The Colorado Economy: Different ways to look at the same thing.

AuthorBinnings, Tom
PositionTHE ECONOMIST

Gaining multiple perspectives when looking at the same thing often yields new understanding. Let's look at the state's economy from different angles and see what we find.

Historically, Colorado's economy was based on transportation, mining and tourism. While important, none of these historical sectors drive the economy today. Over the last half century, the state has consistently outperformed the nation and most neighboring states. The only time the state's economy really tanked was from 1986 to 1990 during the S&L crisis when real estate was severely overbuilt, and prices crashed. In most cases, job growth fuels population growth, and when the state entered the abrupt five-year hiatus on real estate development, it encountered net outmigration as construction workers went elsewhere looking for work.

There must be something driving growth in the first place to create population in-migration and development. All regional economies--especially small nations, states and counties--have what we call an economic base upon which the rest of the regional economy develops. The base is created from dollars flowing into the state from the rest of the world. This can come from exports, from benefits originating outside Colorado paid to retirees, and even investment or capital flows into the state for infrastructure and real estate.

The State Demography Office performs economic base analysis on all counties. From the base analysis, they model overall job growth that ultimately translates into population growth. Taking some liberty with their county data to combine it statewide yields some interesting results. The economic base of Colorado is about 41 percent of the total economy as measured with jobs. This means for every basic job created, another 1.4 jobs are created. This is the "multiplier" we often read about in economic reports. A quarter of Colorado's base comes from traditional industries (agribusiness, manufacturing, mining and the federal government) and another quarter comes from Colorado's role as a regional (multi-state) and national service center related to industries like trade and transportation, business and professional services, and finance, insurance and real estate. The surprise in this base analysis is that 21 percent of the economy appears to come from retiree household spending. Thirteen percent of the base is generated by tourism, and 1 5 percent is derived from non-retiree households with investment income or public transfer...

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