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Sales tax report: guarded optimism

The local economy continues to show a flat trend, as a report released last week indicated that November sales tax revenue receipts were down 7.03 percent from the same month last year and that receipts are down 8.6 percent overall year-to-date.

However, according to Pagosa Springs Town Manager David Mitchem, October and November sales tax receipts show a slight tick upwards that suggest businesses in the area are slowly crawling back from the worst of a bad year.

Indeed, with sales tax decreases of 11.55 and 17.07 percent in August and September, it could be argued that there would be nowhere to go but up.

While news of the November receipts can hardly be construed as sanguine, it does represent the trend endemic to 2009 as far as retail (and other) sales countywide. In fact, the 12-month average decrease in sales tax receipts was 7.05 percent: despite wildly fluctuating variations in sales tax collections between Nov. 2008 and Nov. 2009 (a 5.71 percent increase in January, a 25.46 decrease the next month), 7.05 percent represents the average revenue decrease across a 12-month period relative to the previous year. November’s 7.03 decrease right in line with the past year’s monthly average.

While not completely positive, Mitchem indicated that he sees the recent trend encouraging, relative to revenues over the entirety of 2009. “The trend is showing a slight increase over the past few months,” he said. “As I’ve been walking the streets and talking to merchants, I’m getting the sense that they had a pretty good December. I’m hoping they’re correct.”

To bolster his confidence in recent trends, Mitchem cited a presentation by Dr. Richard Wobbekind from the Leeds School of Business at the University of Colorado, delivered two weeks ago in Durango. During that presentation, Wobbekind forecast a 2.7-percent increase in retail sales statewide in 2010, translating in a 2-percent increase in retail sales employment.

According to a 2007 Region 9 Economic Development District report, retail sales accounts for 15 percent of employment in Archuleta County. While that same report indicated that construction accounted for an additional 15 percent of jobs in Archuleta County, those numbers would most likely be revised, given economic conditions and a flat countywide building climate.

In 2007 (at the peak of the local building boom), annual unemployment was 3.9 percent in Archuleta County. Over the past 12 months, the unemployment rate has averaged out to 7.5 percent in the county.

Recent unemployment numbers from the Bureau of Labor Statistics (BLS) report unemployment in Archuleta County at 6.7 percent in November, up from 6.3 percent in October, but below the state’s 6.9 percent unemployment rate and well below for the national 10 percent rate. However, those unemployment numbers only reflect the number of workers either collecting unemployment or who recently filed unemployment insurance claims — the so-called U3 number. What is not reported (because neither the BLS nor the Colorado Dept. of Labor compile the data) is the U6 number: the U3 number plus discouraged workers (workers who have fallen off unemployment insurance roles and have given up looking for work due to economic conditions), marginally-attached workers (temporary workers) or workers in part-time positions (who desire full-time work but are unable to find it).

Nationally, U6 is at 17.3 percent. Although impossible to determine what the local U6 number is, comparisons between local and national U3 numbers would suggest a county-wide U6 number somewhat lower than overall U6 numbers in the U.S.

Mitchem conceded that the county’s U3 number was probably not an accurate reflection of local unemployment. “There’s been some people who have left the county in search of work and they’d drop off the rolls,” he said, acknowledging that the U3 number was likely artificially low.

And while the U3 number in Archueta County shows a rise in unemployment over the past few months, November through April are traditionally the worst months for employment in the county. Thus, given historical trends in unemployment, along with an apparent rebound in sales tax revenues, Mitchem expressed a cautious optimism in the direction the economy and employment will take over the next few months.

“We may not see positive numbers for awhile,” he said, “but I think we’ll see a gradual upward trend and, eventually, positive numbers over the next few months.”

The final sales tax revenue report for 2009 will be released in mid-February, indicating what kind of a December merchants in the town and county had. Preliminary reports to town and county officials — although anecdotal — suggest a robust holiday season.

Nationally, it was reported last week that retail sales fell for a sixth consecutive month in December, with sales for restaurants, gas stations and other retail businesses down 2.7 percent from November and down 9.8 percent from the same month last year. How that situation played out locally — anecdotes aside — will not be known for several more weeks.

Furthermore, January sales tax revenues could be a wild card in an overall economic picture. So far, January and March were the only months in 2009 that showed a positive sales tax revenues compared to those months in 2008 — 5.71 and 0.19 percent, consecutively. However, one factor possibly leading to the positive January numbers might be that December 2007 saw lower than average snowfall while January 2008 saw record snowfall, storms that shut the town and county down for several days throughout the month and made travel to the area inadvisable. Therefore, January 2009 sales tax revenues may have been a reflection of weather rather than real economic conditions. In fact, in December 2008 (which had record snowfall for the holiday season without any of the problems associated with the January 2008 storms), sales tax receipts for that month showed a 7.15 percent increase relative to December 2007 — and a lead-in for a seemingly robust month for retail sales in January 2009.

Sales tax revenue receipt reports for the next two months, while not necessarily portents for local sales in 2010, will nonetheless provide an interesting snapshot of the economy in Archuleta County.

“If this trend continues,” Mitchem concluded, “this is good news, indeed.”

The next two months, relative to the last two months, will be a better indicator of a any trend — up or down — and the sales tax revenue reports in mid-February and mid-March will most likely present what 2010 might bring for area merchants.

jim@pagosasun.com