Regional Report: The Mountain States Climb with Green Energy and Bioscience
Energy, biosciences, and manufacturing sectors are helping the Mountain States find economic stability during the Great Recession - and beyond.
Lisa A. Bastian (September 2010)

As the recession continues to disrupt the economy, the Mountain States of Colorado, Idaho, Montana, Nevada, Utah, and Wyoming are building up business in traditional and emerging sectors, and preparing their communities to prosper in post-recession America. While employment rates in some of these states still present challenges, new industries, especially in the renewable energy sector, are encouraging an upward economic climb.

Positive Economic Indicators
Recent studies reflect the economic success of the Mountain States. Each month, up to 400 supply managers employed by manufacturing, mining, and utilities companies in Colorado, Utah, and Wyoming provide data for the Mountain States Leading Economic Indicator survey. The Goss Institute for Economic Research, a Denver economic development think tank, conducts the survey.

"If our survey respondents are seeing things good right now, then that indicates the economy will be good in about six months," says Ernest Goss, Ph.D., institute director and Jack A. MacAllister Chair in Regional Economics at Omaha's Creighton University. The June 2010 survey is optimistic, as it reveals "an overall consensus that the economy is crawling out of the recession. That will occur probably in the second half of 2010," Goss says.

The indicators have markedly improved from surveys conducted during the second half of 2009. June's results represent the ninth consecutive month that the leading economic indicators have been above "growth neutral."

How accurate is the monthly survey? In the past it's done a "pretty good job" of determining the direction of the regional economy, Goss says. Much of the anticipated recovery has to do with improvements in manufacturing. "The export market is looking better," Goss says. "We're seeing mining and natural resources industries improving even as oil prices have remained fairly stable."

The Gulf Coast oil spill and general concerns about off-shore drilling have renewed interest in land-based onshore drilling in Wyoming, Colorado, and Utah. In Wyoming, "there are some new areas of discovery where there will be increased drilling," Goss says. "The outlook is looking very promising."

Regarding alternative energies, wind and solar production in these three states is good, but "not as strong as advertised," Goss says, attributing slow growth to the federal government. "It takes a while for government policies and programs to be put in place, and business leaders are [still] trying to figure out where these policies are going," he says. And issues about distributing the alternative energies within and outside the Mountain States persist.

Other survey results show that supply managers reported significant commodity price bubbles, and that hiring was increasing while layoffs were decreasing. "Again, the overall economic numbers are better, but we're still not back to pre-recession levels," Goss says. "We have a ways to go yet."

Future Alternative Energy Boom
Clean Energy Leadership in the Rockies: Competitive Positioning in the Emerging Green Economy, a report by Headwaters Economics of Bozeman, Montana, provides encouraging news for the region's alternative energy initiatives. It focused on indicators of green economic success and policy leadership in Colorado, Montana, Utah, Wyoming, and New Mexico.

The green economy, as defined by the report, encompasses businesses and people providing services and knowledge associated with alternative energy production, recycling, energy efficiency, and cleanup of environmental pollution.

The report found a strong relationship between energy policy and job creation, says author Julia Haggerty, a Headwaters research analyst. "The most successful states have the ability to attract both private and public capital, and then turn these fledgling green industries into mature industries," she says.

Federal and state regulations from the 1960s and 1970s, such as the Clean Air Act and Clean Water Act, have provided the foundation for much of the region's current success in implementing environmental protections. "We're just beginning to see the impact of state renewable portfolio standards and programs enacted in the past five to 10 years," Haggerty says, and the impact on future green energy growth could be powerful.

The region's green energy sector attracts significant investments. Between 2006 and 2008, the area's venture capital investment totaled almost $800 million, with Colorado ranking fifth among all U.S. states, the report noted. So it's not surprising that in 2007, half of the 3,567 regional green establishments were based in Colorado. Utah and New Mexico were each home to 16 percent of them, Montana housed 11 percent, and Wyoming recorded 6 percent.

In 2008 the states attracted over half a billion dollars in venture capital towards clean energy, "a ten-fold increase compared to 2000 levels," the report stated. Competitive stimulus funding awarded through the U.S. Department of Energy totaled nearly $1 billion, with Colorado and New Mexico claiming a combined 70 percent of the region's total, in addition to the millions of federal stimulus dollars delivered through formula-based grants." When looking at the entire region from 1995 to 2007, overall job growth was 19 percent, while the core green economy job growth measured 30 percent.

The five states, already among the nation's top 16 energy producers thanks to abundant coal and natural gas resources, "are well-situated to lead in renewable energy production," the report predicts. "Wyoming is practically the coal mine to the nation, selling nearly four times as much coal in 2008 than the next runner-up, West Virginia," according to the report.

As an added bonus, some of the states also have "skilled work forces, leading public/private research institutions, and supportive state and local governments" necessary to encourage energy generation and efficiency.

Growth in Biosciences
While bioscience activity is not as red-hot compared to other U.S. regions, some Mountain State investments are solid and tied tightly to future growth associated with sectors ranging from biofuels to pharmaceuticals and medical instrumentation.

The latest Battelle/BIO State Bioscience Initiatives 2010 report, published in May by Biotechnology Industry Organization (BIO), provides a snapshot of employment and growth trends from 2001 to 2008 from local, state, and national biotech statistics. According to the report, academic bioscience R&D expenditures for Colorado totaled $437 million in 2008, $244 million in Utah, $116 million in Montana, $59 million in Idaho, $51 million in Nevada, and $40 million in Wyoming.

Colorado's bioscience industry has increased its employment base by approximately 26 percent since 2001, the report found. "Venture capital investments in Colorado bioscience companies totaled $1.46 billion in the last six years, placing the state higher than its population rank," the report stated. "The largest venture investment category was human biotechnology, with smaller but significant shares in biofuels and industrial biotechnology." The biggest share of the state's 1,528 patents during the same period was in surgical and medical instruments, followed by biochemistry, drugs, and pharmaceuticals.

In 2008 Colorado Governor Bill Ritter signed into law a measure pumping $26.5 million into the state's bioscience industry by expediting the sector's research-to-marketplace activity. Two years later, Colorado is home to over 350 diverse bioscience companies supporting over 16,000 direct, high-paying biotech jobs and 20,000 indirect jobs. The Colorado Bioscience Association is leading the development of a world-class bioscience cluster.

In the health sector, Fortune 400 kidney care provider DaVita of El Segundo, California announced in July that it had chosen downtown Denver for its new headquarters. Up to 900 employees are expected to work in the company's future $101 million, 270,000-square-foot building.

In its report, BIO says Utah, the second most active state for biosciences, has employment concentrated in medical devices and equipment, followed by drugs and pharmaceuticals. "Venture capital invested in Utah's bioscience companies during the last six years totaled $287 million," the report stated. "Most VC funds were invested in medical therapeutics and human biotechnology. The 1,028 bioscience patents issued to Utah inventors during the same six-year period were led by surgical and medical instruments.

View From The Fed
Rob Valletta, a Federal Reserve Bank of San Francisco economist, follows the economies of Nevada, Utah, and Idaho. The hardest hit state by the recession is Nevada, he says. In June its unemployment rate hit 14.2 percent, the highest of the 50 states. "It has remained stubbornly high in the last few months," Valletta says. The state's struggling housing market, which was "very hot" prior to the recession downturn, has contributed to its economic troubles. "But just as fast as it soared, it plunged during the downturn," Valletta says. Construction, too, has struggled.

Tourism and gaming, Nevada's top industries, took big hits. But with in-state consumer spending on the rise, there are signs of life for the sector with an increase in employment, but not significant growth, so far this year. "Tourism is the key determining factor for Nevada's health," Valletta says. "There is no other emerging industry ready to take over during a downturn, so as goes that sector goes the whole state." Overall, "Nevada is hard hit and in pretty bad shape, but showing signs of stabilizing," he says.

Idaho's economic health is in the middle of the pack compared to all 50 states. Unemployment in June reached 8.8 percent, slightly higher than the U.S. average. High-tech manufacturing is a key industry, with many jobs in memory chip production. That sector had been struggling prior to the downturn, and was then severely damaged due to lack of demand for computers and associated hardware once American consumers tightened their belts.

Fortunately, when the IT industry picked up steam across the country in the middle of 2009, Idaho benefited. "The state is still losing jobs in the IT sector and still struggling," Valletta says. "We have not seen any employment growth there, but earnings reports from key companies are up."

Boise's Micron Technology, a large semiconductor producer, has posted "positive income" for the last three quarters, Valletta says. In non-IT sectors, employment "seems to be growing at a solid pace."

Utah's diverse economy wasn't hit as hard as the other two states, Valletta says, and much of that has to do with the state's active natural resources of gas and energy, and manufacturing. Both helped offset negative activity in other sectors. "Also, Utah did not experience as severe a housing market downturn as did the other Mountain States," points out Valletta. Its 7.2 percent unemployment rate, the fifteenth lowest in the country, is another plus for the economy.

CEOs Weigh In
In a survey by Chief Executive magazine of the best states for business in 2010, three of the six Mountain States were among the top 10. More than 600 CEOs rated all 50 states on criteria including work force quality, living environment, regulation, and taxation. Nevada took the fifth spot, followed by Colorado in eighth, Utah in ninth, Idaho in thirteenth, Wyoming in fifteenth, and Montana in twenty-eighth.

There's no doubt that the Mountain States, known nationally for their pro-business economic development assets, support a wide variety of new and expanding businesses. As the recession winds down, they will be an integral part of the solution of getting America back on track and regaining lost ground in the global economy.

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