Following positive economic news two weeks ago — a nearly 25 percent jump in sales tax revenues for the town and county — the area received more good news last week when the Colorado Department of Labor and Employment reported that local unemployment dropped two-tenths of a percentage point in June, falling to 9.9 percent after hitting 10.1 percent in May.
Although two-tenths of a percentage point may not sound like much of an improvement for the county’s unemployed, it represents the first time since 1993 that June unemployment numbers have improved from the previous month. In fact, since 1990, unemployment numbers in Archuleta County have worsened from May to June by an average of .3 percent.
Still, unemployment remains a drag on the economy both locally and nationally. Unemployment for the county was slightly better in June 2010 — at 9.6 percent — and the number for this June was the highest since 1984, when unemployment for June stood at 10.8 percent.
May’s sales tax revenues for the area — up 24.38 percent from the same month last year and up nearly 47 percent from April 2011 — suggested that area businesses had seen a momentary boom and might increase hiring to meet consumer demand. June’s improved employment numbers seem to support that suggestion.
Interestingly, the number of unemployed workers rose slightly in June, with 598 unemployed in the county compared with 596 in May. What that means is that the Civilian Labor Force (CLF) increased in June to 6,030 from 5,903 in May, the area adding 127 participants to the work force.
The state also fared well in June, with unemployment falling to 8.5 percent from the 8.7 percent rate in May. It was the fourth straight month unemployment numbers decreased for the state.
Unfortunately, unemployment and the economy have not shown any improvement at the national level. Nationally, unemployment rose from 9.1 percent in May to 9.2 percent in June.
Addressing the nation’s jobless situation appears to have taken a back seat to the debt ceiling controversy. Although the debt ceiling has been raised 74 times since March 1962, with little fanfare or much press coverage, the issue has become a major point of contention this year.
Some say failure to raise the debt ceiling, forcing the country to default on numerous checks written by the federal government, could tip the economy back into a recession with little chance of recovery. Borrowing by businesses for expansion could become extremely difficult while interest rates on borrowed money could rise precipitously.
Under a scenario of national debt default, unemployment would almost certainly rise (many economists forecast a jobless rate shooting up by as much as 12 to 15 percent after a debt default).
What both Congress and the administration fail to realize (or continue to ignore) is that increased employment not only adds revenues to national coffers (through more taxes paid) but injects more money into the economy, benefiting businesses across all sectors as consumer spending rises with more people at work.
Unfortunately, the debt ceiling impasse has become murkier and more convoluted in the run up to the Aug. 2 deadline.
On Tuesday, House Speaker John Boehner (R-Ohio) experienced an unprecedented rejection of his budget reduction plan by many members of his caucus.
According to Boehner, his plan would cut roughly $1.2 trillion from the budget over the next 10 years. However, a report released yesterday by the Congressional Budget Office stated that Boehner’s plan would only cut $850 billion from the deficit by 2021. That same report also stated that Boehner’s plan to repeal the Affordable Care Act (Health Care Reform) would add $230 billion to the deficit in the next decade.
On the other hand, the CBO’s report from Wednesday credited an alternative Senate bill with reducing budget deficits by about $2.2 trillion through 2021, nearly three times the amount in Boehner’s proposal.
Nevertheless, many believe budget discussions have nothing to do with the debt ceiling and believe further that those negotiations have been falsely attached to the issue of raising the debt limit.
This has served to distract from the issues of tepid job creation and moribund economic growth. Although many economists initially predicted a strong finish to the nation’s GDP during the last half of 2011, those forecasts have been revised downwards after a weak first quarter.
Most forecasts portend a 1.8 percent annual rate in GDP growth following a dismal 1.9 percent pace in the first three months of the year. Economists agree that the economy would need to grow at a rate of 2.5 percent or better on a sustained basis to chip away at the nation’s 9.2 percent unemployment rate.
Auto manufacturing, a positive influence on growth over the past two years, slowed considerably during the second quarter of this year due to a disruption in parts manufacturing in Japan (following the earthquake) and high gas prices. While some economists see a modest contribution in GDP growth from the building of stocks, investors are nervously watching the debt ceiling debate.
Unfortunately, risks remain stacked against the economy and the potential for sustained jobs growth. While Archuleta County might appear immune to the national economy due to the area’s dramatic rise in sales tax revenues and slight improvement in unemployment, ignoring the country’s overall economic outlook would be folly. With Pagosa Country’s economy so dependent on out-of-state dollars, what happens across the nation directly affects the local economy.
In fact, the local economy will probably not see a significant improvement until high unemployment and slow growth eases across the country. Furthermore, until the local economy diversifies, offering new jobs in market sectors not directly related to tourism, the unemployment rate will most likely not return to the levels seen in the mid-1990s through the mid-2000s, when unemployment in the area was often just over 2 percent and averaged just over 5 percent for those years.