New numbers crunched by the Colorado Secretary of State’s Office show Colorado is blazing a trail of robust economic growth, business optimism and very low unemployment.
But despite numbers that show state economic growth as high as 5.1 percent, some economists and economic development officials in Colorado see challenges on the horizon. These include lagging economic trends in rural areas, transportation snarls, soaring housing costs and a tightening labor market.
New business filings in the state rose 9.3 percent in the first quarter of 2017 compared to the first quarter of last year and jumped 31 percent over the previous quarter, according to a data summary released by Colorado Secretary of State Wayne Williams. Business optimism is at its highest point since 2005, the data shows.
“The robust growth in business filings bodes well for future job growth in the state,” Williams’ report said. “However, rural areas continue to show weakness in job growth – most growth continues to be concentrated in urban environments in the state.”
Indeed, most of the economic growth is concentrated along a narrow band extending along the western side of the Rocky Mountains from Colorado Springs north to Denver and up through Fort Collins, several economists and economic development officials said.
“My concern has been that it hasn’t spilled over to the rural areas as much,” Stephan Weiler, an economics professor at Colorado State University in Fort Collins, told Watchdog.org.
Employment growth is slow or receding in rural parts of the state, the secretary of state’s report concludes.
The energy-dependent western part of the state is not doing well due to continued low natural gas prices and utilities phasing out coal-fired power plants, Weiler said.
Natalie Mullis, chief economist with the Legislative Council Staff, a nonpartisan research agency created by the state legislature, agreed that the western slope area has not taken part in the state’s economic recovery.
And while oil prices have stabilized, commodities prices have not, Mullis said, and that has led to rising debt for agricultural areas in the state.
“Commodities prices fell off a cliff in 2015,” she told Watchdog.org.
Another concern is the rise of housing prices in urban areas, according to Mullis. New construction in the state has tended to be high-end, leading to a shortage of more affordable homes for some workers, she said.
“We have a lot of people who want homes, but no one’s putting them on the market,” Mullis said.
Weiler concurred with that assessment, saying that there have been disincentives to creating multifamily housing, resulting in a shortage of apartments, condos and townhouses.
“Affordable housing is harder to find these days, he said.
A recent economic forecast put out by Mullis’ agency also raised concerns about the state’s tightening labor market. The state’s jobless rate stood at 2.9 percent in February, according to the secretary of state, meaning that Colorado is on the cusp of full employment.
Mullis’ agency raised concerns about employers’ ability to hire all the skilled workers they need to continue the expansion.
“Full employment may subdue economic growth if employers cannot fill vacant positions,” the forecast said. “A tighter labor market may also fuel inflation.”
But Weiler said skilled labor shortages in the state tend to be less noticeable because of the in-migration of young talent, especially in the Denver area. The state attracts 30,000 to 50,000 net migrants annually, he said.
“Amenities matter,” Weiler said. “Having a nice place matters. Having sunshine matters. … On top of that, Denver’s become a really interesting city in its own right, having a very vibrant music scene and a very vibrant arts scene.”
And Mullis stressed that people from other states continue to want to come to Colorado because of its strong entrepreneurial community, the diverse economy, the mountains and overall lifestyle.
“Denver has been a magnet for young professionals who don’t have kids,” she said.
But the in-migration has caused some problems. The governor will likely call a special session of the legislature this year to deal with transportation issues, Weiler said, adding that the transportation infrastructure has been slow to develop because it’s so expensive. One bright spot, however, has been the private expressways that have developed in the Denver area, he said.
Many observers see the state responding positively to managing the problems associated with Colorado’s economic growth. Stephanie Copeland, executive director of the Colorado Office of Economic Development and International Trade, stressed that programs providing student apprenticeships in industry, state grants to fund startup companies in rural areas, and the creation of enterprise zones are all helping to spread the prosperity.
“With a median age of 36.5, numerous high-performance education and research institutions and a plethora of job-training support organizations, Colorado’s workforce allows resident employers to create, grow and compete in a global economy,” Copeland said in an email to Watchdog.org.
Colorado’s stable tax structure and a low corporate income tax of 4.63 percent have also helped to build the state’s pro-business reputation, she said.
Weiler also sees progress in helping rural parts of the state. Investments in Internet access statewide have helped to connect rural and urban areas, he said. In turn, rural areas have become better at meeting the needs of city dwellers, such as supplying the raw materials for breweries in the Denver area and opening wineries that boost tourism, Weiler said.
“Most of the rest of the country would love to have these problems,” he said.