March 2010 —Mountain Monitor: Tracking Economic Recession and Recovery in the Intermountain West’s Metropolitan Areas

Drawing on data covering the fourth quarter of 2009 (ending in December), this new Mountain Monitor—a companion product to Brookings’ national MetroMonitor and a quarterly resource produced by Brookings Mountain West, a partnership between Brookings and the University of Nevada at Las Vegas—surveys a region that is at once recovering and still struggling.

Previously, the Intermountain West has been almost impervious to national declines over the last 30 years. Construction growth looked automatic. Job growth seemed a given. And when there were recessions as in the 1980s and 1990s they were—in retrospect—mere blips in a steady upward trajectory.

And yet now, the region’s very strengths have become its greatest weaknesses as what was taken for granted now remains elusive. For example, the once unstoppable housing sector now represents one of the heaviest drags on the region’s recovery, dampening the usual rapid snap-back of hiring.

In sum, the region is having to consider what may fuel the next era of growth, job creation, and broadly shared prosperity.

To this end, this edition of the Mountain Monitor examines data on employment, unemployment, output, home prices, and foreclosure rates for Intermountain West’s 10 large metropolitan areas, the nation’s 100 largest metros, and 17 smaller metros dispersed around the Mountain region through the fourth quarter of 2009.

It finds that:

The Mountain region’s recovery spread during the fourth quarter of 2009, with all 10 of the region’s large metros posting robust output growth for the second quarter in a row. Two metros—Ogden and Albuquerque—have, in fact, fully achieved their pre-recession output peaks. Over the third and fourth quarters, Colorado Springs, Denver, and Ogden posted the largest gains in gross metropolitan product (GMP) among large Mountain metros with quarterly growth rates above 2.0 percent. Only Las Vegas significantly trailed the national average of 1.6 percent on GMP growth.

Employment recovery continues to elude the Intermountain West, however, as employment in the region’s largest metropolitan areas declined another 0.4 percent in the fourth quarter—a performance that tracked with broad national trends. So far only Albuquerque and Ogden have achieved job growth, though metro Phoenix at least saw further losses cease in the fourth quarter. In no case, though, has any of the region’s metros returned to its peak prerecession employment level. In fact, Las Vegas and Tucson continued to shed jobs at a faster rate than their regional neighbors and the average large metro.

The slowness of the job recovery is new for the region: For the first time in at least three decades the Mountain West’s job recovery is lagging the nation’s. Subsequent to the last three national recessions, employment in each of the Intermountain West metro areas recovered faster than the national average and, with one exception, fully recovered eight quarters after the start of the recession. The 1981 recession began in the third quarter of 1981. Two years later, the large metros of the Intermountain West had 2.9 percent more jobs than they had at the beginning of the recession. Only Las Vegas lagged behind its pre-recession employment level with 1.4 percent fewer. The recession of 1990–1991 was even milder: Every Intermountain West metro ended up with more jobs two years later than they had when the recession started—an average of 4.9 percent more. The 2001 recession was somewhat more severe. The average Intermountain metro had 1.7 percent fewer jobs two years later than when the recession started, but Las Vegas, Phoenix, and Boise had more. Now, two years after the start of the Great Recession, the Intermountain West possesses 6.1 percent fewer jobs than it had when the recession started.

Also troubling is the continued failure of a housing market recovery to materialize in the region; housing market declines actually accelerated in the fourth quarter. In fact, for nine of the 10 major metros in the Intermountain West year-over-year house price declines were more severe in the fourth quarter than in the third. House prices fell an inflation-adjusted 12.6 percent in the Mountain region from the fourth quarter of 2008 to the fourth quarter of 2009, compared to 6.5 percent nationally and 7.2 percent in the nation’s largest metros. The rate of real-estate-owned properties (REOs) remained exceedingly high in some of the region’s metros, but the most severe cases—Las Vegas and Phoenix—saw large and much needed declines in REOs over the last quarter.

Despite these developments, however, the 2000s have not been an entirely lost decade for the large metros of the region. Nationally, the recession has erased almost all of the decade’s previous job growth. By contrast, the large metros of the Intermountain West still possess nine percent more jobs than they started the decade with, given their torrid pre-recession growth rates. Las Vegas—notwithstanding the devastation of the last two years—still retained 23.3 percent more jobs at the end of 2009 than it did at the end of 1999. Provo retained 17.7 percent more jobs; Phoenix and Boise were 11 percent ahead of where they were a decade ago. In this respect, while job losses during the recession knocked metropolitan job growth back by 4.5 years in the region, that blow was actually less severe than the national set-back of 5.75 years and the 5.25-year blow suffered by large metros on average. In other words, despite everything, the Intermountain West is still a larger and more important engine of economic activity now than it was at the beginning of the decade.

Also encouraging has been the ability of metropolitan education levels to minimize distress in some metros. On balance, metropolitan education levels continued to predict better economic performance and lower unemployment rates across the Mountain West. Denver and Colorado Springs, which have weathered the recession rather well, excel by this measure. Another metro with solid performance on GMP and unemployment, Ogden, is fourth among large metros on high school diploma completion.

Similar to their larger their larger neighbors, finally, the small metros of the Intermountain West also exhibited considerable progress toward a full output recovery, but have yet to begin to recoup the massive number of jobs they have lost. All but four of these 17 metros have recovered their pre-recession output levels. This achievement owes largely to rapid growth at the end of 2009. Like their larger regional counterparts, moreover, the smaller Intermountain West metros have fared relatively well on unemployment rates—perhaps, in part, because of outmigration—but seen massive job losses and housing price busts. Even as job losses continued to mount, in this respect, the 2.6 percent increase in the unemployment rate for the year ending in the fourth quarter was lower than it was for year ending in the third quarter (3.1 percent). This means that a job recovery has not yet taken hold, but it may not be far off. There remains, of course, considerable variation across these metropolitan areas, with metros in states like Arizona (take Yuma and Lake Havasu City) and Nevada (Reno) suffering far worse than their counterparts in New Mexico (Las Cruces, for example) and Colorado (Fort Collins and Boulder).

Overall, the economic pulse of the Mountain metros tracks with the national story of a modest, tentative, variegated, and jobless recovery. Growth is back but not job growth, and so the winter of 2009–2010 is a time of anxiety both nationally and in the West. And yet, the moment may be especially troubling to those who reside in the Intermountain region. For the first time in 30 years, after all, the Mountain metros—large and small—are this winter living through a troubling new experience of tested resilience and slower rather than faster job recovery by comparison with the nation.