Economic signs suggest this year may start out slow, but it should show accelerated improvement in 2013, say local, state and national economists.
Much of the positive news going into 2013 was related to housing. Real estate, household debt levels and construction are making positive comebacks that are expected to continue in the coming year, those economists said
With housing starts at a three-year high, Paul Christopher, chief international strategist at Wells Fargo, said the nation is seeing a “distinct improvement” in the housing market.
Recoveries tend to start with a rebound in the housing market, so positive news on the housing front is a good sign, Christopher said.
State data support the national upward trend as well, said Richard Wobbekind, executive director of the Business Research Division at the University of Colorado’s Leeds School of Business, which annually produces the Colorado Business Economic Outlook. After several pre-recession years when home building outpaced the number of households forming in the state, the balance has been reversed for long enough that household formation is finally catching up with extra inventory, Wobbekind said.
The construction industry’s revival in Colorado is being driven in large part by major infrastructure projects and demand for multifamily housing, with residential building permits expected to increase almost 30 percent in 2013, according to the state outlook.
Meanwhile, home prices have increased in Colorado and La Plata County. Year-over-year comparisons also show a rise in the number of homes sold in the county, number of foreclosures sold and a dip in the number of days homes remain on the market.
Household debt in relation to income is beginning to drop to pre-recession levels, indicating that people might soon be ready to start spending more and taking on more debt, Christopher said.
Wobbekind agreed that “households have much better balance sheets.”
La Plata County residents also are seeing abetter picture as average weekly wages in the county have improved faster than the rest of the state over the past decade. From 2001 to 2012, wages increased by 3.5 percent from 2001 to 2012 compared to the state average of 2.5 percent.
Things are looking good for the area’s tourism, which has seen a 15 percent increase since 2007. Visits to Mesa Verde National Park and the Durango & Silverton Narrow Gauge Railroad, enplanements at the Durango-La Plata Airport and sales-tax revenue all grew in 2012, making the outlook for tourism in the area somewhat optimistic, said Robert Sonora, director of the Office of Business and Economic Research at Fort Lewis.
The near-term prospects for the natural-gas industry aren’t as rosy, although Christopher said he expects 2013 to be the last year for price declines.
Agriculture saw record-setting profits in 2011 and despite drought conditions, the industry recorded the second highest year of profits in 2012. The state outlook predicts this year will be a new record for agricultural profits because of strong demand and increased productivity; however, water will continue to be a concern.
In addressing national policy, the economists criticized lawmakers for putting off the issues of spending cuts and the national debt limit until spring. Christopher said the U.S.’s credit rating could be downgraded again if lawmakers fail to enact enough spending cuts or provide enough future guidance.
Uncertainty about legislators’ next moves have caused businesses to remain reluctant about hiring during the first part of this year, Wobbekind said.
Internationally, the risks of the European debt crisis and political turmoil in the Middle East spiraling out of control have lessened slightly, Christopher said.
The economists took a more optimistic tone than last year, but Sonora cautioned that some concerning signs remain. The number of people unemployed for longer than 27 weeks continues to dwarf the number of people unemployed for five weeks or less, a trend that started in 2008. The proportion of people employed compared to the total population is still well below the peak of 61 percent, and incomes are still below pre-recession levels.
Christopher attempted to put the stormy waters of the nation’s economic situation in perspective. The 11 years since 2001 seem tumultuous only when compared to the relative calm and prosperity of the 1980s and 90s, Christopher said. But the long period before that was a rocky road.
“Welcome back to history,” he told the audience.