Forecasts predict Colorado's economy will continue to slowly grow
(The Center Square) – Low unemployment, rising wages and consistent job openings will help Colorado’s economy continue to slowly grow, according to two state economic forecasts.
Democratic Gov. Jared Polis’ Office of State Planning and Budgeting and the Colorado Legislative Council Staff both distributed quarterly economic projections Tuesday. The OSPB emphasized the influence of the labor market in its outlook and stated it would contribute to the state’s continued strong economic performance.
“Colorado’s strong economy continues to outpace other states, with lower unemployment and more job growth here in Colorado than we are seeing nationally,” Polis said in a statement announcing the report. “As we enter the new year, we are committed to saving people money, creating more good-paying jobs, and attracting new businesses to our thriving state.”
The LCS reported the U.S. and Colorado economies continue to demonstrate resilience when accounting for high inflation during the last year and the Federal Reserve raising interest rates to curtail inflation. They also projected "continued slow growth" in the state and nation through 2023 and a return to a moderate pace of expansion in 2024.
“And the economy remains fragile: any number of unforeseen outside shocks could push the economy into a recession,” the LCS report stated.
The LCS noted different areas of the economy are showing various levels of strength and weakness.
“Labor markets continue to be a bright spot with low levels of unemployment, plentiful job openings, and rising wages,” the report stated. “Household incomes have held up even after the end of pandemic-era government supports, sustaining rates of consumer spending and retail trade that have just outpaced inflation. High inflation remains present, but recent data suggest that most price pressures are receding.”
Colorado’s unemployment rate of 3.5 percent is two-tenths of a percent lower than the national rate. OSPB predicted Colorado’s job growth will continue to be higher than the national rate.
“As consumer spending patterns continue to shift towards services, it benefits Colorado’s robust economy relative to the nation as a whole given the larger share of service-related industries,” the OSPB reported.
Even though Colorado voters this year approved reducing the state income tax rate from 4.55 percent to 4.4 percent, cash from income tax returns is growing. The OSPB projected the general revenue fund to have grown 23.7 percent to $17.7 billion for fiscal year 2021-2022. The growth is attributed to income and sales tax revenues growing approximately 20 percent. It projected for fiscal year 2022-2023 general revenue to be $412.4 million more than its September forecast.
The OSPB expects revenue to decline 2.1 percent in fiscal year 2023-2024 and grow at 6.8 percent for fiscal year 2024-2025.
The Legislative Council Staff said the Federal Reserve actions to suppress demand, lowering prices and slowing inflation, has been successful.
“But this aggressive intervention will have lasting consequences,” the LCS report said. “Real estate values will continue falling, with minimal affordability benefits for would-be homebuyers because of rising mortgage costs. Reducing demand likewise drains consumer and business confidence, which could worsen further as the pace of growth slows.”