Colorado’s economy is projected to grow in 2026, but labor constraints are tempering forecasts

Colorado economists are forecasting positive job growth and spending for the state in 2026, but factors such as federal job disruptions and slowed migration are pointing to slower development than in previous years.

An economic outlook for 2026, published Monday by the University of Colorado’s Leeds School of Business and containing insights from over 130 leaders across the state, projects a 0.6% growth in Colorado’s job market in 2026 — translating to roughly 17,500 more jobs.

Next year’s 0.6% job growth rate is a slight improvement from the 0.4% rate recorded for 2025, which significantly lagged behind the 1.2% growth — or 36,700 new jobs — that Colorado economists predicted at the end of last year. The real figure was closer to 12,500.

Earlier benchmark revisions by the Bureau of Labor Statistics, in which Colorado employment estimates were revised down farther than economists expected, are partially responsible for why forecasts missed the signs of a slower growth pattern in 2025.

“We had sort of overestimated what we thought would happen in 2025 when we did this exercise last year, and then that slowdown really came to fruition,” said Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business. “We have this lower base that we’re growing from, and slower growth, slower momentum than we thought we had in the job market in Colorado.”

In addition to expected job losses from federal layoffs earlier in the year and the recent government shutdown, available data show that state employment — an area that has historically supported some of Colorado’s employment growth — is expected to be flat in 2026.

Professional and business services, which are crucial to job growth in Colorado, also slowed more than expected in 2024, Lewandowski said, contributing to the year’s job slowdown.

“Seeing a slowdown in that industry has been sort of concerning,” Lewandowski said. “We were expecting growth in 2024, and it actually ended up being revised negative. … And 2025 is still trending negative, so that’s a difference of about 10,000 jobs right there.”

Even with more businesses exercising caution in hiring and strained growth in the labor force, economists aren’t using the word “recession.”

“Is it too much of a cliche to say it’s a mixed bag?” Lewandowski said, adding that the positive growth projected for Colorado’s gross domestic product gives him confidence that the state could avoid a recession in the next two years. “There are sort of conflicting signals coming from the data.”

Lewandowski said economists had less data to rely on for their 2026 forecast than in prior years because of the 43-day federal government shutdown, which paused data collection for several agencies, including the Bureau of Labor Statistics. Missing third-quarter data for Colorado’s gross domestic product, for example, made it slightly more challenging to create the forecast.

“We were without a couple months of employment data, which would have provided more insight into the employment situation,” he said. “This year we were sort of teetering on a very slow employment market where … it’s a question if the jobs are up or down any given month.”

Additionally, any data reflecting impacts from the federal employees in Colorado who took buyout packages earlier in 2025 — which ran out of severance at the end of September — would have shown up in October and November employment data, the first of which was never released because of the shutdown.

“We sort of missed that critical employment release to understand what was happening with federal government employment in Colorado,” Lewandowski said. “We’re still able to do the forecast, we just have fewer historical data points than we would normally have.”

Artificial intelligence, slowed migration add to job growth obstacles

Before this employment slowdown, Colorado was a leading state for several economic markers. When comparing growth from 2009 to 2024, Colorado had the fifth fastest growing gross domestic product, sixth fastest population and labor force growth and seventh fastest employment growth, according to the report.

When comparing more recent short-term trends, however, Colorado’s growth rates are closer to average. Real gross domestic product ranked 22nd during the second quarter, while the unemployment, labor force growth and employment growth rates all rank the state in the 30s, the outlook states.

“Colorado’s performance has slipped in the rankings, demonstrating the difficulty in maintaining growth-on-growth for a sustained period of time,” the report states.

Some factors behind increased stress on Colorado’s labor force include the widespread adoption of artificial intelligence and structural demographic shifts, specifically the retirement of baby boomers and slower international migration driven largely by stricter immigration enforcement, which could further limit the labor supply heading into 2026.

On the other hand, the state remains in the top 10 for per capita personal income, average annual pay and labor force participation. The state’s labor force participation rate was 67.4% in August 2025, above the national average of 62.3%.

Coloradans are still spending money amid projected income growth

In other good news, retail sales and spending in Colorado are still growing despite shrinking consumer confidence at the federal level. According to the 2026 outlook, real personal consumption grew an estimated 2.5% in 2025 and is projected to grow by 1.7% in 2026. Personal income, as well as wage and salary income, is projected to increase by 4.5% and 3.6%, respectively.

“Personal income growth of 5% year over year, I think, is still pretty good growth, and it’s beating inflation. It shows that the ability to consume is still there,” Lewandowski said. “At the same time, I worry a little bit because there’s also income growth as we have new employees earning new incomes … so we think that piece will be dampened a little bit in 2026 because we just don’t have the same level of job growth that we had several years ago.”

Although retail growth is still expected to grow in Colorado, that growth is slower than what economists are measuring in national retail sales data, Lewandowski said, likely because of the state’s higher cost of living.

“We know that inflation has gone up faster in Colorado for 11 of the last 15 years … and a lot of that is housing-related. Those items can sort of crowd out what people are spending on taxable retail goods in the state,” he said.

Colorado’s gross domestic product is projected to grow by 2.9% in 2026. If this projection proves accurate, Colorado would outpace the projected national growth rate, which matches Colorado’s 2025 growth rate of 2.1%.

Although state municipalities are “facing growing fiscal pressures as traditional funding sources are increasingly constrained and less reliable than in previous years,” survey responses for the economic outlook showed that Western Slope and mountain municipalities were more likely than other areas of the state to feel that their revenue had improved since 2024.

The state’s labor force is also projected to increase modestly in 2026, and the 4.5% estimated unemployment rate is expected to shrink to 4.1% in 2026 in response to labor supply constraints.

Ski industry outlook: mostly positive

A large portion of 17,500 estimated news jobs for 2026 are expected to come from eight of Colorado’s major industries, including the education and health services sector; trade, transportation and utilities; and government. Meanwhile, sectors expected to lose jobs include information and leisure and hospitality, as hotels and restaurants face regulatory pressures and higher costs of goods.

Job losses in the hospitality sector don’t mean that the industry as a whole is slowing down, however. Occupancy and rates are both projected to increase between 1% to 2.5% and 1.8% to 2.75% respectively, which spells good news for revenue growth. The four factors to keep an eye on are snowfall, limited international demand, tightening rental availability and consumer price sensitivity, as potential tourists hold on tighter to their dollars during a time of heightened economic uncertainty and geopolitical tensions.

Although Colorado resort skier visits dipped 3% year-over-year, taxable sales in many resort communities across destinations like Aspen, Breckenridge, Frisco, Snowmass Village, Steamboat Springs and Vail rose 0.7% during winter 2024-25 compared to the year prior, the report states. This increase in resort communities is slightly below the statewide 1.7% increase.