Colorado economic outlook: Slowing growth in a turbulent economy

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Colorado’s economy should remain resilient in 2024 despite a host of headwinds including persistent inflation, elevated interest rates, a worker shortage and slowing consumer spending, according to the annual Business Economic Outlook released Monday by the Business Research Division (BRD) at the Leeds School of Business. 

The forecast, created by BRD and the state of Colorado with input from 125 business leaders in a variety of industries, includes a job growth projection of 1.4% in 2024 with seven of the state’s 11 major industries expected to add more jobs.

“While the forecast does call for slower job growth in 2024, we are pleased with how well the economy is performing in this financially constrained environment,” said Richard Wobbekind, associate dean for business and government relations at Leeds and BRD faculty director.

Colorado’s growth slowed notably in 2023 in the face of rising interest rates: GDP increased 2.2% in 2022 and 1.5% in the first quarter of 2023 year-over-year. That compares to 1.6% average growth among states nationwide during the same period. In 2023, national GDP increased to an estimated 2.4%. BRD expects 1.4% growth in national GDP in 2024 as consumption slows but remains resilient.

So far this year, Colorado ranks 42nd among states in job growth at 1.5%. However, since employment has been statistically underestimated in the state, BRD expects Colorado to move up in the ranking when revisions are applied during the first quarter of 2024.

From a near-record low of 2.6% in August 2022, Colorado’s unemployment rate stood at 3.3% in October 2023. That ranked near the middle among all states with a tie at 26th. Colorado had the fifth-highest labor participation rate in the country and outranked 31 other states in its labor force growth rate. 

The state’s employment increased an estimated 2.2% in 2023, adding 64,500 jobs, and stood at a record 2.9 million in October 2023. BRD projects an increase of 41,900 jobs in 2024, or a 1.4% increase in the number of employed workers.

Industries projected to add jobs

These industries are projected to add jobs in 2024:

Professional and business services (14,500 jobs)

Employers in this sector—which are involved in professional, scientific and technical services; management of companies and enterprises; and administrative, support, waste management and remediation services—are primarily located along the Front Range and generally hire and retain highly skilled and educated workers.

Employment in the sector grew rapidly in 2022 but is expected to moderate in 2023 and 2024 with 3.4% and 2.9% projected growth, respectively.

Government (10,900 jobs)

This sector accounts for nearly one in six jobs in the state and includes federal, state and local workers. While jobs have recovered from the early years of the pandemic, government entities at all levels are facing challenges similar to other sectors, including worker shortages and supply chain issues.

BRD sees a steady increase in state employment in particular in 2024, driven by new state programs in the Department of Labor and Employment and Department of Public Health and Environment.

Education and health services (9,400 jobs)

Employment gains in nursing and residential care facilities have been driving gains in this sector, while private education services will contribute more jobs in 2024.

Trade, transportation and utilities (5,300 jobs)

Consumers have continued to spend—increasingly online—which has boosted the need for warehousing and deliveries. Although retail sales and retail job growth have slowed from their pandemic highs, this sector should see modest employment growth of 1% in 2024.

Leisure and hospitality (5,000 jobs)

Colorado continues to see plenty of travel spending. The skiing industry in particular enjoyed an exceptional 2022–23 season, setting a second consecutive record for skier visits. BRD expects the leisure and hospitality industry to continue growing in 2024 at a moderate 1.4% pace while combating inflation and supply chain issues.

Other services (1,300 jobs)

Businesses in this category are highly diverse and include car washes, beauty salons, religious organizations, funeral homes, grantmaking foundations and labor unions. One thing they have in common is that their performance is closely linked to the economy, state demographics and consumer spending.

BRD expects job growth of 1% in these services in 2024.

Natural resources and mining (1,200 jobs)

Employment in this industry increased an estimated 4.3% in 2023 and growth is expected to continue in 2024. While this sector comprises less than 1% of Colorado’s workforce, it generates some of the highest per-worker income levels in the state.

Industries projected to lose jobs

Due to rising interest rates and other economic headwinds, four industry groups are projected to lose jobs in 2024: 

Construction (-2,300 jobs)

Rising interest rates have slowed demand in the single-family housing market, and multifamily construction is expected to decline in 2024, as apartment demand will be partially met by new units reaching completion. Meanwhile, demand for nonresidential building and infrastructure projects will remain steady.

Manufacturing (-1,400 jobs)

Although this sector posted its fastest pace of growth since 2018, employment has been hampered by high interest rates and shifting consumer behavior, as well as issues including drought and water availability. In 2023, employment decreased by an estimated 500 jobs.

However, BRD pointed to a couple of bright spots in the sector: Federal investment and incentives are expected to increase employment in industries that support aerospace and defense, and the state’s renewable energy and computer and electronics manufacturers should see a boost thanks to the Inflation Reduction Act and CHIPS Act.

Information (-1,000 jobs)

Employment in this sector is expected to drop in 2023 and 2024 in line with long-term declines in the traditional publishing and telecommunications industries.

Financial activities (-800 jobs)

The two industries that make up this sector—finance and insurance and real estate, rental and leasing—are heavily impacted by higher interest rates and are projected to experience job losses in 2024.

Other highlights from the economic forecast

Additional highlights from the BRD economic forecast include:

Agriculture

Nationwide and in Colorado, the agriculture sector is grappling with a combination of high production costs and lower crop prices. Colorado’s net farm income is expected to decrease 21% in 2023, which is slightly lower than the expected decline in U.S. farm income overall. That’s because beef cattle account for most of the state’s agricultural income, and that segment remains strong.

More rain in 2023 also led to higher production of corn, wheat and other row crops, but farmers, policymakers and industry leaders know water in the West is a “long-term problem with no easy solutions,” according to the BRD report. 

Craft brewing

Colorado’s craft brewing industry continues to thrive and has proven its ability to innovate and adapt over the past few years. In 2022, Colorado remained fifth in the country for the number of craft breweries (440) and had the 10th-highest production with over 834,000 barrels of craft brew, according to the Brewers Association.

Colorado craft breweries are increasingly committing to sustainable practices, such as using solar power and reducing water usage. These breweries have not only become community staples but tourist attractions and will likely continue driving economic growth and job creation, according to BRD.

Diverse communities

Similar to nationwide trends, the pandemic had a big impact on unemployment rates among minority races in Colorado, and these levels are still recovering.

Colorado’s total continuous unemployment claims for Asian populations in July 2023 have struggled to rebound since the pandemic, increasing 103.3% since January 2020 and 75.2% from July 2022. The increase in unemployment for white populations in July 2023 was slightly less drastic, rising from 27.5% year-over-year and 0.7% since January 2020. 

The Black unemployment population in July 2023 decreased 8% year-over-year. The American Indian unemployment population has fully recovered since the pandemic, having decreased 11.1% year-over-year and 30.6% since January 2020 levels.

Minority-owned businesses

These businesses encounter persistent challenges, including limited access to financing and insufficient technical resources. Colorado’s Minority Business Office works to provide educational opportunities and connectivity to resources. Industries where opportunities look promising for minority-owned businesses, according to BRD, include construction, hospitality and services. 

International trade

The report points out that services exports are not factored into official state trade estimates, but it is likely that travel accounts for a strong share in Colorado. The number of international passengers landing at Denver International Airport in September 2023 increased 9.2% year-over-year and 15.3% from September 2019 levels, according to recent passenger data.

For goods trade, annual export values are expected to reach $10.5 billion in 2023 and import values are expected to hit $20 billion. According to BRD, 2022 was the first year that exports exceeded $10 billion and imports exceeded $20 billion. Total export values nominally increased in 2023 through September by 0.8% while total import values nominally decreased by 12.6%.

Five product groupings account for about two-thirds of Colorado’s total export value: meat, precision instruments, industrial machinery, electrical equipment and aircraft and spacecraft.

Population

Colorado’s resident population as of July 2022 was 5.8 million, ranking it 21st in size among all states. Its population increased by 27,710, or 0.5%, from July 2021 to July 2022, ranking Colorado 12th among states in total change and 19th in percentage change. 

Colorado’s growth in 2022 was similar to 2021, but it’s a significant drop from the previous decade’s 74,000 annual average. Births are the largest component of population change in  Colorado; meanwhile, deaths have been increasing due to aging and also COVID-19.

Net migration accounted for 14,924 of the growth in the state in 2022, a slight increase over 2021. Twenty-six counties experienced net out migration, led by Jefferson, Arapahoe, Denver, Eagle and Summit. 

Although Colorado’s population growth is forecast to slow over the next few decades, it is projected to continue to outpace the nation, growing at roughly twice the national rate. Colorado is forecast to increase from 1.7% of the U.S. population in 2020 to 2% by 2050.

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