CU report: Local economy to keep growing in 2015, but speed bumps could loom

The Colorado economy will continue to grow in 2015, even if not at quite the torrid pace it did in 2014.

That’s according to the Colorado Business Economic Outlook for 2015 released Monday morning by the University of Colorado for the 50^th year in a row. The Business Research Division at CU’s Leed’s School of Business compiles the report.

The Boulder Valley and Northern Colorado, Business Research Division executive director Richard Wobbekind said in a phone interview, are the hottest areas in a hot state. In Weld County, it’s sectors like energy, agriculture and construction driving the growth.

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Larimer and Boulder counties, meanwhile, have been much more diversified, with growth coming from high tech to professional and business services to medical device companies to cloud computing and app development to Internet support.

“(Larimer has) had a lot of strength in their economy on those pieces, as has Boulder and as has metro Denver,” Wobbekind said. “Weld over time is striving to do that to get more manufacturing and more tech in their area.”

Of course, there could be a couple of potential speed bumps to keep an eye out for in 2015, Wobbekind said.

The first is the price of oil. Weld could be significantly impacted negatively if oil prices were to drop below $60 per barrel for any extended period of time, he said. But he also noted that there are myriad companies that support the oil and gas industry that are spread out throughout Larimer and Boulder counties and down into the Denver area that could feel the impacts of such a price drop.

“We don’t think that’s going to happen but we’ll certainly keep our eyes open,” Wobbekind said.

Wobbekind said his team thinks oil prices will be more in the $75 to $80 range next year, with the oil and gas industry continuing to grow but not as quickly as the last two years.

One area in which the state could use a slowdown is the growth of housing prices, Wobbekind said. According to Federal Housing Finance Agency figures cited by the CU report, second-quarter housing prices in 2014 were 9.6 percent higher than a year earlier in Boulder County, and they were up 9 percent in both Larimer and Weld counties. State housing prices were up 9.5 percent overall.

If the rate of appreciation doesn’t slow down a bit – and he expects it will – it could be a drain on the economy. Wobbekind expects a 4 or 5 percent rise in housing in the coming year, not quite as hefty but still ahead of wage growth.

“We have become a relatively expensive place housing-wise,” Wobbekind said. “It just makes us a little less competitive in the economic development game.”

Speaking of wage growth, Wobbekind said there should be some upward pressure on wages in the coming year after several years in a row of wages growing merely at about the rate of inflation. That growth will be driven by a growing labor shortage in the state as the unemployment rate continues to dip.

One area about which Wobbekind and his team were worried when they released their report a year ago was the effects the disastrous 2013 floods would have on the economy. But the damage to the economy, he said, hasn’t been as bad as expected. Tourism, in particular, recovered much more quickly than anticipated for mountain areas like Estes Park that were cut off by the floods.

The impact, he said, is still being felt though by people who are still waiting to rebuild their houses as the shortage of workers in the construction industry has helped lead to a backlog of people who have received insurance money or federal aid but can’t yet build.

The Colorado Business Economic Outlook features forecasts and trends for 13 business sectors prepared by more than 100 business, government and industry professionals.

The report projects the state to add 61,300 jobs in 2015. That’s down a bit from the 72,900 added this year, though this year’s growth was the greatest for Colorado since the start of the 21^st Century.

All sectors aside from the information industry are expected to grow in 2015, while the information industry will remain flat. The strongest sector for job growth is predicted to be the professional and business services sector, which is expected to add 12,800 jobs (3.3 percent growth).

Colorado’s population, meanwhile, is the fourth-fastest-growing nationally, trailing only North Dakota, Washington D.C., and Utah. The state is projected to add 89,000 people by July, growing 1.7 percent to about 5.4 million.

The entire economic outlook can be viewed online at leeds.colorado.edu/BRD.