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Job growth insulates Springs from recession, economist says
Comments 0 | Recommend 0The nation has already slid into a recession, but the Pikes Peak region has been spared so far because it has continued to add jobs, local economist Fred Crowley said Wednesday.
"Are we in a recession? I'm pretty sure we're in a recession right now," said Crowley, a senior economist with the Southern Colorado Economic Forum at the University of Colorado at Colorado Springs. He spoke to about 75 people during a Housing and Building Association of Colorado Springs breakfast meeting.
A growing list of national economic indicators prompted Crowley to ratchet up his recession talk from two months ago, when he told the Pikes Peak Association of Realtors the na- tion was on the brink.
Now, Crowley said, consumer confidence continues to sag; manufacturers and wholesale distributors expect conditions to worsen; orders for appliances, cars and other durable goods are down; business inventories are up; employers cut about 63,000 jobs in February; and corporate profits are flat.
Also, tightening capital markets have hurt the ability of would-be homeowners to obtain financing to buy and build homes, Crowley said.
On top of all that, many consumers have cut spending because of fears they might lose their jobs. That leads to retailers reducing orders from suppliers, manufacturers slashing production and employers laying off workers, he said.
"When you guys slow down, even a little," Crowley told attendees of their consumer spending, "it's a big dent in the economy."
The Federal Reserve acted too slowly to the economic downturn; it should have cut interest rates last summer but didn't react until a few months ago, Crowley said.
He also blamed the nation's housing crisis - falling prices, rising foreclosures and too many homes for sale - on lenders and underwriters who approved too many mortgages for homebuyers with bad credit or who weren't required to document their incomes.
To pull out of a recession, which economists define as two consecutive quarters of declining U.S. economic output, more jobs are needed nationally, Crowley said.
When that happens, increasing numbers of consumers will have disposable income to pay for goods and services, while existing job holders will worry less and spend more. Recessions typically last nine to 12 months, he said.
Colorado Springs had staved off a recession because job growth remains positive, he said.
A report this week by the Colorado Labor and Employment Department showed job growth in 2007 was stronger than initially thought.
Despite this week's news on jobs, several local housing and building indicators point to a weak economy: Home construction and prices are down compared with last year, while commercial construction has also declined, Crowley said.
Foreclosure filings and the number of properties that homeowners lose as a result of the foreclosure process are up, Crowley said. When foreclosed homes come back on the market, they frequently sell at a discount and hurt nearby property values, he said.
This year, single-family building permits - a measure of home construction activity - might total only 1,500 to 1,600, Crowley forecast. Three years ago, permits topped 5,000 and set a record.
A reduction in homebuilding is especially troubling, Crowley said. The purchase of a house is essentially an exchange of wealth between buyer and seller, he said. But homebuilding creates jobs - four for every house built.
"We need to build homes," he said.
But it's possible the Springs has reached the bottom or near the bottom of its housing problems, Crowley said.
One indicator: Home sales are on the rise when compared with the total number of housing units available locally.
"If we continue this pattern, it's a good sign," Crowley said.
Future growth at Fort Carson - about 10,000 soldiers are expected to be added to the post in 2009 - also bodes well for the local economy, Crowley said.
