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The Commerce Department announced yesterday that the U.S. economy grew last quarter for the first time in more than a year. In additional good news, local experts say Colorado is in a better economic position than many other states.

It remains unclear, however, how consistent the growth will be in upcoming months. Government stimulus programs like the $8,000 tax credit for first-time home buyers and the “cash for clunkers” program were in full effect during the July-September period, leading at least one local economist to wonder if the government incentives made the economy seem stronger than it actually is.  

“I think it’s certainly good news that we have finally gotten some positive growth numbers,” said Patty Silverstein, chief economist for the Metro Denver Economic Development Corp. “But I would approach it with a little bit of caution, as well.”

3.5-percent growth

The national economy expanded at an annual rate of 3.5 percent in the July-September period of this year. The increase was higher than expected and marked the fastest growth rate since the third quarter of 2007. Reuters reported that consumer spending, which normally accounts for more than 66-percent of U.S. economic activity, and home building were key reasons for the increase.

“After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction,” said a statement from Council of Economic Advisors Chair Christina Romer. “However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered.” 

Completed foreclosures in Colorado on a whole fell 5 percent last month compared to the same time period last year. Denver county reported the largest fall in the total number of completed foreclosure in the state within that same time period. 

Silverstein said a strong housing market is crucial for Denver because it generally signals high consumer confidence. When someone buys a house, they have to buy furnishings for the house, which then spurs retail activity. Silverstein added that people often feel more financially secure when they own a home and are likely to spend more money in the marketplace. 

Job market

However, Colorado’s 7-percent unemployment rate might not be exactly what it seems, according to Silverstein. While it’s likely that more people found work from July-September this year, it’s also possible that some people grew disgruntled and left the labor force altogether.

Also, an expanding economy doesn’t automatically equal more jobs. Even when companies are seeing more sales activity, they will often first get rid of furlough days and expand hours for the employees they already have, Silverstein said. The next monthly report on job growth in Colorado will be posted Tuesday on MetroDenver.org.

“The bottom line is that employment growth tends to be lagging (an economic turnaround),” Silverstein said. 

Government revenue similarly lags economic recovery. Gov. Bill Ritter said this week that the 2010-11 state budget will be worse than the cash strapped 2009-10 budget. This year’s state budget has endured a shortfall of more than $1.1 billion, which has resulted in widespread cuts.

“This isn’t some temporary hiccup or one-time blip,” said Ritter in Tuesday’s speech to the state’s largest business organization. “We’re living in a new economic reality. This is a long-lasting correction, a massive shift that will require shared sacrifice on the part of everyone.”

The Obama administration, which has directed a $787 billion stimulus package to the economy, agreed that more work is needed. For one, Obama this week endorsed the expansion of the first-time homebuyers tax credit until at least April. If no action is taken, the incentive is set to expire Nov. 30.  

“For every person out of work, for every family facing a credit crunch, the recession remains alive and acute,” Treasury Secretary Timothy Geithner told the Senate’s Finance Committee.

Reuters contributed to this report.

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