Colorado’s economy will slow noticeably in the first half of the year, before heating up again in the second half. And should that slowdown turn into a recession, it will likely be mild, short-lived and without widespread job losses, according to the Colorado Business Economic Outlook from the University of Colorado Boulder.
“I can’t say with certainty we will have a recession. Whether it goes into a recession or not, we will have a couple of weak quarters at the beginning of the year,” predicted Richard Wobbekind, a senior economist at the Leeds School of Business at CU Boulder, which prepares the closely followed annual economic forecast, now in its 58th year.
Employers in the state are on track to add an estimated 120,800 jobs this year, which blew away predictions in last year’s Outlook for a gain of 73,900 jobs. Rather than slowing from 2021’s robust rebound, hiring unexpectedly accelerated in 2022, with many positions going unfilled.
“The issue is the same issue as last year — not having enough people to take the jobs,” Wobbekind said. Employers have some cushion to eliminate openings before they cut staff, and if they believe any downturn will be short, they may try to hold onto the workers they have.
The 2023 Outlook is calling for 57,100 jobs to be added, under half the gains seen this year. That will feel slower, but it won’t be too far off from the annual increases in payroll jobs measured in the second half of the last decade.
Colorado’s rate of job growth should drop to 2%, under half of the 4.4% rate of growth expected this year. Unlike the 5% decline in jobs measured in 2020, next year won’t be a negative one for jobs, and that is key.
How well the economy holds up will largely depend on how consumer spending holds up under the pressure of higher prices and higher interest rates, said Brian Lewandowski, executive director of the Business Research Division at Leeds.
Wage growth hasn’t kept up with price growth and consumers are filling the gap by spending down savings and taking on more debt. More people are taking on second jobs. The question is how long they can sustain it, and so far they have proven unexpectedly resilient. Staying resilient will depend on them staying employed.
“Everything rides on the consumer and that consumer has been hit by rising inflation,” Lewandowski said.
The forecast calls for the state’s average unemployment rate to rise from 3.5% this year to 4.1% next year, which works out to an additional 21,000 unemployed people in the state. But 4.1% represents a historically low rate.
After lagging for the last three years, natural resources and mining will be the state’s strongest sector next year for its percentage gain in jobs. Local governments, another laggard in recent years, should maintain strong hiring, as well as leisure and hospitality and professional and business services.
Higher interest rates and a cooling housing market will put downward pressure on financial activities, including mortgage lending and real estate, as well as the construction sector. A loss of 4,000 jobs is forecast in financial activities and 2,000 in construction.
Lewandowski said consumer inflation, which is average just above 8% nationally this year, should come down to just shy of 4%. Colorado’s inflation rate, reflecting prices in the metro Denver area, won’t come down as much, probably closer to 6%.
Colorado’s population should grow by 42,800 this year, reflecting a 0.7% growth rate, before gaining around 55,500 next year, which would put the total at 5.91 million people. Population gains above 60,000 a year in 2024 and 2025 will be followed by gains in the range of 50,000 to 60,000 a year through the rest of the decade. About two-thirds of future gains are expected to come from net migration and one-third from natural increase, or the number of births exceeding deaths.
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