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If the Front Range’s economy is a racehorse, Southwest Colorado’s is a plow horse

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Monday, Jan. 8, 2018 5:14 PM

Can the natural gas industry pull itself off the canvas to once again be an engine for the Four Corners economy? Will Colorado’s 90-cent increase to the minimum wage, which took effect Monday, help or hurt? Why is wage growth so sluggish in Southwest Colorado?

Geeks for all things economic should set aside the morning of Thursday, Jan. 11, when the School of Business at Fort Lewis College will present its SW 2018 Economic Outlook.

Set to speak at the event, which has been cut down from four hours to 2½ hours for 2018, are Robert “Tino” Sonora, professor of economics at Fort Lewis College; Richard Wobbekind, senior associate dean for academic programs at the University of Colorado-Boulder; and Tim Quinlan, vice president and economist with Wells Fargo Securities.

The speakers will present their views of the current local, regional, state, national and international economies.

Wobbekind said weak wage growth, expensive housing and a weak natural gas sector are structural issues for the Four Corners economy that mean the economy is unlikely to improve at any pace other than gradually.

Natural gas was the sector Wobbekind believes holds the most potential for a turnaround that could boost the regional economy, which consistently fails to keep pace with improvements seen on the Front Range.

“Fifty-five percent of Colorado’s electricity is still generated by coal, and there is a push for renewables, but I suspect natural gas is going to pick up the vast majority of that generation as we move away from coal to cleaner-burning options,” he said. “I’m not long-term pessimistic about gas like I am about coal.”

The problem with any kind of a quick turnaround in the natural gas industry in the San Juan Basin, Wobbekind said, is the fracking revolution in several oilfields across the nation that brings up massive amounts of natural gas as a byproduct.

“You’ve got to capture it if for no other reason than environmental, to keep it from venting into the atmosphere. It just adds more supply,” he said.

Sonora also was pessimistic about a quick rebound in the natural gas sector, noting that futures prices three years out for natural gas are less than $3 mmBtu (10,000 million British thermal units), roughly equivalent to the current price.

Wobbekind noted that over a 10-year period, the total amount of coal sales in Colorado has dropped from 40 million short tons to 15 million short tons, and a rebound to decade-old higher numbers is unlikely as U.S. power generation moves away from coal. The only bright spot for coal, Wobbekind said, is if some way is found to export more southern Colorado coal to international customers.

A key for the Four Corners, he said, is to develop diversification in economic activity to help the inevitable booms and busts in tourism, energy extractive industries and agriculture.

The expansion of the Pagosa Springs Medical Center in 2016 and Vantiv’s presence in Durango are examples of economic activity that he said would be helpful in building a more robust economy not so dependent on tourism, agriculture and energy.

“The economy has to become more resilient to balance energy, ag and even tourism,” he said.

“When we did our forecast, we heard from a number of rural areas that they were significantly concerned about the increase, and it was likely to impede job growth,” he said.

One troublesome issue for Sonora is a mismatch between sluggish wage growth in the area and increasingly expensive housing.

He said despite La Plata County’s 2.2 percent October unemployment rate, which is below the state average of 2.7 percent, wages can’t match rising regional housing costs.

The problem, Sonora said, is that the area’s attractiveness to second-homeowners drives up housing costs and a reliance on low-skill service industry jobs that create stagnant wages.

“You have 5,000 to 7,000 people commuting to Durango for jobs. That’s a pretty good chunk of people,” he said. “We’re not good with wages, we’re not good with child care, and we have really low wages. For a lot of people, you need multiple jobs or you don’t live here. You commute.”

Southwest Colorado’s heavy reliance on low-wage service sector jobs, Sonora said, means the area is likely to see only modest wage increases compared with the Front Range. He said 15 percent of La Plata County’s jobs are in the service and hospitality sector and those workers take home only 7 percent of all income from job-holders in the county.

Sonora just returned from a similar economic outlook conference run by the Federal Reserve, and he said the predominant comment expressed at that gathering about Southwest Colorado was surprise that it lagged so far from the economic growth enjoyed on the Front Range.

“The mood was guarded about our economy. One person told me: ‘Wow, I thought you’d be better off than you are.’”

Sonora said the mood at the Fed meeting matched what he’s hearing from local business owners he has met. “No one is hyper, hyper enthusiastic (about the economy). There’s a lot of caution out there.”

If you go

The SW 2018 Economic Outlook will begin at 8 a.m. Thursday at the Community Concert Hall at Fort Lewis College. Refreshments will be served until 8:30 a.m., followed by a welcome and speeches until 10:30 a.m.

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