PATON: Crisis puts state's growth rate at risk

By James Paton, Rocky Mountain News (Contact)

Published October 8, 2008 at 12:05 a.m.

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Colorado's economy has grown as many states have slipped into what is almost certainly a recession, a fact that is easy to overlook in these bleak times.

The state, led by the Denver, Boulder and Grand Junction areas, has recorded modest job growth in recent months, although the expansion rate has slowed. A bunch of other states, such as Arizona, Nevada, Idaho and California, have experienced declines.

But the problems in the financial world, if sustained, could push the nation's economy into a long and deep recession and derail Colorado's growth. A credit crisis affects everyone, threatening loans for cars, homes, farms and businesses, and forcing cutbacks.

The broad economic concerns have prompted Denver officials to recalculate their forecasts for everything from revenue to occupancy rates, said Andre Pettigrew, director of the city's Office of Economic Development.

"We have strong industries and investments are still being made," Pettigrew said in an interview Tuesday. "Still, we are anticipating the financial crisis will cause a credit crunch for our small businesses."

So far, the state has held up relatively well as the U.S. and global economies have come under pressure:

* Colorado's energy sector, fueled by natural gas activity on the Western Slope, has been on a roll, but its housing market did not get carried away and thus has not paid as much of a price in the bust.

* Colorado added 26,700 jobs in August, up 1.1 percent from the same period last year. That represents the weakest gain since early 2004 and a downshifting from the increases of more than 2 percent at the start of the year. But the state has seen continued job increases despite the turmoil.

* Only 57 of 381 metro regions - about 15 percent - are in expansion mode, a Moody's Economy.com study found. Denver, Boulder and Grand Junction are three of those in positive territory. The remaining metro areas are either in a recession currently or at risk of falling into one, the research showed.

* Only Colorado, Massachusetts, Montana, New Hampshire, New Mexico, Texas and Washington, D.C., are advancing, according to the study, which relied on job and industrial production data. More than half of all states are in a recession, the report said.

The numbers tell a positive story for the state, said Jeff Thredgold, Vectra Bank Colorado economist. A few years ago, Colorado was experiencing lackluster growth and watching its Western neighbors enjoy booms. "Now, Idaho is in a recession. Arizona is in a recession. Nevada is in a recession. Utah has slowed down to almost no growth, and Colorado and Wyoming are the strongest states in the region," he said.

Colorado may avoid the pain other states are feeling, he said. "You can make a case that if it hasn't happened yet, maybe it's not going to."

But he acknowledged that Colorado is not immune. "Given what is going on with a national recession and severe global slowing, it could slow down to close to zero," he said.

The Denver metro area is more vulnerable than some spots. The region has nearly 100,000 "financial activities" jobs, which includes finance, insurance and real estate, though the number has been slipping recently.

One of those companies is Aurora Loan Services, the Lehman Brothers subsidiary that significantly reduced its business earlier this year and attracted attention when the Wall Street bank spiraled into bankruptcy.

Colorado's construction industry also has taken a huge hit because of the housing market woes. The sector has lost 6,100 jobs over the past 12 months.

Economists and state officials believe that Colorado will fare better than the rest of the country, but if the current trend continues other states, including Colorado, could see that relative strength erode.

"I think all those states are prone to becoming 'at risk,' " said Andrew Gledhill, of Moody's Economy.com.

• October 9, 2008

  8:27 a.m.

  Suggest removal

  thincaboutit writes:

  FINANCIAL CRISIS: THE MUSICAL
  The economy is no laughing matter. But this parody about the economy is.
  Check it out at:
  http://www.youtube.com/watch?v=henMX3...

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