December 31, 2008 7:37 PM
In the last downturn, Colorado went into recession later and stayed in longer. Will that be different this time?
This post contains the answers to one of 10 questions sent out in our quarterly survey of investment professionals and economists.
10. In the last downturn, Colorado went into recession later and stayed in longer. Will that be different this time?
John Goltermann: No, I believe the same pattern will recur.
Michael L. Serota: The energy sector. This administration will spend money on energy and we as a state will benefit economically.
Bill Greiner: I don't know. The recovery from this recession should be based on debt repayment and the degree of leverage inherent within an economy. Is Colorado more "levered" than the nation in general? I don't know the answer to this question - but if one could find out, the answer to that question would answer your inquiry.
Tucker Hart Adams: Colorado's growth in the 1990s was driven by the technology boom and, when the bubble burst, it took us a long time to recover. This time we are moving pretty much in sync with the rest of the country. The energy industry, which has been strong and is now headed for problems, is too small to have much impact on the Front Range where most of us live, although it will have a significant effect in the Grand Junction market area.
Gregory Anderson: The Colorado economy has become more diverse and should be strong enough to bounce back with the rest of the nation at the same time.
Gary Horvath: The slowdown in employment at the national level began in December 2007. Preliminary state employment numbers show that Colorado employment began to slow in the Q2 2008. The BLCI shows that the slowdown for both Colorado and the U.S. began in Q4 2007. Colorado may see a more shallow or shorter downturn if we are truly past the worst part of the housing slump.
Fred Taylor: Colorado is positioned much better than the rest of the country. With a highly educated population, diversified economy, and a stronger housing market than the rest of the country Colorado should come out of this recession sooner and be less negatively impacted than states like California or New York. It also helps that Mayor Hickenlooper and Governor Ritter have recognized this downturn early and are being proactive in facing this recession head on by taking the necessary steps to create new jobs and get federal funding from the new Obama administration.
Andre Ratkai: Colorado seems like it will probably continue the lagging pattern of past recessions. Our industries and employment patterns tend to be of a lagging nature; in other words, the industrial and construction economy turns up first, then our service-oriented and knowledge-worker economy turns up. This pattern will probably be reinforced by the downturn in the energy industry, which will likely cause the Colorado economy to lag the national economy.
Jeff M. Wilson: Colorado's economy is more diverse than ever before. While not immune, we are well positioned to fare better and recover more quickly than most other states. Retailers will be especially hard hit. This will adversely affect commercial real estate, especially malls, retail centers, strip centers, "big box" stores and some warehousing. This will create unique opportunities for creative entrepreneurs to effectively utilize this space available at bargain rates.
Rich Wobbekind: So far I think the data will eventually confirm that we entered the recession significantly later than the rest of the nation. My view is that we will recover on a timetable more in sync with the nation so yes I do think this will be different than the last time.
Maclyn Clouse: Colorado's economy is now more diversified. With some strength in energy and technology, it will not take longer to come out of the recession, and we could even see some improvement before some parts of the nation.
Mark Lee Levine: Colorado is more diversified today in its economy, compared with problems it faced with the Dot Com and the Oil decline that occurred in some of the prior economic problems in Colorado. Colorado did well in the housing market in the last few years, but it did not have the size of the bubble that has now been seen for parts of California, Arizona, Nevada, and Florida, among other states. Thus, it will recover more quickly than many of these states; but, Colorado will have its share of pain. The pain will, however, ease more quickly than in many instances in the past Colorado recessions and declines. CAVEAT: Remember my caution, noted above: My Crystal Ball remains Opaque!
Patty Silverstein: The slowdown in economic activity in Colorado has been coincident with the downturn in the national economy. While there is great way to define a state recession, if we consider a decline in over-the-year employment as the key indicator, Colorado has yet to actually enter recession. This position is likely to change in the last month of 2008 or first quarter of 2009. Still, I believe that Colorado's recession will be shallower and shorter than other parts of the country for three key reasons. First, Colorado's housing market is likely to improve sooner than other areas as we did not experience the wild swings in prices that other areas had. Second, our slow emergence from the 2001 national recession (indeed, our recession occurred more in the 2002-2003 period) means that our companies were still operating at fairly lean levels. Third, we are a strong entrepreneurial area and small business formation and growth is often a key to successful emergence from an economic downturn.
David A. Peterson: Colorado could perform better than other parts of the country. The growth of our population should lead to a growth in our economic circumstances. The more troubled areas would be the manufacturing regions of the U.S. and the areas with more overbuilt and overpriced housing. Of course Colorado's employment picture just got significantly worse with one of our highest paid employees in Mike Shanahan losing his job.
Barbara Walchli: Colorado did not get caught up as much as some states in the housing speculation excesses of the last cycle, In addition, the Obama administration has signaled that it wants to offer incentives to start up technology companies. We think that could benefit the Colorado economy.