Colorado’s economy is among the strongest in the nation, in fact outperforming the nation as a whole in 2016, report analysts with the Business Research Division at the CU Leeds School of Business.
Given the state of the nation’s economy, that is saying a lot. The United States is currently experiencing the longest economic expansion following a major economic contraction in its history, according to the Mid-Year Economic Outlook published in the Colorado Business Review by CU Leeds Business Research Division.
The nation’s economy overall is strong: the country is at full employment with an unemployment rate of 4.3 percent personal income grew 3.4 percent in 2016 and asset values are up.
Colorado's unemployment rate underscores the robust economic data. Colorado’s 2.3 percent unemployment rate is the lowest the state has seen since data were recorded in 1976, as well as the lowest in the nation. Cities across the state with the lowest unemployment rates are:
- Fort Collins-Loveland, 2.1 percent
- Boulder, 2.3 percent
- Greeley, 2.5 percent
- Denver-Aurora-Broomfield, 2.5 percent
The low unemployment rate does have a downside – few people looking for jobs make finding skilled workers a challenge for businesses. In fact, finding employees is the number one challenge facing Colorado’s economy in 2017, reports the Q3 2017 Leeds Business Confidence Index survey.
In 2016 real GDP, Colorado was the tenth fastest-growing state and the eighteenth largest overall with an annual real GDP growth rate of 2 percent. The report concludes the three largest industries for GDP were Financial Activities at 19.1 percent; Trade, Transportation, and Utilities at 15.7 percent; and Professional and Business Services at 2.3 percent.
The top three fastest-growing industries in 2016 were Information at 8 percent, Construction at 5.3 percent, and Education and Health Services at 4.9 percent. Real GDP decreased for Natural Resources and Mining.
Though fast growing, the construction industry—including residential, nonresidential and nonbuilding—shows a 0.4 percent year-over-year decrease as of June 2017. But experts say the issue is one of the timing of the data, rather than one of weakness.
Key contributors to the current construction lull in residential include the tightening of lending for multifamily homes. The Mid-Year Economic Outlook found that lenders are concerned that multifamily housing is oversaturated, especially high-end multifamily properties. In 2016, permits issued for multifamily totaled about 17,000. Of these new permits, 40 percent were issued in Q4 2016 and approximately 88 percent of these were in the greater Denver-Boulder area.
In addition, construction experts affiliated with the Mid-Year Economic Outlook say fewer units are being planned. Expectations are for residential construction to decrease in early summer 2018. Factors affecting the slowdown include:
- Millennials are beginning to look for properties to purchase
- Property values have decreased as construction moves from prime downtown locations to the edges of the city where property values are less.
- Total construction activity, as measured by dollar value of projects, will not increase in the next few years.
Data suggest a slowdown in single-family home construction began in June 2017. Experts say this can be attributed to the timing of the data currently available: closed contracts on future permits increased by 8 percent as of April 2017. The expectation is that those future permits will lead to an increase in single-family construction. The CBR report says overall the construction industry in Colorado remains strong.
As in other industries, the main restriction on growth for the construction sector is a shortage of skilled labor.
The Colorado Business Review is a quarterly publication of the Business Research Division at CU Boulder. For the full report visit http://www.colorado.edu/business/sites/default/files/attached-files/cbr_2017_issue_2.pdf