Colorado Economic Outlook

Do you know what the opposite of an optimist is?

A realist, a pragmatist, a negativist?

Nope, an economist.

An optimistic economist is one who looks at the data and proclaims that the world isn’t ending today, so it must be ending tomorrow instead.

Yesterday I was invited to hear Pollyanna-level optimistic economist Patty Silverstein, president of Development Research Partners, tell the Denver Association of Business Economists about the state of the economy. Two slides in I wanted to throw up, even as she kept assuring the very high-level audience that it really wasn’t THAT bad.

Here are a few her points that really jumped out:

  • Metro Denver retail sales is tracking at negative 13 percent, year over year.
  • Colorado’s financial infrastructure is built on sales tax, but retail is shrinking fast. We need a new model.
  • Denver foreclosure rates are still more than five times greater than what they were in 2003
  • Companies like Level3 that have to refinance more than 95 percent of their debt could really struggle with the frozen credit markets.
  • Alternative energy is getting the attention, but traditional energy is actually bringing in the $$.
  • Every economy in the world is effected, not just the U.S.

And the most terrifying:
In the last 70 years of Colorado history, there have only been seven years of job loss, but three of those were in last decade. Every industry is receding.

So what does this all mean?
For years now our education and infrastructure have been slowly crumbling, propped up by inefficient systems and bureaucracies while we continue to pump about $2 trillion into Middle East wars. On the first day of Economics 101 in college the professor drew a big graph on the board and labeled one axis guns and the other butter to explain you cannot simultaneously pump fixed resources in two opposing directions. I never really knew what that meant, but I do now and I think everyone else watching the world pass us by knows that too. The current economic climate is being compared with dot.com crash, but I think it is still part of the same cycle.

While I will leave the analysis to the experts, I think our economy, and society as a whole, is going through a pretty significant retooling at every level – values, skills, priorities, and focusing more on people and a sustainable existence. I also think this values shift is in part being driven by social media. People are connecting in ways we never imagined and corporate honesty and transparency is being examined under a microscope.

As a little positive crumb for those of you reaching for the Prozac is that personal savings is the highest it has been is decades.

Point/Counterpoint
One of the attendees was an analyst at the St. Louis Federal Reserve Bank. At the end, Patty asked him for his take on what he was seeing and analysis of the Fed’s data, particularly as it related to inflation. Basically he was pretty happy and thought that the economy was definitely rebounding. He didn’t think the extra money that the Obama administration had infused into the economy had any negative effect, provided it is removed promptly and carefully as the economy recovers. He noted that while nearly $800 billion was earmarked for economic recovery, very little has been doled out because the money is so hard to actually get, and the way it is circulating through the banking system has the equivalent of a rounding error. He pointed out that inflation happens over years, and absolutely nothing that is happening right now is likely to have a long term negative effect provided it is carefully monitored.

So what do you think? Are we bouncing along the bottom of the ocean, on the verge of plunging deeper, or about the surface?

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