5 Economic Trends to Watch in 2019

Three recent economic forecasts — Leeds School of Business, Legislative Council Staff (LCS), and Office of State Planning and Budgeting (OSPB) —project Colorado’s economy will continue to grow in 2019, but at a slower pace. The risk of a recession is low, but if the forecasts are wrong, they’re likely to be too optimistic.  

Below are five Colorado economic trends that will drive our state’s economy in 2019.

Global Economic Growth is Slowing

While Colorado has had a very strong economy in recent years, we depend on other markets to buy our goods and services.

The global economy is showing signs of slowing down, and a stronger dollar relative to other currencies makes exports more expensive. Plus, the current disputes over trade agreements and the uncertain impacts of tariffs could hurt global economic growth. Slowing global growth will put a damper on Colorado’s economy.

Nationally, the current economic expansion is a few months shy of the longest in U.S. history. This expansion has been weaker than the one in the 1990s — the longest on record — and is showing the normal signs of a maturing expansion.

The U.S. Economy is Also Slowing

The stimulus provided by last year’s federal tax cuts is wearing off, and the Federal Reserve Board is continuing to raise interest rates.

The combination of these factors is projected to slow the growth in the U.S. economy, and financial markets in the U.S. are indicating a slow down is likely in the future. For example, the yield curve on bonds is flattening, meaning interest rates on short-term bonds are approaching the rates on long-term bonds. Historically, this has been a signal of slow growth and possibly a recession down the road.

However, financial markets sometimes send false signals leading to the old line that the stock market has predicted 10 out of the last five recessions.

Colorado’s Tight Labor Market Could Constrain Future Growth

Colorado’s unemployment rate is among the lowest in the nation and our labor force participation rate — the percentage of Coloradans aged 16 and older who are either working or looking for work — is the third highest in the country. However, many employers, particularly those in the construction, agriculture, leisure and hospitality, health care, and professional and business services industries report having a hard time finding enough skilled workers to grow their businesses.

On the positive side, the tight labor market is finally pushing wages up, helping workers and stoking consumer spending which adds to economic growth.

Future growth will depend, in part, on businesses ability to attract and retain enough skilled workers to fill current and future jobs. If we can’t find enough workers, growth will be slowed.

Population Growth & Economic Activity Concentrated Along Front Range

Colorado’s population grew by 1.4 percent in 2016 and 2017. Fast by national standards, but much slower than our 3 percent growth during the 1990s. That said, this growth hasn’t been equally distributed throughout the state.

Between 2010 and 2017, 95 percent of the population growth occurred along the Front Range with 64 percent landing in the Denver Metro area. Over the same period, 21 counties, many of them in the southeastern corner of Colorado lost population.

A recent report from the U.S. Bureau of Economic Analysis found that 10 of Colorado’s 64 counties, all located along the front range, accounted for 85 percent of the state’s economic activity in 2015.

Even as Colorado’s overall economy continues to grow, some parts of the state will feel like they’re in a downturn.

Finding ways of ensuring all parts of the state benefit from our economic growth will be a major challenge in the coming years.

Colorado’s Population is Getting Older

Colorado remains one of the youngest states in the nation with the sixth lowest share of people over 65 years old. But we’re aging faster than all but two other states as the baby boomers who moved here in the 1970s and 1980s turn 65.

As people age, their incomes drop and their spending patterns change. As they retire, the labor force participation rate drops, and employers need to replace skilled workers. The aging of Colorado’s population has been one of the factors limiting the strength of the current expansion.

But our aging population will also drive demand for health care and other services creating jobs and promoting growth.

Colorado’s economy should add jobs and continue to grow in 2019. But it will likely be a bit weaker than in recent years and more susceptible to negative shocks.

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