Colorado’s economy next year won’t be a bed of roses, with job gains running at their slowest pace since 2011 and commercial real estate under extreme stress. But neither will it be a bed of thorns, as inflation eases and a recession doesn’t set in, according to the 2024 Colorado Business Economic Outlook.
“It is a slower-growth story. There are positive nuggets in there. We aren’t forecasting a recession and we expect a continued abundance of job opportunities for people,” said Brian Lewandowski, executive director of the Business Research Division at the University of Colorado Boulder Leeds School of Business, which puts the Outlook together each year.
The Outlook, based on input from 130 individuals across a variety of industries, as well as a sophisticated computer model, forecasts employers in the state will add 42,000 nonfarm jobs. The state’s unemployment rate will average 3.4%, not far off the 3.3% rate reached in October.
Adding 42,000 jobs translates into a job growth rate of 1.4%, below the 2.2% growth rate estimated for this year. Initial employment reports through October put Colorado at a 1.1% annual pace, so reaching the expected rate will depend on some big revisions.
“We went from being roughly a top 10 state to being a bottom 10 state for job growth. How could we be so wrong and do we need to revise down our employment numbers?” Lewandowski said of the questions the Outlook panel asked as it tried to prepare its 2024 forecast.
The team essentially did the equivalent of throwing a red flag in football and challenged the initial statistics, which are based on employer surveys and later adjusted based on the actual headcounts reported in quarterly unemployment insurance premium reports.
Other indicators were showing a much stronger economy than what the job numbers were suggesting. And helping with that decision, Ryan Gedney, a senior labor economist at the Colorado Department of Labor and Employment, has consistently argued employment growth this year will end up much stronger than initially reported. Revisions for the first two quarters so far are backing up his view.
Some of the strongest hiring this year has come at local governments and at hotels and restaurants, which aren’t the highest-paying places in terms of wages, said Richard Wobbekind, an associate dean and a senior economist at Leeds.
The strongest job gains next year are forecast to come in professional and business services, where positions are mostly on the upper end of the pay scale. Education and health care should contribute to employment growth, and governments are expected to keep hiring, aided on the local level by higher property taxes.
Higher interest rates, however, will remain a major headwind for the economy and are expected to contribute to job losses in construction, finance and real estate. Manufacturing and information, which includes tech, are also forecast to see declines.
Wobbekind isn’t in the camp of economists expecting a sharp drop in interest rates next year, saying they will stay elevated for longer than expected. Homebuyers holding out for a 5% rate on a 30-year mortgage should be looking for things to stay closer to 6%.
A huge reckoning continues in commercial real estate, and while it is playing out slowly, loans made under now unrealistic assumptions will have to be reworked. Banks continue to tighten their lending standards as they try to build up their reserves against losses, and venture capital remains scarce.
Yet the economy can continue to move forward as long as consumers hold in there, which they have shown a willingness to do.
“Our committee members are expressing optimism in a slow environment,” Wobbekind said. “We will be resilient. We will continue to have growth.”
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