Invested in America – A Growth Agenda for the U.S. Economy

A Report from the Business Roundtable The U.S. economy continues to underperform relative to its potential at great cost to workers, businesses and taxpayers. While America’s leaders continue to totter from confrontation to crisis, economic growth remains stubbornly low, unemployment remains unacceptably high and wages remain stagnant for the vast majority of Americans. The CEOs of the Business Roundtable are deeply invested in America’s success. We understand that when America succeeds, our companies succeed. We believe that realizing the economy’s full potential should be the nation’s top priority. And we believe that fully unlocking economic growth and job creation will require policymakers to rededicate themselves to a singular purpose: restoring America’s status as the most attractive destination for investment.

America’s doors have traditionally remained open to the investment that it needs to realize its full economic potential. But something has changed in recent years. America’s public policies have become increasingly inhospitable to those who are willing to contribute to building a stronger economy. Our fiscal outlook has significantly worsened, reducing the predictability that taxpayers and businesses need to make long-term investment decisions. Our corporate tax rate is the highest in the developed world, discouraging businesses from locating and hiring here at home. Our trade agenda is being affected by failure to pass updated Trade Promotion Authority (TPA) legislation, stifling efforts to complete trade agreements and expand U.S. trade and investment opportunities abroad. And our immigration policy has failed to keep pace with the demands of a modern global economy, threatening America’s ability to attract the world-class talent that it needs to remain an open, innovative and competitive economy.

Solutions to these problems are possible if there is the will to act. Policymakers can reopen America’s doors to the investment needed to drive innovation, economic growth and job creation. To succeed, it is critical that our elected leaders focus their efforts. Priority should be placed on those measures that are meaningful, urgent and ripe for action. Accordingly, the Business Roundtable calls on policymakers to take immediate action on four priorities:

◗ Restore Fiscal Stability

◗ Enact Comprehensive Tax Reform

◗ Expand U.S. Trade and Investment Opportunities

◗ Repair America’s Broken Immigration System

By adopting this four-point plan, our nation’s leaders can lay the groundwork for a strong, balanced and sustained economic recovery. It is time to end the era of governing by crisis. It is time to rebuild a sense of confidence, predictability and optimism among consumers and businesses. It is time for Washington to join the business community in investing in America’s success.

Restoring Fiscal Stability

America’s long-term fiscal trajectory is irresponsible and unsustainable. Mandatory federal spending is rising steadily. Until policymakers act with decisive leadership, these failures will continue to escalate, risking our nation’s economic future and ultimately our social safety net.

While annual federal deficits have recently declined as a result of short-term sequestration policies, the long-term fiscal challenges have yet to be addressed. The overall debt level is already approaching alarming levels. Debt held by the public as a share of gross domestic product (GDP) has doubled in the past five years, rising from 35 percent in 2007 to 70 percent in 2012; government analysts project that it will increase to 100 percent of GDP by 2038.1 This trend is primarily driven by increased spending on federal entitlement programs. For example, mandatory outlays for major health care programs and Social Security are projected to rise from 9 percent of GDP in 2012 to 14 percent of GDP by 2038.2 In addition, as the economy recovers and interest rates rise, interest payments to service the debt will increase as well — leaving fewer resources for the discretionary budget that pays for critical investments in infrastructure, education, and research and development.

Washington’s failure to address long-term fiscal challenges has lowered overall confidence and is undermining investment in America. Despite record-high corporate cash holdings, companies are delaying or foregoing major investments. Evidence suggests that fiscal instability is a key cause of this trend. For instance, in a recent survey by the Business Roundtable, nearly half of CEOs indicated that they were less inclined to hire new workers due to fights in Washington over the 2014 budget and debt ceiling limit.3

This lack of predictability is holding America back from achieving sustained, robust economic growth. Macroeconomic Advisers estimates that fiscal policy uncertainty has reduced annualized GDP growth by 0.3 percentage points and destroyed 900,000 jobs since 2010.4 Similarly, Moody’s Analytics estimates that increased political uncertainty from 2008 to Q3 2013 significantly constrained business investment, reducing real GDP by $150 billion and eliminating 1.1 million jobs.5

The Business Roundtable calls on U.S. policymakers to adopt a more strategic approach to budget and fiscal policy that focuses on predictable and timely fiscal policymaking, thoughtful near-term spending reductions, and measures that strengthen the nation’s health care and retirement system. Specifically:

◗ Congress should pass annual budgets and appropriations bills on time. This would avoid disruptions to government operations and allow an orderly process for necessary borrowing.

◗ Congress and the Administration should constrain federal spending in a manner that reduces long-term spending growth rather than imposing abrupt and arbitrary reductions in near-term outlays.

◗ Congress and the Administration should strengthen Medicare and Social Security by:

Making both Medicare and Social Security more progressive by considering increased means testing of eligible benefits for higher income recipients and increasing the focus on preserving the safety net for low-income Americans.

Updating the method for calculating Social Security cost-of-living adjustments based on the Chained Consumer Price Index, which more accurately reflects the costs people pay.

Preserving the existing system for current retirees and those nearing retirement, while gradually increasing the age at which people receive full benefits from both Medicare and Social Security to 70.

Expanding competitive models of care within Medicare by offering beneficiaries the opportunity to choose among competing and comprehensive private plans and traditional Medicare.

Enacting Comprehensive Tax Reform

America’s unwieldy and outdated tax system is undermining the competitiveness of businesses large and small, holding back economic growth. Policymakers from both sides of the aisle agree that the tax code must be streamlined in a manner that promotes economic efficiency and growth, yet practical proposals have fallen victim to Washington gridlock. Comprehensive tax reform is essential to realizing the U.S. economy’s full potential.

Corporate tax reform is a key component of this overhaul. The global economy has changed considerably in the last several decades, and the corporate tax code has failed to keep pace. The United States imposes the highest corporate tax rate of any Organisation for Economic Co-operation and Development (OECD) country, at 39.1 percent.6 On average, American companies are also subject to higher effective tax rates than their foreign competitors. For example, a study by PricewaterhouseCoopers found that the average effective tax rate for companies with U.S. headquarters was 27.7 percent, compared to 19.5 percent for those with foreign headquarters.7 In addition, the United States is the only G8 country that still uses a “worldwide” tax system, which collects U.S. taxes on the earnings of foreign subsidiaries. The vast majority of OECD countries have modernized their tax systems to tax a company’s sales in foreign markets at local rates.

Burdened by high business tax rates and an outdated method of taxing overseas earnings, the U.S. tax system stifles the business investment that drives innovation, economic growth and job creation. The high corporate tax rate discourages investment at home and places U.S. companies at a competitive disadvantage in the global marketplace for investment and jobs. When comparing different forms of taxation, the OECD characterizes corporate income taxes as “the most harmful for growth as they discourage […] investment in capital and productivity improvements.”9 Furthermore, our antiquated system of taxation severely damages the international competitiveness of U.S. businesses, which increasingly rely on foreign markets for growth and investment opportunities.

Improving the competitiveness of our nation’s corporate tax system would deliver significant benefits. Several studies estimate that cutting the U.S. federal corporate tax rate by 10 percentage points would boost real GDP by a percentage point or more.10 Moreover, transitioning to a modern international tax system would allow companies to return foreign profits to the United States and reinvest them in domestic ventures. For instance, a recent study by economist Laura Tyson found that switching to a territorial tax system would incentivize U.S. multinational companies to repatriate $1 trillion in foreign earnings, boosting U.S. GDP by at least $208 billion and creating at least 1.46 million additional jobs.11 Capturing these economic benefits is essential to realizing the U.S. economy’s full potential.

The Business Roundtable calls on policymakers to adopt a competitive, pro-growth tax framework that promotes economic expansion and levels the playing field for U.S. companies competing in global markets. Specifically:

◗ Congress and the Administration should reform the tax code to enhance the competitiveness of all businesses to fully strengthen the U.S. economy, enhance job creation, and enable American workers and businesses to compete effectively.

◗ Congress and the Administration should reform the corporate tax code in a manner that is fiscally responsible and enhances growth, including (1) encouraging capital investment by setting the corporate tax rate at 25 percent and (2) aligning the U.S. taxation system with other countries by adopting a modern international tax system.

Expanding U.S. Trade and Investment Opportunities

Washington gridlock is holding back efforts to expand U.S. trade and investment opportunities abroad. In particular, Congress has yet to pass updated Trade Promotion Authority (TPA) legislation that would empower U.S. trade negotiators and help complete trade agreements. Repeatedly updated and passed since the 1970s, TPA outlines the nation’s goals for trade negotiations with other countries, establishes a framework for consulting with and seeking input from Congress and other stakeholders at all stages of trade negotiations, and allows the President to bring a completed trade agreement to Congress for an up-or-down vote. By failing to pass updated TPA, Congress weakens the hands of U.S. trade negotiators and undermines their ability to open new markets for U.S. goods and services while ensuring a rules-based, two-way trading system.

International trade and investment are important engines for U.S. economic growth and job creation. More than 30 percent of U.S. GDP is tied to international trade and investment.12 International trade alone supports more than one in every five U.S. jobs.13 U.S. engagement in the international marketplace will become even more important in the coming years, as more than 95 percent of the world’s population and 80 percent of its purchasing power lie outside the United States.14 If the U.S. economy is to realize its full potential, policymakers must aggressively pursue opportunities beyond the nation’s borders.

The successful completion of pending and future trade agreements is critical to that endeavor. The United States is currently pursuing a range of trade agreements, including the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the Trade in Services Agreement (TISA), and an expansion of the 1996 World Trade Organization (WTO) Information Technology Agreement. These agreements would expand U.S. exports, boost economic output and support millions of American jobs. Securing TPA is a critical step to realizing these economic benefits.

The Business Roundtable calls on U.S. policymakers to take action to fully capitalize on U.S. trade and investment opportunities. Specifically:

◗ Congress and the Administration should work together to pass updated TPA legislation as soon as possible.

◗ Congress and the Administration should aggressively advance and finalize high-quality trade and investment opportunities in the TPP, TTIP, TISA and expanded WTO Information Technology Agreement.

◗ Congress should reauthorize the U.S. Export-Import Bank to help U.S. companies compete for sales abroad and support the U.S. jobs that depend on those sales.

◗ The Administration should continue to implement reforms to outdated U.S. export controls.

Repairing America’s Broken Immigration System

America, once a beacon for diversity and innovation, is now turning its back on a wave of talent and entrepreneurship. While the forces of globalization and international competitiveness have never been stronger, current U.S. immigration policies discourage foreign students and essential workers from joining the labor force, imparting their expertise and contributing to the economy.

Policymakers from both sides of the aisle agree that the immigration system is broken. An estimated 11 million immigrants currently reside in the United States illegally, raising important concerns related to border security and law enforcement. Nearly two-thirds of this population have lived and worked in the United States for more than a decade.15 In addition, existing legal channels for attracting foreign workers are cumbersome, and the protracted process costs U.S. employers the chance to retain talented foreign students or persuade foreign nationals to relocate. The partisan politics of Washington have prevented practical solutions from being adopted. Our nation surely can find a way to manage border and security concerns while benefitting from the energy, innovation and skills that immigrants can bring to America.

Immigration fuels entrepreneurship, as immigrants are nearly twice as likely to start a new business as U.S.-born individuals.16 It produces widespread employment benefits, with studies estimating that each temporary work visa for a skilled worker or less skilled nonagricultural worker supports an additional 1.8 to 4.6 jobs for U.S. natives.17 And the impact of successful reform would resonate throughout the economy. For example, the Bipartisan Policy Center estimates that over the next 20 years, immigration reform could boost economic output by 4.8 percent, add as many as 8.3 million jobs and reduce the deficit by $1.2 trillion.18 Balanced, sensible immigration reform is a critical step toward realizing the U.S. economy’s full potential.

The Business Roundtable calls on policymakers to fix America’s broken immigration system and recommit our nation to attracting the brightest minds and hardest workers from around the world. Specifically:

◗ Congress and the Administration should improve security and better enforce immigration laws, in part by increasing resources for border security and requiring all U.S. businesses to use the E-Verify system.

◗ Congress and the Administration should welcome legal immigrant workers to contribute to America by increasing visas for higher skilled workers and establishing a new system for lower skilled workers.

◗ Congress and the Administration should find a solution to integrate undocumented immigrants into our society and allow those already residing in the United States to come forward, pay a penalty, and earn a legal status so they may work and travel freely.

Conclusion

Washington inaction continues to undermine the U.S. economic recovery. Despite recent progress, policymakers have largely failed to address long-term fiscal imbalances, significantly reducing the predictability that consumers and businesses need to make long-term investment decisions. The existing corporate tax system, marked by high tax rates and an outdated method of taxing overseas earnings, discourages U.S. companies from locating and hiring here at home. By failing to pass updated TPA legislation, policymakers have stifled efforts to complete key trade agreements and expand U.S. trade and investment opportunities abroad. And the failure to fix America’s broken immigration system is threatening the nation’s ability to attract the world-class talent that it needs to compete and win in the modern global economy.

Fortunately, these challenges are not insurmountable, and thoughtful, long-term solutions are well within Washington’s reach. Policymakers have the means to reopen America’s doors to the investment that it desperately needs to realize its full potential. By adopting a responsible approach to fiscal policymaking, modernizing the business tax system, expanding trade opportunities abroad and implementing sensible immigration reform, Washington can join the business community in investing in America’s success.

Business Roundtable (BRT) is an association of chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy. To learn more about the BRT, visit www.brt.org.

How Big Business Hurts Economies and Destroy Jobs

Why Small Business Is The Engine of Every Growing Economy Big businesses work great for investors, but when it comes to building economies or creating jobs, they are a failed experiment. A wide array of research has recently proven they actually have the opposite effect; they hurt economic growth and destroy jobs. It is the small and local businesses, particularly those starting up, that data shows are the engine of economies and job growth.

Big Businesses Destroy Jobs

In 2010, the Kauffman Foundation published its groundbreaking research on who creates jobs (The Importance of Startups in Job Creation and Job Destruction – July 2010). Since then a lot of other researchers have confirmed their findings.

Using newly available data from the U.S. government called Business Dynamics Statistics (BDS), Kauffman concluded that all business more than one-year old, including those that are centuries old, are “net job destroyers, losing 1 million jobs net combined per year.” It turns out 100% of job growth actually comes from brand new companies in their first year of growth. 98% of those startups will never be bigger than nineteen employees, 99.6% will never have more than one hundred. Startups that will almost all exclusively stay small are the engine of job growth, and bigger, older businesses destroy jobs.

General Motors is a classic example. Started as a holding company in 1908, it bought companies like Buick, Chevrolet, Cadillac, Oldsmobile and many others. Every time it acquired on of those companies, GM laid off a high percentage of “redundant” workers. Everybody touts the 200,000 jobs GM provides, but if you take into account the jobs they have destroyed over the last 100 years by swallowing other companies, the net effect is more like a negative 200,000 jobs.

Big Businesses Slow Down Economies

Stephan Goetz, professor of agricultural and regional economics at Penn State and director of the Northeast Regional Center for Rural Development, says small businesses are good for the economy and big businesses are generally not. In his research, “Big companies that employ more than 500 workers and that are headquartered in other states are associated with slower economic growth.”

“Many communities try to bring in outside firms and large factories, but the lesson is that while there may be short-term employment gains by recruiting larger businesses, they don't trigger long-term economic growth.” Goetz says a better strategy to promote economic growth is to encourage local businesses rather than recruiting large outside firms. “We can't look outside of the community for our economic salvation,” Goetz said. “The best strategy is to help people start new businesses and firms locally and help them grow and be successful.”

Big Businesses Don’t Create or Innovate

One of the serious side effects of big businesses growing by acquisition is the effect it has on innovation. All of General Motors’ successful car lines were created by entrepreneurs, then swallowed up by GM, which itself has only created one internal car line in its 105 year history, the Saturn line, which failed. This is not atypical. One of the reasons large companies want to acquire small ones is because they produce 16.5 times as many patents per employee than large companies, and virtually all the game-changing innovations come from the Smalls. Big companies rarely do anything new.

Big Businesses Create Recessions

Big businesses also create recessions, something no small business has ever done. Before the 1850s, only governments had created recessions, usually by bone-headed decisions around devaluing currency, and then only rarely. In 1873, Jay Cooke’s bank failed, which took down Henry Clews bank, creating a chain reaction that took us into a depression that lasted until 1880. Sound familiar? In 1907, J.P. Morgan set off a national depression by a few very calculated comments about risky Wall Street investments intended to drive down the stock of his competitors so he could buy them cheaply. Ever since then, big business has taken over the central role from government in bringing down economies.

Big Businesses Drain National Treasuries

The bank bailouts of 2008, which started at $500 billion and ballooned to over $1.2 trillion by 2009, were deemed necessary to keep the world economy from collapsing. After accepting the money, the banks turned around and took away the credit lines of virtually every small business in America with under $1 million a year in revenue, without consideration of credit worthiness. It simply made their books look better.

This lack of credit for small businesses, those Kauffman and others claim are the engine of all job growth, continues today and is considered by many, including this author, to be the central reason we have experienced the slowest recovery since the Great Depression of the 1930s. Big businesses have always caused recessions and small ones have always brought us out. This time the Smalls are hobbled by lack of credit and have not been able to play their role.

Big Businesses Lobby to Be Seen as Small

The Small Business Administration has been just as destructive to small business. From 2008 through 2013 the SBA, under the leadership of Karen Mills, set about the biggest expansion of the definition of “small” since its inception in 1953. As a result, tens of thousands of extremely large corporations with $30-plus million in revenue and 500-plus employees were reclassified as small. The banks that work closely with the SBA had lobbied for this for years and rejoiced. Over the last couple years, you regularly see the SBA and the banks putting out press releases about how small business lending has increased. But this expansion of the definition of “small” tells a different story.

Big Businesses Receive Loans That Should Go To Small Business

The 98% of small businesses with 1-19 employees (98% of all businesses) need loans of $50,000 to $250,00. In 2008, the average SBA loan was $180,000 and 24% of them were under $100,000. In 2013, the average SBA loan was a bloated $485,000 and less than 9% were under $100,000, and declining. The SBA and their banks are making much bigger loans to a lot fewer, much bigger corporations, and claiming they are helping small businesses. Nothing could be further from the truth. The SBA is as infatuated with Big as the rest of the world.

Big Business Benefits From Government Regulation (Crony Industrialism)

Government attempts to regulate big businesses to lessen their effect on the economy have also hurt the Smalls and helped the Bigs. Dodd-Frank, which big businesses helped write, was signed on July 31, 2010. It was supposed to keep banks from being a threat to our national security. But instead it created such onerous requirements that small banks and small mortgage companies were crushed under the weight of them. The Bigs just added a few lawyers and accountants and went about acquiring the Smalls. By 2011, the top 15 banks in the U.S. were all larger than when they were deemed “too big to fail.” In an attempt to regulate the negative effect big businesses can have on the economy, they made it more likely.

What’s To Like?

So the facts are that big businesses create recessions and depressions, are national security threats, have proven to be net job destroyers, require government bailouts, encourage politicians to create bad regulations, and are infamous for crony industrialism and lack innovation.

But as long as the Bigs are the main source of political contributions for all politicians, the deck will continue to be stacked against the Smalls, which are the true engine of every economy. Every successful economy in the world is founded on 98% or more of the businesses with one to nineteen employees because small and local companies make the world go round. The sooner we get over our infatuation with Big, the better.

Chuck Blakeman, World-Renowned Business Advisor and Best-Selling Business Author of Making Money is Killing Your Business and Why Employees are ALWAYS a Bad Idea

Broad Industry Growth Will Lead to Record Jobs in Colorado

The following economic projections and commentary were compiled from various products of the Business Research Division at the Leeds School of Business. Primary sources are the 2014 Colorado Business Economic Outlook, the Colorado Secretary of State Quarterly Business & Economic Indicators Report and the Leeds Business Confidence Index. Job growth was strong in Colorado in 2013, with the state adding 68,100 jobs, a gain of 2.9%. This is the highest rate of employment increase since 2000. This growth accelerated to a rate of 3.0% in February 2014, with 70,900 jobs added compared to February 2013. In June 2013, the state surpassed the previous peak employment reached in May 2008. The consensus of the 2014 Colorado Business Economic Outlook estimating committees is that employment growth will continue in 2014, with the state adding 61,300 new jobs. The fastest growth is being observed in the Greeley, Fort Collins-Loveland, Denver-Aurora-Broomfield, and Boulder metropolitan statistical areas (MSAs).

New business filings from the Colorado Secretary of State’s Office serve as a leading indicator of employment. Business filings fell slightly in Q1 2014, to 26,522, despite increases in existing entity renewals and entities in good standing. New entity filings remained near record highs despite this slight drop of 0.1% in comparison to Q1 2013, with a five-year compound annual growth rate of 5.3%. Despite the aforementioned drop in Q1 filings, annual new business filings rose 3% over the past year. This relationship between new business filings and employment in Colorado signals continued employment expansion in the first half of 2014. Existing entity renewals numbered 118,167, an increase of 7.3% in comparison to Q1 2013. Likewise, the Leeds Business Confidence Index (LBCI) indicates further growth in 2014 as the index increased from 59.9 to 61 in the Q2 2014 survey. Expectations above 50 show a positive economic outlook for the upcoming quarter. Improvement coincided with improving economic conditions and subsiding political risks. Compared to the Q1 2014 survey, respondents’ confidence improved for all metrics except capital expenditures. The greatest gain was in expectations for profits, which rose 3.4 points. Large companies were notably more optimistic than small companies. Sales expectations rose to 62.7 while profits rose to 61.3. Capital Expenditures slipped to 58.6, yet remained strongly positive. Hiring expectations rose slightly, from 59.3 in Q1 to 59.6, in Q2. Around 43.5% of respondents were neutral on hiring, while 46.4% were positive.

Over the past 10 years, goods-producing industries lost a net 25,000 jobs; however, in 2013 the industry saw growth, adding 12,800 jobs, or 4.6%. Services-producing industries gained 253,300 jobs and an accelerated growth of 2.7% in 2013, up from 2.3% in 2012. Both goods- and services-producing sectors are anticipated to add workers in 2014.

Highlights on the goods and services industries follow.

GOODS-PRODUCING INDUSTRIES

The goods-producing sector includes Agriculture, Natural Resources and Mining, Construction and Manufacturing.

Agriculture — While total cash receipts to farmers and ranchers are projected to decline into 2014, expenses are anticipated to moderate only slightly. Real interest rates remain low, and fuel prices are up over the past month, despite an overall downward trend. The year 2014 might be viewed as a transitional one in which both farmers and ranchers make adjustments stemming from lower corn prices. Net income is projected to fall by about 7%, to $1.48 billion, in 2014.

Natural Resources and Mining — Colorado has abundant natural resources, ranging from coal and natural gas to molybdenum and uranium. In 2013, Natural Resources and Mining saw 200 jobs added, or 0.7%. This is significantly down from 2012, when the industry was adding jobs at a rate of 8.6%. The value of production is anticipated to increase in 2014 for oil, natural gas, carbon dioxide, coal, minerals and uranium. This has translated into a promising growth in 2014, adding 6.1% over 2013 through February.

Construction — The greatest casualty of the recession, this industry is exhibiting strong year-over-year growth in permits, values and employment. Total value of Construction is estimated to rise 14.8% in 2014, to $15.1 billion. The largest increase is attributable to residential construction, which will grow to more than $1.4 billion in 2014. Non-residential projects recorded a decrease of 18% and non-building plummeted 38%. Residential increased 7% year-over-year in February. Total housing permits are expected to rise to 33,500, with 17.5% growth marked by year-over-year gains in both single-family and multifamily units. Employment will increase by 11,000 jobs, or 8.4%, in 2014.

Over the past year, home prices have climbed by 8.2% in Colorado according to the Federal Housing Finance Agency (FHFA). This gain was attributed to increases in six of the state’s seven MSAs: Denver-Aurora-Broomfield (10.9%), Boulder (9.4%), Fort Collins-Loveland (8.5%), Greeley (7.3%), Grand Junction (5.7%) and Colorado Springs (3.1%).

Manufacturing — Following a decade of decline, Manufacturing employment is expected to increase for the fourth consecutive year, ending 2013 with 1,900 jobs added (+1.5%) and 2014 with 1,700 more jobs (+14%). This growth will be mostly in the Durable Goods Sector. The services-producing sectors include Trade, Transportation and Utilities; Information; Financial Activities; Professional and Business Service; Education and Health Services; Leisure and Hospitality; and Government.

International Trade — Colorado’s merchandise and commodities exports experienced strong growth last year. Strength included electronics, beef, medical and surgical equipment, orthopedic appliances and engines and motors. Despite this, the state still ranks only 36th among U.S. states in dollar value of merchandise and commodities exports. Colorado’s manufactured exports and commodities are projected to grow 10% in 2014, to $9.8 billion in sales.

SERVICES-PRODUCING INDUSTRIES

The Service Producing industries include Trade, Transportation and Utilities, Information, Financial Activities, Professional and Business Services, Education and Health Services and Government. The outlook for services employment shows growth in all sectors but Information in 2014.

Trade, Transportation and Utilities — TTU employment is anticipated to increase by 9,100 in 2014 due to growth in wholesale and retail trade. Transportation and Warehousing employment increased in 2013, and Utilities recorded no net change. It is projected that Denver International Airport will record more than 52 million passengers in both 2013 and 2014. Retail sales are anticipated to rise 5% in 2014, following 4.2% growth in 2013.

Information — A best-case scenario is that the Information Sector will remain flat in 2013 and post a modest decline in 2014. In 2013, growth in telecom, software publishing and film outweighed losses in traditional publishing. It is anticipated that many of the losses related to the telecom merger between CenturyLink and Qwest have already been absorbed in the Denver Metro region.

Financial Activities — The Financial Activities Sector began rebounding in 2013, adding 4,000 jobs. Despite some employment declines related to reductions in mortgage refinancing, the sector is still expected to add 2,700 jobs in 2014, with most activity concentrated in banking and other finance and insurance activities. Increased regulation and tepid loan demand will continue to impact the industry.

Professional and Business Services — Employment in this sector will increase by 14,200 jobs in 2014, building on gains in the Professional, Scientific and Technical Services subsectors related to Colorado’s high-tech industries and research institutions. Growth in the sector may be stronger if political and fiscal uncertainty subsides.

Education and Health Services — Private education and health care services are expected to add 8,000 jobs in 2014, demonstrating resilience both during and after the recession. Most of the growth has been in health care, driven by population growth and demographic shifts.

Leisure and Hospitality — Despite a number of setbacks in 2013 (e.g., fires, floods, drought), the Leisure and Hospitality industry added 10,100 jobs. The 2014 forecast calls for 7,500 additional jobs, mostly in the Accommodation and Food Services Sector. This forecast rests on a number of assumptions, including average snowfall and reasonable gasoline prices.

Government — Government is expected to add jobs in 2014, but not at all levels. Federal government is expected to shed jobs in 2014, continuing a trend that coincided with economic recovery in 2010. Sequestration will impact both direct federal jobs, as well as federal contractors. State and local government are adding jobs, with a portion of the increase related to education. Population continues to grow, pressuring the public education system to accommodate a growing student number of students.

SUMMARY

Colorado will continue to record employment growth that will place it in the top five states for growth in 2014 with the unemployment rate remaining below 7%. With respect to population, Colorado is the seventh-fastest growing state in the nation in percentage terms and the ninth fastest in absolute terms. Population growth in 2014 is projected at 1.7% with a healthy amount of in-migration contributing to this scenario.

The forecasted employment growth will be broad based, although some sectors will do better than others. The information sector is forecast to continue the weak employment situation it has experienced since the recession of 2001. Agriculture production and tourism will continue to be impacted by volatile weather fluctuations and natural disasters of the past several years.

An additional bright spot is the value of homes. Home prices will continue to grow in Colorado as inventory is absorbed, foreclosures abate and more homeowners elevate from being underwater in their mortgages. Tightening inventory and more stable households are driving appreciation in all Colorado MSAs except Pueblo.

With Colorado’s skilled workforce; high-tech, diversified economy; relatively low cost of doing business; global economic access; and exceptional quality of life, the state is poised for long-term economic growth.

For more information on each industry sector, visit leeds.colorado.edu/brd.