Regional economic forecasts employment growth to slow down in 2008: Clean energy offers bright spot

By Martin Shields, contributing writer

The Northern Front Range economy continues its rather unremarkable recovery from the 2001 recession. Over the past six years, employment growth in Larimer and Weld counties has averaged 1.4 percent per year. In 2005-06, the region’s job totals grew by 2.8 percent (5,730 jobs).

Although this is down substantially from the 4.2 percent annual average in the 1990s, it has generally been in line with or outpaced the Colorado and U.S. economies, and the region continues to enjoy relatively low unemployment rates.

Our employment forecasts for 2008 show the regional economy should grow at a modest 1.9 percent rate. By comparison, we expect state employment to increase by 1.0 percent. Things could be better, but they are not so bad.

Clean-energy opportunities

While overall regional growth is expected to slow, emerging clean-energy technologies offer unique opportunities to help stem recent job losses in manufacturing. In a study unveiled at the 2008 economic summit, my colleague David Keyser and I identified several clean energy sectors in which the region currently has a substantial presence.

First, the region boasts international companies developing core renewable energy technologies, including wind power, solar photovoltaics, and biomass. Additionally, Northern Colorado is home to a variety of businesses focusing on the efficient utilization, distribution, and end uses of clean energy – from smart electric grids to more efficient engine controls to green-building applications.

Together, these sectors have a substantial impact on the regional economy. In 2006, 33 firms and organizations employed 2,132 workers in Northern Colorado’s clean energy cluster. This is a 53 job increase (2.5 percent) from 2001 and a 152 job increase (7.4 percent) from 2005.

And the clean-energy cluster’s economic impacts extend beyond its employees and the wages they are paid. For example, the cluster creates additional jobs at other stages of the industry supply chain as clean energy workers spend money in the local economy. In our analysis, we estimate the cluster creates 1,087 jobs through multiplier effects. In sum, then, we find the clean-energy cluster supports 3,219 total jobs in the Northern Colorado economy, and provides households with $236 million in earnings income.

Clean-energy economy

How do we grow Northern Colorado’s clean-energy cluster? The 21st century clean energy economy is many things and will occur in many places. Northern Colorado, however, is uniquely positioned to provide global leadership in several areas.

Recent research on the role of universities in economic development suggests that small and medium-sized cities are the ones most likely to benefit from university-based research activities. The argument is that knowledge spillovers substitute for other agglomeration advantages enjoyed by larger places. Given Colorado State University’s commitment to developing its Clean Energy Supercluster, it is poised to take on a larger role in the regional and state economies.

Still, while CSU is certainly a technology leader, the University must position itself as more than a source of scientific ideas and spin-off firms. Although such outcomes are definitely successes, research universities in fact play a more fundamental role, owing to their ability to both provide and attract talent and civic leadership for the local community.

Martin Shields is a regional economist and an associate professor of economics at Colorado State University.