5 takeaways about Colorado's economy right now
Colorado's economy is expected to grow 2% this year — a more optimistic outlook for gross domestic product than expected because of robust consumer demand, economists told state lawmakers Wednesday.
Yes, but: Economic risks loom in the distance and warnings are emerging that could pinch the state's financial picture.
State of play: Two economic forecasts — one from nonpartisan legislative analysts, and another from the Polis administration — offer a snapshot of where Colorado stands as big questions remain at the national level.
- Here's what you need to know.
1. A cautionary jobs picture. Colorado's unemployment rate in July ticked upward to 3.1% — the first time in 15 months it exceeded 3%.
- The state's rate remains below the U.S. average of 3.8%, but job growth is slowing and economists in the governor's office are predicting the state will create fewer jobs than the the U.S. in the coming year.
- The reasons include a slowing pace of migration that is constraining labor supply and limited affordable housing for new workers.
2. Inflation remains elevated. Stubbornly high inflation is another concern. The cost of housing and services are keeping the Denver metro inflation rates above the U.S. average of 4.1% this year.
- The governor's office increased its inflation forecasts for the next three years, anticipating it averaging 5% in 2023, 3.1% in 2024 and 2.9% in 2025.
- The administration also is expecting the Federal Reserve to make one more rate hike this cycle.
3. Consumers are spending. The inflation rate isn't limiting consumer spending because wages are growing in the tight labor market, particularly among higher-income brackets.
- Retail sales in Colorado increased 2.3% year-to-date in June and are expected to exceed the nation's 3% growth in 2024.
- Behind the scenes, the spending is driven by decreased savings deposits, assets among wealthy households and increasing credit card debt.
4. The risk of a recession. The warning signs embedded in these numbers are not increasing the risk of recession at the moment, both economic forecasts suggest.
- The governor's office lowered their projections for a recession from 45% to 33% on the premise that inflation will slow and labor demand will remain strong.
- The wild card is national monetary policy overshooting the target and creating a recession, says Elizabeth Ramey, principal economist with the Legislative Council.
5. State budget outlook. For the next state budget that lawmakers will begin crafting in November, it means a "back to normal" landscape.
- For the 2023-24 fiscal year, state revenue for discretionary spending from the general fund is expected to actually decline by 3.1%, legislative economists say. Most of that drop means lower projected taxpayer refunds.
- That gives lawmakers about $1.2-$1.8 billion in additional spending — which all but vanishes to a meager $23 million in surplus dollars once the growth in expenses is factored into the equation, experts said.
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