The rate of employment growth for the Rocky Mountain region as a whole has slowed and for the first time in several years is not above the national average. Utah continued to lead the region with an annual growth rate close to 4 percent, but a weak third quarter in South Dakota and Wyoming dampened the total gain for the region. Service industries still accounted for one-half of the total job increase. Construction remained the fastest growing sector, although growth has slowed from the torrid pace earlier in the year.
Tourism got off to a sluggish start in most of the region, and a spotty recovery in midseason failed to completely offset the early weakness. Oil drilling continues to increase, and the region's rotary rig count is now 50 percent higher than at the beginning of the year. This miniboom has been particularly noticeable in western North Dakota. Highway construction has kept the construction sector active in much of the region. South Dakota suffered a setback with the closure of a pork- processing plant, but expansion in computer production by Gateway 2000 gave the statewide manufacturing sector a modest net gain. Gateway 2000 is also expanding in Utah and plans to gradually increase its workforce in Salt Lake City to more than 1,000 workers after its plant there is completed. Construction is also slated to resume on the $2.5 billion Micron Technologies plant in Lehi, Utah, which was halted in early 1996. The high-technology sector continues to expand in Colorado's northern front range, anchored by Hewlett-Packard and a variety of related companies.
Unemployment rates have remained low. North Dakota and South Dakota routinely report some of the lowest rates in the country. Tight labor markets continue to make headlines. One asks if there are "Too Many Jobs?" while another reports that the "Tight Labor Market Could Be Hindrance" to a potential employer considering expanding into the Denver area. The manufacturing and construction sectors seem particularly stretched, but even retailers report a challenge in staffing new stores in the Park Meadows Mall in the Denver area.
Single-family building permit activity in the Rocky Mountain region during the first 9 months of 1997 totalled 40,891 units, a drop of 5 percent from a strong first 9 months of 1996. Colorado held its own as permit activity dropped in the other five States. Sales of existing homes in the region were up, however, by 7 percent. As of the third quarter, the annual rate of sales had reached 179,700.
The first 6 months of 1997 brought a major slide in apartment construction, but the decline had moderated considerably by the third quarter. Utah's multifamily permit activity during the first 9 months of 1997 (3,086 units) was off by two-thirds early in the year until a limited recovery in the third quarter brought the decline down to 39 percent. Apartment construction in South Dakota came to a virtual standstill in the first half of the year, before increasing in August and September. Colorado's multifamily activity through September (8,445 units) is back up to its level of 1 year ago. The resurgence in Colorado held the region's decline to 16 percent in the third quarter.
The local economies and housing markets in Salt Lake City and Colorado Springs are slowing from the rapid increases of the past several years. Home sales activity has decreased and listings are up in both areas. Sales prices are increasing at slower rates than previously. Rent increases are small, but vacancy rates remain low, and new units are being absorbed as expected.
Spotlight on Denver, Colorado
The Denver metropolitan area's economy continues its gradual slowing from the boom of the early 1990s. Annual job growth is down to 2 percent as of the 12 months ending in August 1997, approximately one-half the rate of the 1993-95 period. Construction job growth has slowed from its peak but remains the fastest growing major employment sector. Strength in nonresidential building has fueled the expansion, and there is little reason to expect a major slowdown. Ongoing highway projects will soon be joined by a light rail extension, the Ocean Journey Aquarium, and the Pepsi Events Center, which will keep this sector active in the near future. In contrast, the manufacturing sector has seen little growth, while mergers and restructuring in communications and public utilities have caused actual declines in these sectors. Trade and service employers still provide the lion's share of job gains. Business services leads these categories, and the recent surge in hotel construction has boosted employment in lodging services.
Denver's nonresidential real estate markets have remained firm despite a slowing economy. There are signs of cooling off in some areas, but there is little concern that the bust of the 1980s will be repeated. During 1997 office vacancy rates have declined and speculative construction is being absorbed. The anticipated slowdown of demand for retail space has become a reality. The shake-out is primarily limited to big-box retailers, although in many communities taxpayers are being asked to support the redevelopment of traditional shopping malls. Industrial real estate has weathered a recent surge in construction, but the pace of building will have to slow if the market is to maintain its current strength. Hotel occupancy bears watching, as several hotels will be completed in 1998.
A slowdown of residential activity will eventually follow the slower job growth, but this is not expected to occur in 1997. Through the first three quarters of 1997, single-family building permits totalled slightly less than 10,500 units, a 9-percent increase from a year ago. At the current pace, 1997 is headed for a record level for the 1990s. In new home sales, the $125,000 to $150,000 price range remains the most active. The availability of new condominiums for less than $125,000 is very limited. Inventories have remained stable despite the increase in new construction.
The existing home market is also poised to set a record in 1997. Total sales for the first three quarters of the year (30,099 homes) are up 4 percent from the same period last year. Sales listings are at the highest level since 1990. The average sales price as of September of $152,800 is up 5.5 percent from 1 year ago, but below the 8+-percent gains from 1993 through 1995. Sales of homes priced at more than $150,000 have increased each year and now comprise more than 40 percent of single-family sales.
Apartment construction stayed well above the 1996 pace through the third quarter. In the first 9 months of 1997, permits were issued for 4,509 units. If this pace continues, 1997 will set a new record for the 1990s. Most of the recently completed apartments have been high-amenity developments, with rents for two-bedroom units ranging from $900 to $1,200 a month. There also has been an increase in low-income tax credit projects and those aimed at the more moderate-income market.
The rental market has been relatively stable during the recent boom in construction from 1994 through the present, during which an average of 4,900 units have been completed annually. The rental vacancy rate has hovered at approximately 5 percent for most of the period. Rent concessions were uncommon through most of 1995 but became widespread last year when traffic began to slow and leasing took more effort. This year concessions are typical in initial rent-up of new projects, but many property owners remove them after reaching sustaining occupancy.
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