Items of interest from Leg Council's economic forecast

I have pulled out some of the more interesting statements in the economic forecast provided on Monday by Legislative Council. For the full 80-page document, see here.

The recovery in Colorado’s economy is strengthening. Recent gains in the labor market signal that the economy, which only six months ago was feared to be nearing recession, has not only stabilized but its recovery has gained a solid foothold and is more resilient than previously thought. However, growth will remain below the long run potential, weighed down by concerns about the global economy, high levels of consumer debt, rising gasoline prices, and continuing imbalances in the real estate and credit markets.

The economy is expected to continue to grow through 2012. However, growth will remain below the long run potential, weighed down by concerns about the global economy, business and consumer uncertainty, rising gasoline prices, and continuing imbalances in the real estate and credit markets.

Although movements in nonfarm employment may not necessarily show it, increasing agriculture prices have driven growth in ranch and farm income, boosting consumer spending and economic health in the eastern plains, San Luis Valley, western slope, and northern regions of the state. Weld County and the southwest mountain region have enjoyed a stronger economic recovery as a result of increased activity in the oil industry. Meanwhile, the Boulder area is enjoying strong growth in software publishing and related industries and economic activity in the Metro Denver and Pueblo regions is strengthening gradually. Meanwhile, the economy in the Colorado Springs region is showing only weak signs of recovery.

Colorado’s construction, financial activities, and information industries continued to shed jobs even as the rest of the economy recovered over the past two years

Nonfarm employment will increase 1.5 percent in 2012 and 1.6 percent in 2013. Most sectors of the labor market are improving, but growth will continue to be moderate as the economy works through damage done by the financial crisis and uncertainty about international economic conditions. The unemployment rate will remain high, averaging 7.6 percent in both 2012 and 2013. As the labor market continues to improve in 2012 and 2013, the labor force is expected to increase at about the same rate over time as people find employment. Therefore, the unemployment rate is expected to remain high.

Personal income will increase 4.1 percent in 2012 and 5.1 percent in 2013. Expectations for growth in 2013 were reduced somewhat because of the expiration of the federal payroll tax cut and extended unemployment benefits. Wages and salaries are expected to rise 4.6 percent in 2012 and 5.5 percent in 2013 as the economy gains strength.

In total, the number of home permits issued for residential construction will increase 29.0 percent in 2011 and 19.8 percent in 2012. The number of permits issued in 2012, however, will remain relatively low by historical standards. The bulk of the increase will be driven by multi-family home permits.

The value of nonresidential construction contracts will increase 0.4 percent in 2012 and 4.4 percent growth in 2013.

Colorado’s recovery continues to move forward. Employment growth gained momentum and consumers increased spending. In addition, the agriculture and energy industries are expected to continue the boost in growth through the forecast period. These positive trends will be constrained, however, by the housing market, tight credit conditions, and the financial markets.