On Monday afternoon, Archuleta County and the Town of Pagosa Springs received good news from the Colorado Department of Revenue, with a report that showed August sales tax revenue receipts up 3.25 percent from the same month last year — the first revenue increase since May.
Better yet, with August’s numbers, year-to-date collections have continued to improve, indicating a local levelling out of the recession.
In March, year-to-date collections showed a 8.42 percent decline from the same period in 2009, but that improved by 5.07 percent through this spring and summer, with revenues down by just 3.35 percent year-to-date in August.
The 3.35 decrease in year-to-date sales tax receipts is the best performance in sales tax collections since 2008.
Although sales tax receipts are down 7.13 percent relative to average receipts for August 2008 and 2009, August is the second best performance for sales tax collections this year (April was down just 1.85 percent relative to the two-year average), further indication that the slump in local sales is receding.
In fact, declines (relative to the past two years) have decreased dramatically since the first quarter of this year, with January through March receipts averaging an almost 12 percent decline compared to collections from the previous two years. Since June of this year, declines have dropped to an average 4.66 percent decline relative to the two-year average, indicating a trend that, while not completely positive, shows tremendous improvement.
Pagosa Springs Town Manager David Mitchem agreed with that assessment, saying on Tuesday that, “We’re seeing a gradual increase (in sales tax receipts) and that’s helpful.”
“There’s been a mellowing of the downturn in the economy and hopefully we’re seeing an expansion.”
Unfortunately, while the local sales environment appears to have turned around — in August 2009, sales tax receipts were down 11.55 percent for the month, with a year-to-date decrease of 7.53 percent and 13.52 percent below the previous two year’s average receipts — the same cannot be said regarding countywide unemployment. As reported late last month in The SUN, August unemployment held steady from the previous month at 8.8 percent. While that number is over two points better than March 2010 (when unemployment in the county hit 10.9 percent), it is substantially worse than the unemployment rate from the same month last year — 7.2 percent.
Average unemployment in 2009 was 8 percent; as of August, the average unemployment rate in Archuleta County was at 9.64 percent for 2010.
Sustained high unemployment in the county reflects the national situation. Late last week, the U.S. Bureau of Labor Statistics (BLS) released September unemployment numbers showing national unemployment at 9.6 percent — about 14.8 million Americans were jobless with 6.1 million for more than six months (down by 640,000 from the peak in May). That report also indicated the so-called U6 number, a broader unemployment measure including those who have given up seeking work or are working part time but want full time, rose by 400,000 to 17.1 million — the highest it’s been since December.
The BLS report also showed that while private-sector employment rose by 64,000 jobs, federal and local government layoffs lost around 159,000 jobs — among that number, 77,000 temporary federal census jobs lost, while local governments trimmed payrolls by 76,000 (many of those jobs belonging to teachers).
Many analysts suggest that the U.S. economy is in “a slow-growth mode,” having added about 75,000 private-sector jobs a month (on average) during the past nine months. About double that amount is needed to substantially lower an unemployment rate that continues to hover near 10 percent.
Earlier this week, U.S. Federal Reserve officials released minutes from a late-September meeting that indicated that the Fed is considering revising target inflation rates and purchasing Treasury bonds as two strategies to boost the economy and improve unemployment numbers.
Federal officials have recognized that sustained high unemployment is a detriment to overall economic recovery: fewer workers drawing a pay check means less money circulating in the economy.
In fact, on Monday both the Fed and the National Association of Business Economists revised growth projections for the final quarter of this year, with real gross domestic product (GDP) expected to advance 2.6 percent in 2010, down from 3.2 percent predicted in May.
The NABE based its revision on continued high unemployment which led to projections of moribund consumer spending over the next few months (and an especially disappointing holiday season for retailers, just 2.5 percent growth from last year).
Nonetheless, one sector of the economy appears to be recession proof: on Tuesday, the Wall Street Journal reported that bonuses were estimated to increase by 4 percent at 26 of 35 Wall Street firms — from $139 billion paid out in bonuses last year to an estimated $144 billion in 2010.
No estimates exist for the future economic fortunes of Archuleta County, however, although county businesses will most certainly not see the kind of compensation handed out on Wall Street. Still, if history is any indication, September has been the third best month for sales tax collections during the past six years, led only by July (at second best) and December.
August has been the fifth best month for sales tax collections during the past six years, with June as the fourth best month.
If that six-year trend remains true to form, next month’s sales tax report could show a further leveling out of declining sales tax collections.
However, with August revenues still down 3.35 percent year-to-date from 2009 and down 7.13 percent from average year-to-date receipts for 2008 and 2009, it would require revenues to improve 6.36 percent over the next four months to show no sales tax revenue decrease by the end of 2010 (from 2009) and just over 11 percent to show a zero decrease from revenues averaged over the past two years.
A 6.36 percent improvement (much less 11 percent) would, by most estimates require not just a substantial rebound in the economy but a miracle.
While sales tax receipts in August indicate a slowly improving economy in Archuleta County, a sluggish national situation, combined with continued high local unemployment will most likely conspire to prevent 2010 from ending with a zero decline in sales tax revenues.