Behind the headlines: Colorado economy doing well compared to many states
By Christen Lara
Colorado College research fellow
The Legislative Council staff's June economic forecast, released last week, shows Colorado continuing "to suffer through one of its worst downturns in over 50 years." Unemployment reached a two-decade high – Colorado's rate was 7.6 percent in May – and the council's economists expect things to worsen. Their forecast shows the average unemployment rate rising to 9.6 percent in 2010.
The council's economic forecast shines a light on how Colorado is faring through the recession. Though we most often hear about the recession in terms of its national impacts, each state is experiencing it in different ways and to varying degrees.
Colorado is clearly struggling, but it has continued to function better than many of its counterparts, according to data released by the Economic Policy Institute and updated by the Bell to include May employment figures. When unemployment rates as well as overall and housing-industry-specific job losses are compared across the nation, Colorado falls in the middle of the pack.
Colorado's 7.6 percent unemployment rate in May was lower than rates in 33 other states. Thirteen states had rates above 10 percent, and nineteen states had rates above 9 percent. Michigan ranks first, with an unemployment rate of 14.1 percent.
Colorado has also experienced significant job losses. The state has lost 87,200 jobs since the recession began in December 2007. According to Legislative Council projections, such losses will continue, with jobs decreasing by 84,600 (3.6 percent) in 2009 and 86,000 (0.4 percent) in 2010. While these figures are striking, they follow the national average. After taking population variations by state into consideration, Colorado ranks 24th in job losses.
The EPI data also offer perspective on how the current recession compares to the recessions of 2001 and 1990 on a state-by-state basis. Seventeen months into the current recession, Colorado has already surpassed peak unemployment rates of both previous recessions – 6.3 percent during the 2001 recession ant 6.2 percent during the 1990 recession.
Relative increases in the unemployment rate vary significantly by recession. Since the current recession began, Colorado has experienced a 3.5-percentage-point increase in the unemployment rate. The rate increased an average of 0.1 percentage point each month over the first eleven months and has picked up steam in recent months, rising by 0.4 percentage point per month.
In the 2001 recession, Colorado's unemployment rate increased at a much quicker pace, by 0.3 percentage point per month during first eleven months, ultimately reaching 6.3 percent. The initial increase was due largely to the economy's strong dependence on the technology industry. When the technology bust occurred, Colorado's unemployment rate darted upward.
Colorado was less affected by the 1990 recession. Unemployment rates were already high, at 5.1 percent, when that recession began, and after seventeen months the rate increased to 5.9 percent.
So, what does this mean for the current recession? Unlike in 2001, when a more narrow range of industries was impacted, the current recession has affected nearly every industry.
Housing-related industries have been hit the hardest, both within the state and across the nation. In Colorado, since the recession began, there has been an 11.1 percent decrease in manufacturing jobs and a 15.8 percent decrease in construction jobs. Though these declines are significant, they put the state only slightly above the national average in terms of industry-specific job loss.
While the recession began with the collapse of the housing market, sub-prime lending has had a much broader impact, as credit has tightened for a variety of businesses. In Colorado, industries currently experiencing average or greater jobs losses include business and professional services, financial activities and leisure and hospitality sectors.