Forecast finds state economy still slowing
Colorado’s overall economy slowed this year, a trend that is expected to continue in 2023— at least, that’s what’s in a forecast put together by dozens of economists and industry leaders around the state.
But, while mentioning reasons like the impact of the war in Ukraine, high inflation, and the end of federal pandemic benefits, economists said that the reality could change. This year, for example, Colorado added more jobs than had been forecast for 2022 — off by nearly 47,000 new jobs.
“After revisions to the data, we believe Colorado added 120,800 jobs this year, growing at 4.4%,” Richard L. Wobbekind, faculty director for University of Colorado’s Business Research Division at the Leeds School of Business, said during a presentation Monday in Denver. “This is well above what we forecasted a year ago at this time.”
Last year, businesses complained that it was difficult to find enough workers, and that played into the reason why Wobbekind and his team underestimated job growth. Last year’s report predicted about 73,900 new jobs, setting a record for employment in Colorado. The state still set a record, reaching 3,146,008 employed individuals in August.
“Generally, we didn’t think there were enough bodies” to fill more jobs, Wobbekind said in an earlier interview. “There are certain sectors that grew faster than we anticipated. There was strong growth in manufacturing, life sciences, and there was really strong growth in professional and business services that were beyond what we envisioned.”
Anything can happen in 2023, so keep that in mind as you read on. Based on the current economic data and insight from folks on the ground, here’s what’s in the economic crystal ball for Colorado, according to the Business Economic Outlook 2023:
57,100 new jobs projected — That’s the number of new jobs expected in 2023, up 2% but slower than the 4.4% growth experienced this year. The calculation comes from looking at the top 11 industry sectors, and all but two show job growth next year. Higher interest rates put a chill on construction projects, so that sector’s jobs are expected to decline 1.1% in 2023. The other industry that was hit hard by higher interest rates? The financial sector, as higher mortgage rates slowed down home loans.
Leading the growth are professional jobs, which blossomed in the pandemic as workers more easily headed home to work remotely. Growth is expected to continue because this is typically a highly-educated workforce, and Colorado has the nation’s second highest percentage of bachelor’s degrees, at 44% compared to the U.S. rate of 35%, state demographer Elizabeth Garner said.
The forecast “is supported by the state’s ability to educate young adults and recruit a highly-educated workforce from other states,” she said during the event. The “proportion of people in Colorado with scientific or engineering degrees is 39.4% compared to 33.9% overall for the nations. … This is one of Colorado’s strongest employment sectors and is on track to add 20,500 jobs in 2022 (and) next year, adding an additional 16,500 new jobs.”
4.1% unemployment rate projected — Colorado’s unemployment rate has been falling all year though it went up slightly to 3.6% in October. But, next year, the rate is forecast to edge up to 4.1%. That’s partly because so many working-age Coloradans who can work are doing so or are looking for a job. Approximately 67% of Coloradans over 16 are participating in the labor force, compared with 62% nationwide.
“There continues to be variation in unemployment around Colorado; already, the spread between the lowest and highest has compressed,” Wobbekind said.
That’s a range of 2.5% in the Boulder area to 5.1% in Pueblo, according to September data from the U.S. Bureau of Labor Statistics.
Updates and forecasts by industry
Agriculture’s high prices: While 2022 was a record year for agricultural prices — with prices for wheat, corn, and hogs seeing large increases from last year — those were outweighed by record expenses for farmers, ranchers, and others in the ag industry, Wobbekind said.
“Wheat, one of Colorado’s staples, recorded substantially higher prices as a result of the war in Ukraine,” he said. “However, this positive news was countered by higher production costs, rising costs for farm labor, trucking, and shipping; repairs and equipment are expected to decrease profit margins in the sector.”
And, while production is expected to “reach record levels in Colorado in 2022 and 2023,” he said, those record-high expenses will continue. With less pandemic assistance from the government this year, Colorado’s net farm income will drop by $1 billion, or 58%, from 2021. And, next year, he added, “it’s expected to fall $772 million, a decrease of 9.4% in 2023, the lowest Colorado net farm income in 20 years.”
Beer still growing, pot sales down: A continued highlight within the state’s manufacturing sector is beer. Small and large brewers plus other beverage makers contribute to non-durable goods, which makes up about 30% of the manufacturing jobs in the state. The niche grew 5% this year in terms of jobs as customers returned to brew pubs in person, though the cost and availability of aluminum cans was a challenge, according to the Brewers Association. Job growth of 1.2% is forecast for 2023.
Overall, the manufacturing sector, which includes aerospace and computer manufacturing and marijuana sales, is also slowing. Demand for goods — especially furniture, electronics, and appliances — is declining, and there’s competition from other states. Manufacturing is expected to add about 500 jobs in 2023, a 0.3% growth from 2022, Garner said.
A notable decline? Cannabis. Colorado was a trailblazer and legalized marijuana for medical use in 2000, one of eight states to do so at the time. Now, there’s 37. Likewise, Colorado’s early foray into recreational marijuana in 2012 is seeing sales fall as at least 20 other states also legalized weed.
“Marijuana sales are decreasing in 2022 as the pandemic waned. Competition spiked, and prices fell,” Garner said. “Total sales year to date in June was down 22% over the 2021 level of $991 million but are expected to stabilize in 2023.”
Oil and gas revival: High gasoline prices over the summer fueled the value of the natural gas and mining sector, pushing Colorado’s market value for the sector up 55% from 2021, to $27.8 billion this year, which was more than double the value in 2020. The strong valuation is expected to continue in 2023 with more jobs being added.
Oil production hit a record in 2019 with 192 million barrels. That dropped to 154 million barrels in 2021 but that’s expected to modestly increase 3% this year to 160 million barrels. Next year, production is expected to be about the same.
Workers in this sector make up 1% of the state’s workforce but contribute 4% of the state’s gross domestic product. The local industry is still recovering jobs lost at the start of COVID-19, so job gains are anticipated: 900 this year and potentially 3,000 next year.
“In 2023, employment is anticipated to grow to 23,700 workers, purely driven by the persistently higher oil and gas price environments, both nationally and globally,” Wobbekind said.
Real estate and finance ups and downs: The year has been topsy-turvy for anyone touching real estate. Finance companies began laying off workers as interest rates increased, and prospective homebuyers were scared off. The median price of a single home on the market in Denver dropped to $632,000 in September, compared with $680,000 in April. However, the report points out, the September price is still higher than 2021, when the median was $576,000.
But, because the financial sector has been hit hard, Wobbekind said he expects the financial activities sector to lose 1,000 jobs this year and 4,000 in 2023.
Building permits are also expected to decline 6% this year because of the slowdown in residential construction.
An area expected to grow? Infrastructure construction, thanks to federal funding for roads, broadband internet, and other non-building construction. That could add another $4.4 billion in infrastructure investment in the state in 2023, Garner said.
- Travel has nearly returned at the state’s two largest airports. Denver International Airport’s passenger traffic was down just 1.2% in September compared to 2019 before the pandemic. By comparison, travel at Colorado Springs Airport was up 30% in September compared with 2019, though it added Southwest Airlines in March 2021.
- Tourism and the hospitality industry continues to rebound and the jobs have returned. But, staffing is still an issue that will continue into the new year. Employers have had to raise wages to attract workers, especially in the restaurant industry, where 92% of restaurants increased pay, according to the Colorado Restaurant Association.
- Incentives to the film and video gaming industries help boost those workforces and offset job losses in other information-related industries, like print news. According to the Colorado Office of Film and Television and Media, 16 video game projects have received $4.2 million in incentives since 2013 while $30.3 million went to 127 film projects.
Tamara Chuang writes about businesses, technology and the local economy for The Colorado Sun. She also writes the “What’s Working” column, available as a free newsletter at coloradosun.com/getww. The Colorado Sun is a journalist-owned, award-winning news outlet based in Denver that strives to cover all of Colorado so that our state — our community — can better understand itself.
Snowmass Tourism announced the appointment of Drew Welsheimer as the organization’s new sales group sales director. His first day was Jan. 26.