No recession, but even slower

The Colorado Springs economy will slow to a crawl next year, but won’t tumble into a recession, according to the Southern Colorado Economic Forum.

Much of the slowdown will be triggered by a declining local housing market in which mortgage foreclosures are nearing record levels and housing construction is falling to the lowest level in more than a decade, said Fred Crowley, the forum’s senior economist.

“At this point, I am not convinced there is enough momentum (from the declining housing market) to drive us into a recession, but there is enough momentum to keep us from going anywhere,” Crowley said. “Next year will be slow, even slower than 2007.”

Tucker Hart Adams, a Springs resident who is chief economist in the Rocky Mountain region for U.S. Bank, predicted last month that the national and state economies will soon slip into a recession, if they haven’t done so already.

The forecast — which will be released today during the forum’s 11th annual conference about the local, state and national economies — anticipates slowdowns next year in local job growth, retail sales, nonresidential construction spending and incomes.

Many of the forum’s forecast of local economic indicators next year were revised lower in the last month or so after a nationwide credit crunch in August triggered widespread fears the nation’s economy might be slipping into a recession, Crowley said.

“The mortgage market collapse was one of the components in reducing our forecast,” said Tom Zwirlein, a University of Colorado at Colorado Springs finance professor who also serves as the forum’s faculty director. “This year has been slow; next year will be a crawl.”

Slow wage gains also are playing a role in a slowing local economy — the average wage last year rose just 2.9 percent from the previous year. Since inflation rose at a faster rate, Crowley said workers lost buying power, which resulted in weak retail sales growth.

“The local employment base shifted to an economy that is less dependent on a limited number of large, well-paying employers to an economy that is increasingly dependent on small firms” that pay about $4,500 a year less than large firms, the forum’s forecast said.

Crowley and Zwirlein expect mortgage foreclosures to slow somewhat next year, but a recovery in the local housing market will take 12 to 18 months. Slowing housing construction has cut the growth in local payrolls by about 4,000 jobs this year, they estimate.

The forum expects local housing construction to decline by about 3 percent next year after falling an estimated 25 percent this year. At the same time, nonresidential construction will slow about 5 percent as major projects now under way are completed.

“The area has benefited tremendously from large projects that are now coming to an end — the expansion of Interstate 25, housing at Fort Carson and two new hospitals” Zwirlein said. “Without a recovery in residential construction, we could lose jobs in construction.”

The arrival of most of the remaining troops moving to Fort Carson from Texas isn’t expected to happen until 2009, too late to cushion the local economy from a slowdown next year, Zwirlein said. The influx could contribute to a recovery beginning in 2009, he said.

CONTACT THE WRITER: 636-0234 or wayneh@gazette.com

FORECAST AT A GLANCE

A few numbers from the Southern Colorado Economic Forum’s forecast for the local economy in 2008:

- Payroll growth: 1.5 percent, down from an estimated 1.8 percent for 2007

- Unemployment rate: 4.6 percent, up from an estimated 4.4 percent for 2007

- Personal income growth: 5.5 percent, down from an estimated 5.9 percent for 2007

- Retail trade growth: 5.8 percent, unchanged from estimate for 2007

CONFERENCE DETAILS

What: 11th annual Southern Colorado Economic Forum

When: 7 a.m.-noon today Where: Antlers Hilton hotel, 4 S. Cascade Ave.

Cost: $75 (includes breakfast); $95 to receive real estate continuing education certificate

Keynote speaker: Gary Schlossberg, vice president and senior economist, Wells Capital Management

Web site: www.southerncoloradoeconomic forum.com

Go to gazette.com after the forum for streaming audio of the keynote address and forum results.