, didn't see a huge run up in prices.

Lawrence Yun, the chief economist for the National Association of Realtors, recently said that Denver could be one of the brightest markets in the country, bucking a national trend.

*Juanita Gutierrez, a real estate agent with Prudential Colorado Real Estate

"I feel sorry for people who are trying to sell their homes," said Gutierrez.

"My advice is if you don't have to sell, put it on hold a while and stay put," said Gutierrez, who flipped homes in the Denver-area for about 25 years, before switching to selling them about a year ago.

She said every week she gets a list of at least 100 foreclosed homes that are competing with market-rate homes. While it's still early in the year, it looks like sales could also be slowing slightly, she said.

"If you're waiting for it to hit rock bottom, you might get the bottom of the barrel," Gutierrez said. "The smart ones are buying right now."

John Rebchook

Nonprofits

TURMOIL

Charitable groups get hit with a double-whammy when the economy suffers because donations from individuals drop off just as demand for their services tends to rise.

Cushioning the blow: many donations come at year-end, meaning that groups took in lots of cash before all the recession talk took hold in early 2008.

Another plus: wealthy donors and seasoned philanthropists often keep giving when the going gets tough.

*Paul Dunne, who heads fundraising efforts for the Inner City Health Center

The 25-year-old clinic, which provides medical and dental care for the uninsured, enjoyed record contributions in 2007. But turmoil in the financial markets could be an issue because the performance of stocks plays heavily into how much money institutions and individuals have available for charity. "We either get stock gifts or donors will give us gifts from what they made on their investments," Dunne said.

The nonprofit also depends on grants for 60 percent of its budget. And in past economic slumps, foundations have cut back on either the number of grants they give or the size of their outlays.

Reflecting the economic crunch, the clinic's clientele recently has expanded to include self-employed lawyers, real-estate agents and others who can't afford more than catastrophic health coverage.

"We have people coming through the door that you'd never think you would see," Dunne said.

Joanne Kelley

Retail

PINCH

Consumers are paying more for everything from loaves of bread to a gallon of gas, which might mean fewer trips to the mall to stock up on high-definition TVs and cashmere twin sets. The International Council of Shopping Centers and UBS Securities this week cut its January same-store sales forecast for the third time this month, predicting that monthly sales may be unchanged or slightly down.

Even the once seemingly bulletproof luxury retailers are finally feeling the pinch, with Williams-Sonoma and Tiffany & Co. lowering profit forecasts after disappointing holiday sales while Coach reported a 1.1 percent decline in same-store sales for the quarter ended Dec. 29.

*Denise Snyder, Mariel owner

In Denver, retailers like Mariel aren't seeing any evidence of the predictions of doom and gloom. The Larimer Square boutique is in the midst of one of its strongest Januarys ever, outfitting customers for society galas, taking orders for bridal gowns and ringing up designer handbags.

Mariel owner Denise Snyder brushed off the pessimistic economic forecasts while out in Los Angeles recently while scouting out new clothes for her store, and she's glad she did. Her new inventory is selling briskly enough that she hired another sales person to work on the weekends.

"We've seen every kind of economic cycle," said Snyder, who has owned her boutique for 26 years. "This doesn't feel like we're heading into a recession."

Joyzelle Davis

Tourism/Travel

BELT-TIGHTENING

The tourism and travel sector has been holding its own in the face of historically high gasoline prices and signs of a sputtering economy.

In the recent past, economic woes have prodded travelers to scale back on their spending instead of canceling trip plans. That might mean choosing less expensive lodging, avoiding souvenirs or staying closer to home. The dollar's weakness overseas could also benefit Colorado's tourism sector.

*Carl Schmidt, owner of Capitol Hill Mansion Bed & Breakfast

The eight-room inn near downtown Denver has built up a steady following since its owner bought it in Nov. 2001, a lowpoint for U.S. tourism in the aftermath of the terrorist attacks in New York.

"We took a chance and came in here and bought the place and we're doing well," Schmidt said. "January is a slower month, as usual, citywide."

Schmidt said he gets lots of repeat business and that almost half of his guests live somewhere in Colorado. But he still worries about the economy.

"When the recession comes around, you're going to see a drop in business and reservations," he said. "I think it's a possibility that we could end up in a recession. I hope not."

Joanne Kelley

Telecommunications

UNCERTAIN

Local telecommunications stocks -- Qwest, Level 3, Time Warner Telecom -- have taken a beating in recent weeks because of investor concerns over the weakening economy and housing turmoil and foreclosures.

The situation remains uncertain. The challenges vary by carrier.

For example, Qwest, under new CEO Ed Mueller, is trying to offset a loss in traditional land lines with growth in high-speed Internet services and other services. It also faces increased competition from cable TV and wireless.

Broomfield-based Level 3 is struggling to integrate recent acquisitions amid the slowing economy.

The good news: demand for high-speed services, such as video, continues at a strong rate.

*Barry Pier, founder and CEO of Evergreen-based WisperTel, a small fixed wireless company:

Pier said 2008 should feature continued consolidation in the fixed wireless market, which currently has "scores" of players. "That's not bad news," he said of consolidation. WisperTel offers high-speed Internet and Internet telephony services to more than 3,500 customers in Summit County and in the foothills stretching as far southwest as Fairplay.

His 27-employee company didn't have the resources to compete in the current government wireless auction, but continues to hunt for acquisition opportunities.

While the economic slowdown will constrain spending, Pier said health-care rate increases were more modest this year, so "costs seem to be contained."

One challenge is that Qwest has been progressively expanding into the foothills with high-speed Internet services, Pier said.

Jeff Smith

Financial Services

TROUBLING

This could be a year in which investment managers grapple with a tough stock market and banks try to minimize the impact of problem loans.

The fees earned by money management firms depend on the level of assets they oversee. So if those assets drop due to market depreciation or investor withdrawals, revenue declines as well.

But in troubling times people are more likely to seek out financial help, and if stocks rise again this year, business in financial services could keep humming.

There are positive employment trends in Colorado. Janus Capital's employee base in Denver has 10 percent to about 1,100 workers over the past year. TIAA-CREF, in expansion mode, now has 2,400 workers around Denver. T. Rowe Price, which has a campus in Colorado Springs, is growing fast and plans to add another 650 jobs there. And US Bank is hiring, too.

*Mark Smith, financial advisor with M.J. Smith and Associates:

If the stock market and the economy both struggle in 2008, financial advisers like Mark Smith could see business take a hit. On the flip side, increasing numbers of jittery investors could wind up turning to them for help.

"What you find when markets become more volatile is that the anxiety is raised for those people who were always take charge I'll do it on my own," said the adviser, who looks after $550 million in clients' investments.

The long-term picture is bright, he said, as baby-boomers prepare for retirement and look for sound financial advice. Smith also is optimistic about the stock market.

James Paton

Aerospace

SLOWDOWN

Colorado's once humming aerospace economy appears to have downshifted. But it has not gone into reverse.

"I don't think it's as hot as last year. But I don't think it's gone cold," said Todd Mosher, director of advanced systems at Jefferson County satellite maker MicroSat Systems Inc.

Big employers such as United Launch Alliance, Lockheed Martin and Ball Aerospace & Technologies, which had been hiring, have slowed their pace -- or, in the case of Boulder-based Ball, shed employees in the last year.

Centennial-based ULA hired 750 employees last year after parent companies Lockheed and Boeing got the green light from federal trustbusters to create the joint rocket venture.

*Neil Chismar, software quality engineer at Centennial-based United Launch Alliance

Neil Chismar noted he's "an exception" versus the average Main Street person who might be worried about the economy, the stock market, or their job.

"My wife and I have a tight handle on our finances. The last home we bought we didn't overextend ourselves. I get compensated quite well. My wife does too," said the 52-year-old Chismar, who's married and has no kids.

"We have a plan for retirement," he added. "We have our percentages worked out in terms of how we're saving.

Chismar's employer, a Lockheed Martin-Boeing joint rocket venture, launches satellites for the U.S. Air Force, the nation's spy agencies, NASA, and others. "We have a unique slice of aerospace business," said Chismar.

Roger Fillion

Airlines

BRUTAL

The nation's airlines are bracing for what could be a brutal year, particularly if oil prices remain high and the economy slips into a recession.

There's some indication that travel demand already is softening, a trend many observers say will get worse if consumers tightening their wallets. That could be devastating for airlines, which have struggled to make profits even though demand is at all-time highs.

A wildcard: mergers. United Airlines, the largest carrier at Denver International Airport, is actively exploring mergers. Some observers also have suggested that homegrown Frontier Airlines might also be a merger candidate.

In general, mergers and acquisitions would lead to higher fares, fewer seats in the air, and potentially fewer airline jobs as companies consolidate.

*Jessica Mills, senior analyst at Frontier Airlines

Mills entered the airline industry about three-and-a-half years ago as a senior analyst of revenue management at Frontier Airlines, a position she still holds today.

Her employer has grown rapidly in that time, but Frontier - like every other airline -- has been ravaged by high fuel prices and other factors. To cope with those challenges, Frontier recently cut 100 jobs. It's also reorganizing its route structure and slowing growth.

Mills, 26, still thinks she's in a relatively good position, despite the current climate.

The airline industry "is always going through a lot of changes," she said. "One of the advantages is that I'm young, so I thought I could weather the fact that it's a little more unstable" than other industries.

Mills also said her skills are transferrable to other industries.

She said the economy hasn't really begun to affect her personally, although she does have some concerns as to where it's heading. Still, she tends "to believe that it's not all the doom and gloom you hear about."

Chris Walsh

Oil and Natural Gas

NEUTRAL

Permits to drill oil and gas wells are up. As are production levels.

Even so, Colorado's $23 billion industry -- among the state's largest employing more than 70,000 -- is not sure where it's going: up or down.

"I'd say we are neutral," said Ken Wonstolen, lawyer at Denver lawfirm Fulbright & Jaworski who also counsels the Colorado Oil and Gas Association.

On the plus side, there is the opening of the $4.4 billion Rockies Express pipeline that will help local producers fetch a better commodity price for Colorado's natural gas in the Midwestern states.

But on the minus side, pundits are predicting a softening of the price of natural gas this year if the nation glides into recession.

*Michael Quintana, rig consultant with Denver-based EnCana Oil and Gas (USA)

Michael Quintana's first brush with the oil and gas industry came in 1979, when as an 18-year-old he donned fire-retardant overalls and safety glasses before climbing a drilling rig outside Farmington, New Mex.

And it has been a fun ride, says Quintana, 46.

The industry always has always come through for him, he says, no matter boom or bust - helping raise five children, aged seven to 18.

Besides, Quintana says he has seen enough of those cycles to worry about the next economic bump - having shouldered the ups of the late 1970s and early 1980s, then the decades of downs triggered by Black Sunday on May 2, 1982, and back to the ups again since the beginning of 2000s.

Along the way, he has managed to curve out a lucrative career, advancing from a mere rig-hand to launching his own company, Quintana Consultancy Inc.

"I am too busy to worry about anything," he said from a man camp outside Rifle in Garfield County's Piceance Basin. Quintana stays in a trailer adjacent to the man camp when he's on duty two weeks a month, and moves wherever the rig goes.

"I have been doing this for 29 years," Quintana says. "I haven't been laid off in all these years."

Gargi Chakrabarty

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