Denver’s economic immune system was able to fend off the effects of the recession which took hold of the U.S. early in 2007 and plagued the country for almost a year.

Late in 2008, however, the Mile High City succumbed and over the past 12 months has lost jobs as fast, and indeed slightly faster, than the nation as a whole.

Across major industrial sectors, construction employment is down 15%, followed by manufacturing (-7%), trade and transportation (-5.4%), information services (-5.3%) and financial services (-4.6%).

Although Denver’s unemployment rate (7.8%) is below the national average (9.4%), retail sales in the metro area are down over 11% year to date compared to -9.1% for the country as a whole.

Residential building permits in Denver are down by 66% year to date compared to a countrywide year-to-date decline of 47%.

Looking forward, there are some large clouds on Denver’s economic horizon in the form of potential layoffs in the wake of the acquisition by Oracle of Sun Microsystems.

What’s more, the sustained drop in office-based employment over the past year will probably cause office vacancy rates in the metro area to head higher through mid-2010.

Having said this, a number of indicators suggest that economic activity in Denver will stabilize in late 2009 and begin to recover in 2010.

First, despite its current downturn, Denver is fundamentally an attractive business location in terms of workforce quality, quality of life and the cost of living and doing business.

Second, the most recent Leeds Business Confidence Index increased from 35.5 to 46.5 in the third quarter due to increases in all six of its component series. This increase was reinforced by a stronger outlook for capital spending and for employment. 

Finally, according to the National Association of Realtors, existing home sales in Denver have increased for the past three months.