2021 Colorado Economic Forecast

The following forecast is from the 2021 cber.co Economic Forecast for the United States and Colorado.

Colorado’s real GDP growth rate for 2021 will be slightly higher than the U.S. rate It will return to its pre-pandemic value in late 2021.

Colorado employment posted declines in Q4 2020. The negative trend will continue in Q1 2021. Employment will return to its 2019 level in 2022.

Colorado’s unemployment rate will be greater than most states because unemployment claims will remain high.

Retail sales will rebound in 2021 as a result of pent-up demand. Sales will level off at pre-pandemic levels in 2022.

In 2021 and 2022, inflation will be slightly higher than the U.S. rate.

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The number of passengers through DIA in 2020 was about half of the 2019 total. Domestic flights will return to their 2019 level in 2023. International flights will return to their pre-pandemic level in 2024.

There was an increase in the number of building permits issued in 2020. There will be more permits in 2021 as the population increases. Also, there is a need for affordable housing in the metro areas.

State regulations and reduced demand caused a decline in oil production in 2020. The production of oil will be flat in 2021 and 2022.

Colorado Unemployment Rate Drops to 3.6%

Earlier today the Bureau of Labor Statistics released employment and unemployment data  Colorado. It was a mixed blessing.


The Colorado unemployment rate for November dropped to 3.6%, down from 3.8% in October and 4.3% a year ago.

Nationally, the unemployment rate declined in 45 states compared to a year ago. By contrast only 27 states have rates lower than October. Colorado’s seasonally adjusted unemployment rate has been at or below 4.2% since December 2014 and there is little room for it to drop much further.

For job hunters this is good news as long as their skills match the available jobs. In addition, there will be upward wage pressure for occupations facing a shortage of qualified workers, such a construction, machining, and technicians.

On the other hand, the lower rate may be bad news for some companies. They may have greater difficulty finding qualified and clean workers. As a result they may have to pay higher wages for skilled positions. In addition, there is greater employee turnover during times of lower unemployment. This may decrease productivity and increase recruitment, hiring, and training costs. These increased costs will lead to lower profit margins and increased prices.

At the end of November there were 102,035 unemployed workers in Colorado. This is only 8,306 greater than the trough in May 2007 and 138,542 less than the peak in October 2010.

unemployment rate


Despite the lower unemployment rate, November wage and salary job growth was lackluster, only 43,600 greater than a year ago. During the first half of 2015 Colorado employment increased at an average monthly rate of about 5,600 jobs. That average has dropped to 3,900 jobs during the second half of the year.

Even with the declining rate of job growth Colorado will add 55,000 to 60,000 jobs this year – prior to BLS benchmark revisions that will be released in March 2016. Those revisions may push 2015 average employment to 70,000+. The leading sectors for job growth are Health Care, Accommodations and Food Services, and Construction.

As the level of job growth has tapered off there has been an increase in the number of discussions about a recession; however; the Fed’s recent decision to hike interest rates suggests the economy is on solid footing and a recession will not occur in the short-term.

Colorado Real GDP Currently Stronger than U.S.

On December 10th, the Bureau of Economic Analysis (BEA) released quarterly GDP data for Colorado (2005 to Q2 2015). The Q2 year-over-year Real GDP for Colorado increased by 4.8% compared to 2.7% for the U.S.

The following trends are evident in the comparison of the year-over-year GDP data for Colorado and the U.S:
• The correlation coefficient between these two variables is .69
• The U.S. was stronger during the period Q1 2006 through Q1 2007.
• Colorado outperformed the U.S. significantly between Q2 2007 and Q4 2009 (This was during the recession).
• The U.S. was stronger coming out of the recession for most of 2010 – from Q1 2010 to Q3 2010.
• For the next two years, from Q4 2010 to Q3 2012 the rates of growth for Colorado and the U.S. were similar.
• From Q4 2012 to the present, the Colorado GDP expanded at a faster rate than the U.S. GDP. Beginning in Q1 2014 the gap between the two rates became greater as a result of the strength of the oil and gas industry in Colorado.
• That gap has since narrowed in 2015 as the price of oil has declined and oil and gas production has fallen off.

Colorado Real GDP


The following trends are evident in the comparison of the year-over-year GDP data for Colorado and the Colorado wage and salary employment:
• The correlation coefficient between these two variables is .72
• Employment grew at a higher rate from Q1 2006 to Q2 2007 than the Real GDP.
• Generally, the Real GDP grew at a greater rate from Q3 2007 to Q2 2011 than employment growth.
• From Q3 2011 to Q1 2014 the rate of growth for employment was generally greater than the Real GDP growth.
• From Q2 2014 to present the Real GDP grew at a greater rate than employment. This was in part largely because of the increase in oil and gas production in Colorado during this period.
• As the price for a barrel has dropped and oil and gas production has fallen off the gap between the two rates has declined. This caused a much greater decline in the growth rate for GDP than employment.

Colorado Real GDP

As can be seen the growth of the Colorado Real GDP and the U.S. Real GDP are closely related. As well, there is a strong relationship between the rate of growth for state Real GDP and employment.

If the Economy is Doing so Well, Why Doesn’t it Feel More Robust? -Take II

In the previous blog post, the topic of the economic recovery was discussed. Although it has been a solid recovery, why doesn’t it feel more robust?

The 2007 recovery was atypical in that it occurred over a period of years, as opposed to months. As a result Colorado posted accelerating job growth for four consecutive years. Essentially, the recovery from the recession was weak and gradual. At no point has the state reached a point where public and private leaders could really say, “We have arrived.”

At the national level, the U.S. will add 3.0 million jobs in 2015. Yet, the focus is on the slowdown of the global economy, not the fact that 2015 will be the fifth consecutive year of solid job growth.

Nationally, GDP growth has been subpar. It is hard to get excited when the rate of Real GDP growth is 2.0% to 2.5%. Consumer spending has increased at a similar anemic rate. In other words consumers have remained cautious, as if they are always looking over their shoulder.

The construction industry is “booming” and there is a shortage of trained workers. At the same time, the growth of the industry pales when compared to the 2000s. The good news is that housing has been built on an “as needed basis” and the chance of being overbuilt is slim.

During the recovery period, the state has suffered natural tragedies. There were multiple severe forest fires in several parts of the state, as well as flooding and drought. That was taxing on the state – fiscally and psychologically. Fortunately, Coloradans have remained resilient.

Lower oil prices have dampened growth in parts of the state that had previously experienced strong growth. It is easy to forget the risk associated with the extractive industries until the price of the commodities (oil, molybdenum, coal) drops precipitously or regulations are established that eliminate demand for these commodities.

Then there is the state government… The legislature has focused on social issues for the past couple of sessions – and that is not bad. Some feel insufficient time and resources were spent addressing issues that could improve the state’s ability to conduct business.

At one point, there was sufficient discourse to cause several counties to threaten secession from the state. At times, state government seemed dysfunctional over the past five years.

State government faces a new problem – the state economy is on solid footing and the state will generate record levels of revenue, yet the legislature will be forced to make cuts to key service areas. This conundrum is caused by the combination of Amendment 23, the Gallagher Amendment, TABOR, the initiative process, and Medicare obligations. It is difficult for legislators to govern the state in a way they feel is appropriate.

Despite the challenges and angst created by the items mentioned above, the growth of Colorado’s economy has exceeded the growth of the U.S. economy in many key areas (rate of job growth, rate of population growth, growth of Gross Domestic Product).

Unfortunately, the picture hasn’t always been rosy for the past five years, despite the many great things that have happened.

Economic Risks at the National Level That Might Affect Colorado

The U.S. economy is currently stronger than it was in 2014. The good news is the Colorado is outperforming the U.S. in three key areas:
• The Colorado rate of population growth in 2015 is projected to be 1.6% vs. 0.7% for the U.S.
• The Colorado rate of job growth in 2015 is currently projected to be 3.0% vs. 2.2% for the U.S.
• The recently released GDP data shows that Colorado outperformed the U.S. in the rate of growth, 4.7% vs. 2.2% in 2014.

Currently, the strengths of the national economy outnumber the economic risks. With that in mind this post reviews the manner in which the risks might impact the Colorado economy. For each risk the impact on Colorado is highlighted in italics.

The Economic Risks

The Fed – Janet Yellen indicated there are still issues with the labor market. These concerns include finding trained workers and weak wage growth.

Colorado’s low unemployment rate has caused companies to have difficulty finding trained workers in such industries as construction and the high tech sector. Areas of strong wage growth have occurred in occupations where there is high demand for workers.

Real GDP – The rate of growth in business investments is lackluster. Increased demand for goods and services will drive companies to invest in new equipment, software and buildings.

The decrease in the price of oil has caused Colorado companies in the Oil and Gas industry to curtail investments in their business.

The Dollar – The strong dollar has made U.S. goods/exports less competitive in foreign markets.

The strong dollar is one of many factors that could challenge Colorado exporters in 2015.economic risks

Industry Sentiment – Manufacturing may remain sluggish through the end of the year.

The growth of Colorado manufacturing output was disappointing in 2014. That is unlikely to change in 2015.

Housing – In some parts of the country the rate of housing price appreciation may be problematic.

It will be more difficult to find attainable and affordable housing as a result of the sharp increases in housing prices. These rising prices will cause the state’s rate of inflation to increase.

Price of Oil – Low oil prices have benefited consumers (lower prices at the pump) and some industries, but they have hurt the extractive industries.

Through the first half of the year, consumers have saved about $480 with lower gasoline prices. Currently, it is not possible to measure the impact of cheaper oil on the Oil and Gas industry.

International Situations – The current global situational and foreign policy challenges to the U.S. economy currently include Iran, Syria, China, Russia, Greece, Israel, Cuba, the EU, and Ukraine.

At the moment Colorado shares a level of risk similar to the U.S. as a result of situational and foreign policy challenges.

The strengths of the national economy have created momentum that will further strengthen the U.S. and Colorado moving into 2016; however, if several of these economic risks materialize at the same time, then the health of the U.S. and Colorado economies might be jeopardized.

Colorado Economy On Track to Add At Least 68,600 Jobs in 2015

At the midpoint of the year the U.S. economy is on solid footing and the second half of the year will be much stronger than the first half. The Colorado economy continues to outperform the U.S. in its rate of growth for population, employment, and GDP.

Key Data Points for the U.S.
Real GDP – Q2 will be stronger. Annual growth will be 2.5% to 2.9% in 2015.
Retail Sales – Up 1.3% for 6 months, projected to be up 3.0% for 2015.
U.S. Employment – The U.S. is on track to add 3.1 million jobs this year.
Unemployment Rate – 5.3%, down from 6.1% a year ago, 8.3 million unemployed, trending down.
ISM Indices –Manufacturing is sluggish and expected to remain that way; Non-Manufacturing is steady and well above 50.
Price of a Barrel of Oil (WTI) – Since mid-March it has varied from $43 to $61. Currently in the low 50s, but trending down.
Construction – For 6 months, employment up 4.2%, weekly earnings up 3.0%.
Case Shiller Housing Prices – U.S. prices up 4.2% from a year ago.
Dow Jones Industrial Average – On July 17rd the DJIA was 18,086, up 1.5% from 17,823 at the end of the year.

Average Colorado employment is 68,600 greater than the same period last year, with the potential of being revised upward at a later date.

Colorado Economy

As has been the case in the past, the sectors with the top job growth are: Health Care; Accommodations and Food Services (part of the Tourism Industry); Construction; Professional, Scientific, and Technical Services; and Manufacturing. These sectors accounted for about 72% of total job growth in the first half of 2015.

The Bureau of Economic Analysis has released the 2014 Gross Domestic Product for Colorado. The state’s Real GDP expanded at a rate of 4.7% compared to 2.2% for the U.S.

Key Data Points for Colorado
QCEW Revisions – Recent revisions to Q4 2014 could cause 2014 employment to be revised upward in the March 2016 benchmark revisions. There was stronger momentum coming into 2015 than originally anticipated.
Population – Colorado’s population will increase by 88,800 people this year.
Unemployment Rate – 4.4%, down from 5.0% a year ago.
MSA Unemployment Rate – Boulder and Ft. Collins have the lowest rates at 3.5% and 3.6% respectively.
2014 Colorado GDP – The state Real GDP grew by 4.7% in 2014 compared to 2.2% for the U.S.
2014 Contribution to GDP Growth – The Mining sector accounted for 6.2% of GDP and 18.2% of GDP growth in 2014.
Wage and Salary Employment – On average Colorado has added 68,600 jobs this year based on current data. This is not adjusted for the projected revisions.
Leading Sectors for Growth – About 72.2% of the jobs have been added in the Health Care; Construction; Accommodations and Food Services; Professional, Scientific, and Technical Services; and Manufacturing.

For details or more information about the Colorado economy, check out the 2015 cber.co forecast and economic updates on this website, https://cber.co.

2014 Colorado Real GDP Growth More than Twice the Rate for U.S.

In early June the Bureau of Economic Analysis released Gross Domestic Product at the state level for two-digit NAICS Codes.

Since 1997 Colorado Real GDP has grown at a faster rate than the Real GDP for the U.S. (Sum of States) in 11 of 17 years.

gdp index

Since 1997 Colorado Real GDP has grown at a faster rate than the U.S. (Sum of States), 2.8% vs. 2.1%. The 2014 U.S. rate of growth was 2.2% compared to 4.7% for Colorado.

gdp index

There were 8 sectors that gained share in 2014, i.e., their percent of contribution to GDP was greater than their percent of the 2014 total GDP. Collectively, they accounted for 27.1% of the 2014 GDP and 46.5% of the change in the GDP. These sectors were:
• Arts, entertainment, and recreation
• Utilities
• Management of companies and enterprises
• Transportation and warehousing
• Accommodation and food services
• Construction
• Wholesale trade
• Mining

There were 12 sectors that lost share in 2014, i.e. their percent of contribution for these sectors was less than their percent of the 2014 total. Collectively, they accounted for 72.9% of the 2014 GDP and 53.5% of the change in the GDP. These sectors were:
• Educational services
• Agriculture, forestry, fishing, and hunting
• Other services, except government
• Administrative and waste management services
• Retail trade
• Finance and insurance
• Health care and social assistance
• Manufacturing
• Information
• Professional, scientific, and technical services
• Government
• Real estate and rental and leasing

The level of Real GDP Growth in 2014 provided significant momentum for the Colorado economy moving into 2015.

Expect Solid Growth in Colorado Wage and Salary Employment

The U.S. economy remains on solid footing  in anticipation of the upcoming release of BLS Colorado wage and salary employment data.

U.S. Employment and GDP

Earlier this month BLS reported the U.S. added 126,000 jobs in March compared to February. This was the weakest level of month-over-previous-month job growth for the seasonally adjusted data since 2013. Despite the slower rate of growth for March 2015, U.S. employment for March is about 2.29 million jobs greater than March 2014..

Currently, Colorado wage and salary employment is about 1.8% of the U.S. total. About 2.8% of U.S. job growth can be attributed to Colorado.

Most economists think U.S. Real GDP growth will be in the neighborhood of 2.5% to 3.0% this year. This past week The Conference Board bumped its 2015 projection for the U.S. output growth up to 2.9% based on projections for stronger personal consumption. This is notable given their conservative estimates over the past ten years. Meanwhile, other economists have bumped their forecasts down to the range of 2.5% to 3.0%

Stronger output growth should translate into a greater number of wage and salary workers. In other words, the slower rate of U.S. job growth in March appears to be a glitch rather than the start of a downward trend. The strong rate of U.S. job and output growth will ensure that in the short term Colorado with continue to add jobs at a rate similar to the past twelve months.

U.S. and Colorado Unemployment Rates

In March the U.S. unemployment rate remained steady at 5.5%, but down from 6.6% a year ago.

The U.S. Congressional Budget Office has indicated the natural rate of unemployment is currently 5.2%. The natural rate is the point of equilibrium or the rate at which an economy will operate most efficiently.

When the unemployment rate drops below the natural rate there will be upward wage pressures and companies will be challenged to find qualified workers. The economy will operate inefficiently for different reasons than when the rate of unemployment is above the natural rate.

In Colorado, the February unemployment rate of 4.2% was well below the U.S. rate. Some Colorado industries are currently experiencing symptoms of an economy that is operating below the natural rate of unemployment. They are experiencing difficulty finding qualified workers in select occupations. In addition, there are upward wage pressures in industries such as construction and agriculture. Anecdotal evidence suggests some companies are not able to find workers even when they pay higher wages.

The state’s rate of unemployment is expected to remain below 4.5% in the near-term, although there are concerns the layoffs caused by lower oil prices will cause an increase in the unemployment rate. At the state level the direct impact of oil and gas layoffs may not have a major impact on total state employment and unemployment data, but it will definitely affect regions where the oil and gas industry has played a significant role in the economy, such as Weld and Garfield counties.

Expect continued solid growth in Colorado wage and salary employment in the short-term.

2015 cber.co Forecast – Fine Tuning the Volatile Category

In preparing its annual forecast, cber.co divides the NAICS sectors into three categories. This portfolio approach makes it easy to see that some sectors consistently create jobs at a higher rate of growth, some show solid growth, and others are more volatile. Ultimately, the volatile category tends to have a greater influence on the magnitude of change in total job growth than the sectors with steady growth. In March 2015 BLS released its benchmark revision of the 2014 data. The changes were more significant than usual.

As a result  the 2015 cber.co forecast was fine-tuned to have a better understanding of categories and sectors that were driving the economy. This brief discussion highlights the revisions to the 2015 cber.co forecast. This post will evaluate the Volatile Category.

The Volatile Category

Over the past two decades the sectors listed below were the primary source of volatility in total employment.

The sectors are:

  • Natural Resources and Mining
  • Construction
  • Manufacturing
  • Transportation, Warehousing, and Utilities
  • Employment Services
  • Financial Activities
  • Information
  • Federal Government

Total employment for this category was:

  • 1994  625,400 workers, 35.6% of total employment
  • 2004  716,000 workers, 32.8% of total employment
  • 2014  713,000 workers, 29.0% of total employment

2015 cber.co forecast

Estimated Job Growth

As can be seen below there is a significant difference between the original estimates for 2014 (January 11) and Benchmark revisions for 2014 (March 27). BLS significantly underestimated growth in this category in 2014.

The original Volatile Category estimates/forecast (January 11 Forecast) was + 23,000 to 27,000 Employees.

  • 19,800 jobs added in 2013
  • 25,600 jobs added in 2014
  • 706,100 employees in 2014

In 2015 between 23,000 and 27,000 jobs will be added, at a rate of 3.3% to 3.7%. This rate of growth is slightly slower than 2014.

The updated Volatile Category estimates/ forecasts, after benchmark revisions (March 27 Forecast) was + 23,000 to 27,000 Employees.

  • 22,200 jobs added in 2013
  • 30,000 jobs added in 2014
  • 713,000 employees in 2014

In 2015, between 23,000 and 27,000 workers will be added at a rate of 3.2% to 3.8%. Despite the significant underestimate in 2014, the forecast for 2015 was unchanged.

The recalibration of the 2015 forecast resulted in the following changes:
• The Strong Growth Category was revised upward by 4,500.
• The Solid Growth Category was revised downward by 1,500.
• The Volatile Category remained unchanged.
• The net change to the 2015 forecast was an upward revision of 3,000; however, the 2015 forecast is for total growth slightly below the 2014 total.

The change in the mix of jobs being added is equally as important as the change in the number of jobs being added. For further information on the cber.co forecasts click here.

2015 cber.co forecast


2014 Unemployment Rate – Challenges and Positives for 2015

On March 4, the Bureau of Labor Statistics released its annual unemployment data for Colorado. The 2014 unemployment rate for Colorado was 5.0%, down from 6.8% in 2013. The average number of unemployed decreased from 189,023 in 2013 to 141,387 in 2014.

With that as a background, some of the challenges and positives facing the economy are listed below.

Employment in Colorado has increased at a modest and manageable rate for the last two years. A similar level of growth is expected in 2015, but there will be some challenges.
• The decline in the price of oil has begun to hit Colorado producers. The breakeven point for the Niobrara is in the $65 to $70 range. Several companies have announced significant layoffs.
• In addition to the drop in the price of oil, demand for Colorado coal declined in 2014. Coal is a major driver of several rural economies throughout the state. With the decline in demand, many communities are fine tuning their economic development strategies to diversify their economies.
• Colorado’s rate of inflation is more than a point higher than the rate for the U.S. (The Denver-Boulder-Greeley index is used as a proxy for the state). Last year it was 1.6% for the U.S., while it was 2.8% for Colorado. The rapidly appreciating prices of housing in Denver and many parts of the state are largely responsible for the gap in inflation between the state and the nation.
• Rising home prices are a two-edged sword. They benefit the home owners but may be detrimental to prospective buyers. In parts of the Front Range, there is solid demand and low inventories for certain types of housing, particularly at the lower end. Affordable and attainable housing are in high demand.

On the other hand the state has many positives:
• Nationally, jobs are being added at rate that is accelerating slightly. That bodes well for Colorado.
• The decline in oil and gas prices has increased disposable income slightly, about $50 for 2014 and $500 to $700 for 2015.
• Rising home prices will be beneficial to Colorado. Homeowners are more confident if they feel the value of their home is increasing. As a result they may spend more. Rising property values directly benefit the coffers of local governments and school districts.
• After a slowdown in 2014, Wall Street is enjoying a bull market. This in turn creates wealth and increases greater consumer and business confidence.
• Unemployment is expected to remain below 5.0% throughout 2015. As a result wage pressures will become a bigger issue in more occupations and industries. This is great for workers, particularly if their increases exceed Colorado’s rate of inflation (2.8% in 2014). Wage increases that exceed the rate of inflation will serve as a form of stimulus to the economy because workers will have greater confidence and more to spend. In turn, education and state and local government will be able to more fully fund programs that have been underfunded in the past.
• Because the decline in the price of oil is a global issue, oil and gas employees may not be able to move to other states or countries to find work. With the Colorado unemployment in the range of 4.0% some of these workers may be able to stay in-state and work in construction, manufacturing or other positions.
• Colorado has experienced another first-rate ski season, with an added benefit of hosting the 2015 FIS Alpine World Ski Championships in Vail. The event showcased the state to 700 athletes from more than 70 nations.
• The spring snow storms significantly increased snowpack levels in many parts of the state; however, additional snow is needed. Water in critical for all aspects of Colorado’s economy. While the snow is often viewed as an inconvenience to those along the Front Range, it is essential to have good snow pack in our mountains and counties where agriculture dominates the local economy.
• The sectors that have driven the economy over the past two years are construction; healthcare; accommodations and food services; retail trade; and professional, scientific, and technical services (PST). These sectors are expected to account for about 60% of the job growth in the state in 2015. There will admittedly be challenges in the extractive industries; however, they will have a minor impact on the growth of the state’s top five sectors for job growth.

As Colorado addresses these challenges and positives, job growth in 2015 is expected to be at or slightly less than the rate for 2014.