Fears and Hopes for the upcoming year
The general consensus amongst business analysts in Colorado is that the state’s economic growth is poised to slow in 2023 as inflation and rising interest continues to hamper business activity across all sectors.
According to economists at the University of Colorado’s Leeds School of Business, while it is not expected to stall out completely, the coming year will witness extremely slow movement on the business front overall.
It’s not all doom and gloom though as the Business Research Division at the Leeds School of Business predicted 2 percent job growth for the upcoming year—comfortably beating the national average—with nine of Colorado’s 11 industry categories expected to see growth.
Without any shred of doubt, one of the main stories that dominated this year was inflation. As things stand presently, the story of next year will also be—inflation.
The governor’s Office of State Planning and Budgeting back in September had warned that the risk of a recession in the next 18 months has risen since June to 50%. Various legislative council staff also alluded to the fact that there were a host of economic risks, including fallout from the war in Ukraine and the effects of the Federal Reserve tightening monetary policy even further.
One upside in all of this is the state’s labor market. Colorado is expected to add about 57,000 jobs next year, up 2% but slower than the 4.4% growth experienced this year, economists from the University of Colorado said in a newly released business outlook report. The two largest sectors in the state — professional and business services, and trade, transportation and utilities — are expected to add a combined 26,700 jobs in 2023, if their report is anything to go by.
The only two sectors that have been forecasted to lose jobs next year are the construction and financial services sectors, both of which are highly sensitive to changes in interest rates – especially mortgage rates.
It is known that higher mortgage rates make it more expensive to buy a home, stifling the demand for new houses. Added to that, more and more mortgage organizations are taking a big hit because a lot of homeowners stopped refinancing their existing loans, which had been a flourishing part of the business when interest rates were low.
This outgoing year has been disjointed and chaotic for the real estate sector. Finance companies began laying off workers when interest rates increased which scared off prospective home buyers.
American Financing Corp., just last month announced plans to lay off more than half of the employees at its Aurora headquarters and they weren’t the only ones to do so.
The average price of a single home on the market in Denver and its environs 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 average was $576,000.
The business scene has been somber both in Colorado and across the U.S. for the past seven to eight months. Some signals like the declining gross domestic product earlier in the year point to a possible recession, on the other hand the job market hasn’t faltered yet, making it difficult to predict definitely where the economy is headed next year.
The unemployment rate in Colorado has been on a free fall all year, though it went up slightly to 3.6% in October. Next year though, the unemployment rate is expected to edge up to 4.1%.
That’s due in part to the fact that so many Coloradans who can work are doing so, or are looking for a job and also the fact that Colorado is still one of the youngest states in the nation, but the 65-plus demographic is the fastest-growing age group in the state.
According to October data from the U.S. Bureau of Labor Statistics, approximately 67% of Coloradans over 16 are participating in the labor force, compared with 62% nationwide.
The tourism and the hospitality industry seem to be on the rebound and the jobs have gradually returned. Even though staffing is still an issue that will continue into the New Year, employers have had to raise wages to attract more workers, especially in the restaurant industry, where 92% of restaurants in the state increased wages to its workers, according to the Colorado Restaurant Association.
The various incentives the film and video gaming industries got throughout the year helped in boosting the workforce of the state as a whole, and also helped to offset job losses in other information-related industries, like print news. According to statistics from 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.
The projections so far are that the Media (both print and electronic) will gradually witness an upsurge in terms of engagement from other sectors of the economy that will once again turn their gaze to the media to keep their businesses competitive.
All in all, everyone in Colorado can only hope that the year 2023 holds steady for businesses, otherwise everyone’s worst fear of a recession might be an unwelcome reality.