Economic forecast for Steamboat indicates more gloom early in 2011

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Learn more about Yampa Valley Partners and its Community Indicators Project at www.yampavalleypartners.com.

— Consumer spending and retail sales will continue trending slightly upward early in 2011, but the local construction industry and overall employment market will remain very bleak, according to a regional economic forecast.

“We can expect between 3 and 6 percent increase in gross retail sales in the first quarter of 2011 (compared to first quarter 2010),” states the forecast produced by Yampa Valley Partners, which compiles and interprets national and local economic data to help community discussions. “(National) consumer spending has increased from a low of $55 (per day) in September to $81 in time for the holiday season in December.”

Yampa Valley Partners’ latest forecast provides data for Routt and Moffat counties’ performance in several economic sectors, including real estate, retail, construction, cost of living, transportation, energy and “economic stress,” an employment model contrasting the number of jobs to the number of workers.

The model tracks that ratio throughout the past 20 years and shows a clear message, Scott Ford said, about current unemployment levels in Routt and Moffat counties.

“Both of us are in the toilet,” said Ford, director of the Routt County Economic Development Cooperative and a member of a Yampa Valley Partners’ advisory board. While Ford said the gloomy market obviously is no surprise to the many people without work in Northwest Colorado, the latest economic stress model gives a deeper look into local unemployment trends.

The model shows, for example, that while Routt County’s jobs-to-workers ratio was improving from early 2009 to early 2010 — moving closer toward equilibrium — the ratio again began widening, negatively, near July and remains on a sharply downward trend.

The model’s current economic stress ratios easily are among the worst Routt County has seen since the early ’90s.

“There’s a lot of hardship out there,” Ford said.

The forecast indicates a very slow construction industry for the first quarter of 2011 and home construction “at historical lows throughout the upcoming year,” Ford said. But there also are some positive indicators, such as home prices, that are declining less rapidly. Ford said the forecast has a simple overall message.

“It’s really: ‘Be patient,’” Ford said. “We’ll get better in increments, but it’s not going to get better overnight.”

The complete forecast is online with this story at www.steamboatpilot.com.

Kate Nowak, executive director of Yampa Valley Partners, said the forecast’s wide range of data could provide valuable information for local business owners who are making projections for 2011.

“If I was a small business, I would use this as one of the tools that I have in my toolbox to see if I was going to make a major change,” she said.

Comments

Scott Wedel 3 years, 3 months ago

A couple of comments on the economics report: Sometimes processing information removes value instead of adding value. It is bad enough to have a chart labeled "Economic Stress Due to Unemployment" which whatever it is trying to measure is hardly the abstract concept of economic stress. But there are also the easy to understand numbers of local jobs and number of local unemployed which can easily both be shown on the same graph and give a real good idea of how number of jobs is changing and how many are looking for work. It makes no sense to not include the straightforward highly informative employed and unemployed while including the abstract Economic Stress due to Unemployment chart. If the report has room for only one chart then the wrong chart is included.

Specifically, the jobs to worker ratio obscures the critically important question of what is happening. The ratio is a curiosity that would not report any change if 10,000 jobs with another 1,000 unemployed suddenly became 5,000 jobs with 500 unemployed or 15,000 jobs with 1,500 unemployed. A measurement that fails to distinguish between an economic collapse and an economic boom is most certainly not the most important measure of the local job situation. This measurement only makes sense if you assume there is no migration of people into or out of the area due to the economic situation so it is complete rubbish for this area which has a high level of mobility. It only makes sense for countries like Japan or India where there is not going to be large economically driven immigration or emigration, but where it can correct the employment numbers for the country's increase in workforce or retirees.

FYI, the local employment trend is that local jobs are disappearing at about 10% a year over year for two years now. So yes, we are down about 20% of number of jobs since the economic downturn.

Also, if the commentary on average spending vs local sales tax notes how Gallup Poll says there was an increase from $55 per day to $81 per day. The report says that is a good trend for local business. But local sales tax increased only a couple of percent. If the nearly 50% increase in daily spending is a credible number then it hardly makes sense for sales tax to increase by 2% or so. That would seem to imply that purchasing out of county (leakage) increased 49%.

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Scott Ford 3 years, 3 months ago

Good Morning Scott W. - The reality is that we have relative few timely economic data sets at the local level. Employment is one and a sale tax collection is another. Both of these data sets have significant limitations but are better than nothing. Care needs to be taken that we do not try to torture these numbers beyond what they cannot tell us. Hopefully with Yampa Valley Partner's stress indicator we are not doing that.

It is no secret that I like this indicator. Like most data sets we deal with it tells only a part of the story - not the full picture and your insights are correct. I think one of the on-going challenges we have with any economic data is, "now that we know what we know, does it really make a difference?" This is a philosophical question I struggle with all the time.

This particular indicator does measure the equilibrium relationship that exist between workforce and jobs. It does not use any data that we do not already have - it simply formats it differently. Since it is seasonally adjusted by comparing like periods - I find that useful. It also takes a longer view.

I know that Kate and I welcome new ideas. I am a bit obtuse at times so you may need to draw me a picture or two before I get it.

I am always curious about how the consumer behaves. The vicissitudes are complex but fun to study as long as it is studied with the understanding that we may not be actually studying anything meaningful. One of the reasons for the decline in sales tax has been a shift in local spending patterns. In reviewing about a dozen years of State of Colorado Department of Revenue data that about 35% to 37% of retail sales were for items that were not subject to sales tax.

The lion's share of this slice of the pie is likely groceries. Beginning in October 2008 until 2009 this slice not subject to sales tax grew to 45% to 47%. Most likely because ourselves and our visitors to a lesser degree stop going out to eat. I know this is true in my family. Simply put it is far cheaper to eat at home than it is to go out. We reserve going out now only for special occasions; not because I just did not want to cook. I think this pattern of 45% to 47% will remain for a very long time.

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JLM 3 years, 3 months ago

The local economy is not a "help, I've fallen down and can't get up" kind of problem.

It is a "help, I've fallen down and now I need to learn how to crawl" kind of problem.

The economy has fallen down at least two curves on a parallel family of curves and is not going to improve materially for a considerable period of time.

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Scott Wedel 3 years, 3 months ago

Scott F. I think the far more relevant employment chart would be a simple chart that had two lines: A) the total number of jobs and B) the total number unemployed. That would clearly show job growth/decline which is a good indicator of economic growth and unemployment which shows the job market.

That chart contains the raw data of the "Economic Stress" chart so it suffers from the same limitations of timeliness and accuracy of the data, but it has the benefit of not being processed into a ratio and so still the actual size of each can still be shown.

The key sentence of my criticism of the ratio is "This measurement only makes sense if you assume there is no migration of people into or out of the area due to the economic situation". The reason that is the key sentence is because the jobs ratio measurement is designed to compensate for changes in the size of the workforce when comparing economies and thus allow compare countries with a growing workforce vs ones with static or even declining workforce (ie Japan).

From a statistical analysis point of view, that sort of ratio only makes sense when the two variables (employed, unemployed) are considered to be independent variables. That the number of employed is primarily dependent upon economic conditions. That the number of unemployed is primarily dependent upon the size of the population that is between 18 and 65 that cannot find work.

So, the ratio makes sense for an area that if it went from 1,000,000 jobs with 100,000 unemployed to suddenly 900,000 jobs then unemployed would be 200,000 minus those that gave up looking.

The ratio does not make sense in this area because it is easy to move and leave here. A particular aspect is that this is a resort area so it has a higher percentage of residents that moved here to enjoy the region, but the family home is elsewhere. So if things do not work out here then the person does not stay here, but goes home. I think that locally the number of employed is a valid economic indicator, but unemployed is more of an indicator of job prospects elsewhere - of whether it is worth staying here to find work or to find work elsewhere.

Thus, if our local economy goes from 15,000 jobs with 400 unemployed (who were probably mostly between jobs) to 12,500 with 1,000 unemployed then the missing 1,900 are not retirees, but mostly people that left the area. And if economy further moves to 10,000 jobs with 900 unemployed then that situation would be economic depression with many people moving away. A indicator based upon a ratio of employed vs unemployed would show that economic situation to be stable.

The ratio indicator was also rubbish during the boom. While the number of jobs was exploding, there were still some unemployed so the ratio failed to indicate the true extent of job growth.

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Scott Wedel 3 years, 3 months ago

You have previously stated how you like the ratio and so I would be surprised if YVP didn't include it in their reports. But can you please first show the primary chart of simple employed and unemployed which can then be followed up be the ratio chart?

As for the Gallup spending number, I think there is a lack of supporting evidence that spending dropped to $55 and recovered to $81. That sort of 50% increase is simply not found in any sort of retail sales, business activity or anywhere. Thus, the Gallup Poll spending number should be viewed as a consumer sentiment indicator, not as a credible number of actual consumer spending.

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Scott Wedel 3 years, 3 months ago

JLM, I am not sure what two curves on a parallel family of curves is intending to describe, but I agree things have gotten worse. Initial reaction by some to the bust was to buy cheap real estate, remodel and expect to sell into a stable or recovering housing market. But the housing market is so bad that sort of flipping has become just more dead money.

So now I am told that remodeling activity is also way down.

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Steve Lewis 3 years, 3 months ago

Scott W., Last Spring you had some interesting home inventory data: sales rate, inventory on the market, etc...

How are we doing there?

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Scott Wedel 3 years, 3 months ago

Steve, I am not quite sure what data I dug up that you found interesting.

This is probably different than then, but I think is interesting.

According to county website, 2006 and 2007 had just over 2600 real estate sales each year. 2008 had half that (just under 1300). 2009 had just over half that (686) so 25% of the peak activity. 2010 had 866. County website is searchable back to 1998 and previous low was about 1800. It appears that inventory has stayed about the same, and with an increase in sales, average time on the market would appear to have decreased to 2 years from 3 years. Woohoo, except a terrible real estate market is when there is more than 9 months of inventory.

I think the far bigger real estate story of 2010 is that sellers adjusted pricing to find buyers and how far down they had to go. One of my favorite case examples is Red Hawk Village because it is a good number of similar units. In 2007 as new construction they started off getting $550K. Sold a bunch more in the mid to high $400s. Then in later 2008 the foreclosures came and they were then being sold for just about $300K. Remember the SB Pilot real estate series that had our local real estate experts saying how $300K was such a great deal. Well, in 2010 only one unit sold and the price was $220K. And there are more available at the price. That is down 60% of initial pricing and down about 25% from "great deal", bottom of the market pricing. There are listings for townhomes in Stagecoach for less than $100K. Similar continued decline for Sierra View condos above Oak Creek.

It would appear that property values for "affordable" housing has seen more severe price declines than the county average. It would appear that the housing market that is dependent upon local employment is still searching for qualified buyers. While the housing market for those with outside income sources (early retirees, location neutrals, etc) is less severely affected. That may indicate there is a path to economic recovery even as the current economy is still in very bad shape.

So regional governments dependent upon property tax are going to see serious reductions in their tax base (assessed values July 2008- June 2010 compared to 2006-2008) and that is going to persist because we are currently well below the average of 2008-June 2010.

(Personally, I think we will start seeing pressure for an unified Routt County School district because the differences between what Hayden and Soroco can do vs Steamboat is going to extend the trend of out of SB area kids being enrolled in SB schools. Those other school districts are already challenged by being small and have a high number of students spending one year in one district and the next year in another which is disruptive to the student's education.)

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