Leeds School of Business-December 2007


The forty-third Annual Colorado Business Economic Outlook 2008 published by the Leeds School of Business, University of Colorado at Boulder, forecasts a continued thriving energy-based economy in Grand Junction and surrounding Mesa County in future years. Implications are that the demand for housing will remain high, leading to substantial returns on investment in real estate and land development. This is in marked contrast with the recent economic downturn elsewhere in the nation following the 2007 sub-prime mortgage meltdown. A relevant excerpt from the Leed's 2008 Outlook explaining Mesa County's prosperous economy follows:

From Around the State: Mesa County (p. 107)

The Heat Is On

The watchful eye of the Fed continues to monitor a retracting national economy that has resulted from the fallout in the subprime market, a declining auto industry, and escalating oil prices. Meanwhile, the Grand Junction area economy is still as hot as ever. The Grand Junction GDP grew 80% over the past decade, and it was recently designated as the 15th fastest-growing economy in the nation. The Grand Junction MSA also ranked near the top of the Milken Institute best-performing small cities list, placing 18th out of 179.

With energy extraction as its primary driver, followed by energy service industries and construction, the Grand Junction economy is projected to remain very strong. An estimated 43,000 wells are expected to be drilled in Colorado from 2006 to 2010. Concomitant to this are increases in overall gas production and the partnering of energy giants Kinder Morgan Energy Partners, Sempra, and ConocoPhillips on the construction of a 1,678- mile transmission pipeline capable of transporting 1.8 billion cubic feet of gas per day. When completed, the pipeline will extend from northern Colorado to eastern Ohio, with a 713-mile stretch reaching from Colorado into Cheyenne, Wyoming. It is expected to be in full service by mid-2009. To date, this equates to a $25 million infusion of capital investment into the economy. (Source: http://www.kindermorgangas.com)

To feed the insatiable global appetite for gas and oil, all indicators point to ongoing upward trends and continued economic growth. The development of the Piceance Basin alone is expected to generate a total of $3.4 billion in revenues and create more than 6,500 jobs, with labor earnings of $398 million. (Source: Colorado Energy Research Institute)

The rapid growth in the Grand Junction MSA has increased the average hourly wage to $16.10, which in past years has lagged behind national averages. At the same time, labor force and job growth rates are the highest in Colorado. In fact, in both 2006 and 2007 the number of jobs in the area is anticipated to increase by approximately 5%. Not surprisingly, one of the immediate issues is the low unemployment rate. After falling to 2.8% in May, it held steady at 3% in August and September of 2007. Even though the overall workforce climbed a staggering 42% over the previous 10 years, with an increase of 12.3% from January 2006 to September 2007, this growth still does not meet the demand for qualified workers. At the fiscal year-end in June 2007, the Mesa County Workforce Center recorded 8,000 open positions, a rise of 21% over the previous year. In an effort to find workers, the center has initiated recruitment efforts to hire workers from other parts of the country that are experiencing soft economic conditions. They are also tapping into military returnees and retirees, and are even recruiting in places like Puerto Rico.

This rapid growth has also reduced housing and facility vacancy rates to all-time lows and driven up the costs of land and construction. Single-family housing, with a median price of $209,783 in the first quarter of 2007, has appreciated so quickly that Grand Junction now has the fourth-fastest home appreciation rate in the country. Industrial land prices have tripled in just two years. The affordability and availability of housing is now a factor in workforce recruitment.

Communities and economic development organizations are working together to devise strategic plans to meet current needs and formulate long-term plans to ensure sustainable, balanced economic growth in the future. The Grand Junction MSA is poised for continued growth and change well into the next decade. Energy companies are working on 20-25 year plans that take the development of the industry from the ramp-up period, where the drilling and infrastructure are put into place, to the extraction, production, and maintenance mode. While this transition will likely be felt as an economic leveling off, the energy industry should remain a strong economic driver.

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