CU economist predicts another strong year for Colorado
Every year, the Business Research Division of CU’s Leeds School of Business produces the Colorado Business Economic Outlook. The forecast focuses on 13 different industries, analyzing the current economic trends, predicting job growth and providing the public with an in-depth but understandable look at the economy. Richard Wobbekind, executive director of the Business Research Division and the senior associate dean for academic programs at CU, develops the forecast with committees that focus on each industry. Yellow Scene sat down with Wobbekind to discuss the 48th annual Economic Outlook and its predictions for Colorado’s economy, from the effects of Amendment 64 to the impact of CU’s reformed journalism programming.
YS: Overall, the outlook predicts a positive year for Colorado’s economy?
RW: Absolutely. Job growth is strong. It’s a little bit less positive than this year, 2012, but that has a lot to do with the issue of the fiscal cliff that’s going on nationally and the resolution of that. Because of that and the hurricane (Sandy), this quarter’s GDP is probably going to be a little slower, with a slow down at the end of the year and a slow picking-up at the beginning of the year. … But overall the growth numbers for Colorado are strong both in 2012 and 2013 and put Colorado in the top 10 growth states both years, so it’s quite a positive report. … Every sector except information is growing, so that helps with diversification of the economy.
YS: Colorado is doing better than the national economy?
RW: Yes, definitely doing better. One thing that helps that is something we don’t think of much on the Front Range or in the Boulder-Denver area—agriculture has done very well. It did extremely well in 2011, had its best year ever. In 2012, with the drought, people thought, “Oh, it’s going to be a terrible year,” but the drought was national in nature and kept agricultural prices up, so Colorado actually had a very good year in agriculture, which is probably going to go down as the second best year ever. We expect Colorado with continuing exports from the ag sector to set another record in 2013.
We tend to be a little more focused on technology and government provisions and retail and wholesale, and things that we see tend to be what we think of as the economy, but the state economy is actually broader. …Energy has been and continues to be an important contributor, both conventional and renewable energies. …Most people don’t really think about those things in sort of the Yellow Scene distribution area, but those are all things for the broader state that are very, very important.
Another thing we don’t think about as much in this area is tourism. Tourism has recovered very nicely in the state as well, with the exception of skiing, with the weak snowfall last year. We’ve seen really record-setting flights and numbers of passengers out of DIA. We continue to see growth in the convention business…and we’ve finally seen the actual occupancy rates and revenues generated per room rise to values what they were at before the economic downturn. We’re on a much stronger footing there.
So you look at a lot of indicators and we see strength in the economy.
YS: Do you think the outlook affects the attitude of local businesses going into the next year?
RW: First of all, do I believe economic forecasts influence the way people feel? I do. Unfortunately, I think that you really want to tell people the most accurate information you can tell them, whether it’s good news or bad news, but you always have this in the back of your mind, especially with bad news, that you’re exacerbating the situation. You’re making it worse because people are all, “Oh, he said it’s not going to be very good, and the committee said it’s not going to be very good; I better hunker down a little bit more” or whatever, and then you even slow it down more. You affect the psyche.
I do think that when you forecast good news, it tends to reinforce things that they see in a little bit more concrete way. One of my favorite things when we deliver the big forecast in Denver, I talk to people out in the lobby, and I say, “What do you think?” and “What’d you think about the presentation?” but I also say, “How does it match up to what your business is seeing?” Pretty consistently people say, “You know there’s definitely uncertainty from what’s going on, it matched exactly there, but our business is significantly up year over year,” and almost everybody that was there told me that, so I do think it helps reinforce what they’re seeing in their own businesses as they go through the process.
YS: The outlook mentioned that Amendment 64 could hurt tourism because of the brand of Colorado. I’ve also heard the other side, that people could be drawn to the state because of the legalization of marijuana.
RW: The committee talked about that. We haven’t done any work in that area. We have been asked to, and we really haven’t made any comments there, because we don’t really know at this point. Washington’s online already, so is that going to increase their tourism to the state? I don’t know. Maybe it will. We’ll see down the line. The concern is that it will give Colorado a certain type of image.
Honestly, I think the committee was more concerned about the image that we’ve received with the Aurora theater shooting, the fires, types of things that made national news this year that were not really positive things. I think those types of things are of more concern to the tourism industry than Amendment 64 at this point. We just don’t know what that’s going to do.
At the time, they interviewed folks in Breckenridge, which had already changed the rule as a city (and legalized marijuana), and they said that they didn’t really see much impact at all. They had one convention cancel that was coming there, but they didn’t think after observing for a little while that they had seen any impact one way or another.
YS: The big issue in Longmont is their ban on fracking and how the state will probably fight them. Do you think if Longmont succeeds in actually banning fracking that producers are going to turn away from Colorado as working here gets more difficult because of the regulations?
RW: The Longmont piece right now is in isolation. Now if that’s one of those things that one community does it and then the next community does it and then the next community does it and then they see Colorado as a difficult place to operate, then. …There was some feeling a few years ago that Colorado was becoming less friendly in general to the natural gas industry, and some people accused the state’s regulatory environment as the reason that drilling rigs were getting moved out of the state to other parts of the country, particularly up north to the North Dakota area, which has become an enormous producer at this point. That’s a booming industry for them. A lot of rigs also moved to the Gulf Coast area, but I think it’s going to take more than just one area. If the state were to say adopt that degree of regulation, then that’s a signal to the oil and gas industry. I don’t expect the state to do that, but that’s what it would take.
YS: The information sector is the only one that’s really losing jobs and not growing this year and last. Why is that?
RW: There are a couple of interesting pieces to that. (The information sector) includes telecommunications so, as an example, the Century Link acquisition of Qwest and the sort of disappearance of the Qwest headquarters was a big impact over the last couple of years, so that’s one piece. But also in that sector is printing and publishing, and you have had a dramatic transformation there.
…There’s all this consolidation going on. Obviously it makes it more efficient, but it clearly makes fewer jobs. The efficiency winds up with job loss.
(That has) led to job reductions, both on the telecommunications side and the printing and publishing side. The interesting part on output though is that if you go over the last 10 years, the output in the sector is up 56 percent over the last decade. …If you look at the contribution of the information GDP piece, that’s up 56 percent in the last eleven years, so 2000–2011. And at the same time, the sector lost 37,000 jobs. So 37,000 fewer employees and 56 percent higher output. Efficiency, efficiency, efficiency. It’s got to be the largest efficiency gains of any sector per employee because of the trends that are going on there.
It’s not a sector that’s going away but it’s a sector that continues to have to redefine itself, and it keeps getting blown up—every time you think you have the thing settling down, somebody comes up with some new technology or invention that does something else, that creates more tension and a whole new set of revolutions.
We have a lot of former (CU) J school graduates who are out there bemoaning the change in the J school, the demise of the J school, but I think that’s the reality.
The university’s got to adapt to the world we’re supplying people to right now.