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COVID vaccine has Colorado business leaders optimistic — but not immediately

The Leeds Business Confidence Index for the first quarter found the needle didn’t move much from the end of 2020. However, confidence for the second quarter “improved largely on positive news about the vaccine and the hopes of a real reopening of the economy,” according to the report from the Leeds Business Research Division at the University of Colorado Boulder. 
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The rollout of the COVID vaccine has improved Colorado business leaders’ outlook for the coming year. But their positive outlook is tempered with a dose of patience.

The Leeds Business Confidence Index for the first quarter found the needle didn’t move much from the end of 2020. However, confidence for the second quarter “improved largely on positive news about the vaccine and the hopes of a real reopening of the economy,” according to the report from the Leeds Business Research Division at the University of Colorado Boulder. 

Three hundred and twenty-eight panelists responded to the survey Dec. 1-21.

The index, which looks at expectations for the national and state economies, sales, profits, hiring plans and spending, remained flat ahead of Q1 2021, holding the 2020 fourth-quarter rating of 47.9. 

A mark of 50 is considered neutral. 

Respondents to the Leeds survey had negative first quarter perceptions about four of the six components included in the index: state economy, national economy, sales and profits, with the ranks in each of those areas dropping by as little as a tenth of a point or as much as two points, according to the report. Respondents were rosier on hiring and capital expenditures, with those categories improving by 1.9 and 2.1 points, respectively. 

“Looking two quarters ahead to Q2 2021, expectations returned to growth (59.5), with all six components in positive territory,” the report states. “Index revisions illustrate the volatile economic environment that is impacted by the pandemic. The index illustrates the continuing impacts of COVID-19, but also the optimism that a recovery is in sight.”

Panelists were asked to give reasons for their expectations and of the 228 respondents who did so, 33% often cited the vaccine, according to the report. COVID-19 was the next most cited reason at 25%, followed by a change in federal leadership at 14%. 

“While the vaccine was mostly cited by individuals who expressed a positive outlook, some individuals cited the lag in deploying a vaccine as a reason for their pessimism in the immediate quarter ahead,” the report states. “Similarly, while most individuals who cited COVID-19 for their pessimism, some individuals expressed that the waning virus in Q1 is their reason for optimism.” 

The greatest first quarter pessimism centered on the state economy and capital expenditures, and while sales outlooks were positive, respondents also were pessimistic about profits, according to the report.

Business leaders’ feelings about productivity in the time of a pandemic was more of a mixed bag, with 30% of respondents reporting no change in their workers’ productivity, 33.8% reporting improvement and 36.3% stating productivity was down March through December. 

“Despite the impact (good or bad) on productivity, many respondents do not expect to return to the office until the second or third quarters of 2021,” the report states.

Here are some of the report’s findings by component:

  • Hiring

    “National employment has recovered from the recession lows reached in April, but jobs are coming back at a slower rate, indicating a stalling in the recovery,” the report states pointing to total nonfarm employment falling a record 14.5% (down 22.2 million jobs) from February to April before rebounding 9.5% (12.3 million jobs) from April to November.

    Total U.S. nonfarm employment remained down 6.1% year-over-year in November, but the nationwide unemployment rate improved from 14.7% in April to 6.7% in November. 

    In Colorado, nonfarm employment decreased 12.2% (down 342,300 jobs) from February to April but increased 8.5% (209,600 jobs) from April to November. The report also noted “the rebound stalled in November, with a month-over-month decrease of 6,900.”

    Colorado employment remained down 4.6% (128,200 jobs) in November compared to November 2019. 

    Year-over-year employment declines were recorded in all but one of Colorado’s seven metropolitan statistical areas, or MSAs, in November. The Boulder MSA, which includes Longmont, recorded the largest year-over-year decline at -7.2%, followed by Fort Collins-Loveland at -7%, Greeley at -5.6%, DenverAurora-Lakewood at -3.3%, Pueblo at -3.1%, and Colorado Springs at -2.6%. Employment in the Grand Junction MSA increased 0.3% year-over-year. 

    State industries with the largest annual percent loss were leisure and hospitality, down -16.4%; mining and logging, down -11.7%; and other services, down -7.7%, according to the report. 

    “The only industries to record year-over-year growth in November were manufacturing (2.4%) and professional and business services (0.7%),” the report states.

     
  • National and state economies

    “General state and national economic expectations paused as the pandemic spiked and the economy went through another round of rolling shutdowns. State expectations fell from 48.9 in Q4 to 46.9 ahead of Q1 but shot up to 61.2 ahead of Q2 2021,” the report states. “The state outlook is 3.4 points above the national outlook, indicating business leaders’ confidence that the state will continue to outperform relative to the nation.” 
     
  • Sales and profits

    “Sales and profits expectations decreased 1 point and 0.1 points, respectively, from Q4 2020 to Q1 2021. The sales component recorded the highest expectations among the six components and was the only component above neutral ahead of Q1,” the report states. “Looking toward Q2, the sales and profits outlook increased, both pointing to strong expansion.”

    A majority of panelists were neutral-to-positive about sales and profits ahead of the first quarter but 30.2% expected a decrease in sales and 34.5% expected falling profits. “Looking ahead to Q2, sales expectations increased to 63.4, while profits improved to 58.4,” the report states.
     
  • Capital expenditures

    “The outlook for capital expenditures and hiring increased to 46.8 and 49.9, respectively, ahead of Q1. Both metrics rebounded further looking ahead to Q2 — planned capital expenditures increased to 56.9 and hiring plans increased to 58.8,” the report states. “These components reflect investment in firm growth, thus, the rebound in the index in Q2 2021 is a positive confirmation of business conditions.”