Economic forecast: Growth to slow in 2020, but no recession yet

DENVER — Since the Great Recession in 2008, Colorado has enjoyed a full decade of strong economic growth. While that growth is expected to continue in 2020, the economy will likely grow more slowly than in recent years, according to the latest Colorado Business Economic Outlook. 

University of Colorado Business Research Division executive director Richard Wobbekind and Denver Metro Chamber of Commerce CEO Kelly Brough presented the Colorado Business Economic Outlook during a conference held Monday in Denver. Lucas High/BizWest.

The 55th annual report, compiled by the University of Colorado Business Research Division of the Leeds School of Business, examines recent economic trends and offers a glimpse at what may be in store for the coming year. Business Research Division executive director Richard Wobbekind and Denver Metro Chamber of Commerce CEO Kelly Brough presented the findings of the 2020 Colorado Business Economic Outlook during a conference held Monday in Denver. 

Colorado will face a “slowing state economy but not an economy in recession” during 2020, Wobbekind said.

In total, the Colorado economy is expected to add 51,000 new jobs across industry sectors in 2019. Next year, that job growth total is expected to drop to around 40,100.

“The United States is currently in its longest economic expansion in post-[World War II] history, exceeding the record set during the technology boom of the 1990s,” according to the report. “Real gross domestic product is estimated to have grown 2.3 percent in 2019 — down from 2.9 percent in 2018 and 2.4 percent in 2017 — marking 10 consecutive years of positive economic growth in the United States.”

Three main factors nationwide are leading to slower growth in 2019 and beyond: effects of 2017 tax cuts waning, trade conflicts with China, and a widening United States government budget deficit.

While growth might be slower nationwide, Colorado is expected to continue outperforming the nation in 2020. Still, there’s no denying the economy is showing signs of a slowdown.

“While benchmarking to the other 49 states shows Colorado well above the fold, the fact remains that the economy is showing signs of slowing,” the report said. “The 3.4 percent real GDP growth in Q2 2019 compares to 4.2 percent in Q2 2018 and 4 percent in Q1 2019. Average job growth from January through September 2019 grew 1.9 percent compared to 2.5 percent for the same period in 2018.”

In Colorado, localized factors slowing growth include talent shortages and housing affordability challenges. 

Despite the headwinds, there is “nothing to be overly concerned about,” Wobbekind said, as the fundamentals of Colorado’s economy remain on solid footing. 

“We still expect Colorado to remain competitive in 2020,” he said. “The job growth we are projecting is in the country’s top 10. We expect to continue to be able to recruit a talented workforce with assets ranging from our quality of life to our diverse and robust economy.”

In addition to offering insights into the overall economy, the Colorado Business Economic Outlook zooms in on the economies of various geographic regions and industries. Here’s what the report has to say about some of those subsections:

Northern Colorado

“Northern Colorado continues to grow in technological innovation and entrepreneurship supported by its increasingly diverse and highly educated population,” the report said. “The region’s stability and growing economy are attributed to industry and employment diversity. Northern Colorado’s high level of patent production and strong presence of multiple research institutions illustrate the regional passion for investment in ideas and innovation.”

Boulder Valley 

“Boulder County’s dynamic economy is fueled by competitive concentrations of businesses and employees in a diverse mix of industries. A highly educated workforce, visionary entrepreneurs, global industry leaders, a desirable quality of life, and a world-class research university are equally critical to Boulder County’s economic vitality,” according to the report. “The county has continued to outperform state and national economies in many areas, such as job growth, educational attainment, capital investment, and commercial real estate absorption.”

Leading industries in the region include aerospace, natural and organic products, outdoor products and recreation and biotechnology.”

Agriculture

“Colorado net farm income is estimated to be $1.52 billion for 2019, a 21 percent increase. This increase is well ahead of the estimated U.S. increase of 4 percent,” according to the report. “For 2020, Colorado’s net farm income is forecast to grow a more modest 6 percent, to $1.61 billion.”

The rise of hemp agriculture and plant-based meat substitutes are trends that are expected to continue into 2020.

Natural Resources and Mining

Colorado’s oil and gas industry faced significant challenges in 2019, a year when the value of the state’s oil production dropped 10 percent to $9.1 billion. That decline is expected to continue in the coming year.

The passage of sweeping new regulations further complicates matters for the energy industry. “While no moratoriums on drilling have been enacted, there remains controversy and uncertainty over the real economic impact of the legislation,” the report said.

Construction

While the sector remained strong in 2019, there are signs of a slowdown.

“Challenges facing the industry include a continued shortage of skilled and unskilled labor, unease regarding trade policy, the ‘silver tsunami’ of baby boomers retiring, regulatory and political uncertainty heading into an election year, and a reduction in the number of large projects on the horizon to begin once current projects end,” the report said.“Although companies involved in construction are currently very busy, many are now reporting fewer projects being added to backlog than in recent years.”

Manufacturing

Colorado manufacturers punched above their weight in recent years and are expected to continue doing so in the near future.

“Manufacturing in Colorado was a $25.1 billion industry in 2018, representing about 6.8 percent of the state’s nominal GDP despite the sector comprising just 5.4 percent of the state’s nonfarm employment base,” according to the report.

The manufacturing sector is expected to grow in 2020, marking the 10th consecutive year of expansion. 

Leading manufacturing subsectors in Colorado include food products, beverages, chemical products, and transportation equipment,” the report said. “Other positive areas of manufacturing include the continued expansion of jobs in companies making cannabis products and a surge in machinery manufacturing in 2019.”

Trade, Transportation, and Utilities

One of the larger subsectors of the economy, this industry includes “wholesale trade, retail trade, utilities, warehousing, and multiple facets of transportation,” according to the report. “More than one-sixth of Colorado workers are included in this industry. The industry gained an estimated 1.3 percent in 2019, to a total of 475,700. The sector is expected to grow another 1.3 percent in 2020, to total 482,000 jobs.”

Information

Certain portions of the information industry are expected to continue to thrive in 2020 while others will face ongoing challenges, the report concludes.

“The industry is expected to add 600 jobs in 2019, but lose 500 in 2020,” according to the report.

The publishing industry will continue its struggles as newspapers grapple with additional staffing cuts and narrower revenue streams. 

The broadband and wireless telecommunications sectors are expected to fare better.

Financial Activities

This industry, which includes finance, insurance, real estate and leasing, “marks eight consecutive years of growth in 2019, adding 2,500 jobs to total 173,000. Growth is projected for 2020 — 1 percent, or 1,700 jobs,” the report said. “Foundationally, the strong economy will support banking, insurance, and real estate employment.”

Professional and Business Services

The large and diverse sector “has produced solid employment growth, adding nearly 130,000 jobs across Colorado since 2009,” the report said. “Average monthly growth through August 2019 reached a near-record 5.1 percent. As a result, [the sector] will retain its position as the largest private industry, with 16.4 percent of all private-sector jobs.”

The report estimates industry employment will “increase by over 15,800, totaling 441,400 by the end of 2019. Growth will slow to 2.7 percent in 2020, adding another 11,700 jobs across Colorado.”

Education and Health Services

In addition to private education providers, the industry sector includes private health care providers who work in ambulatory care, hospitals, residential and nursing facilities, and social assistance.

The industry is on track to add about 6,500 jobs in 2019, a growth rate of 1.9 percent,” the report said. “In 2020, jobs are projected to grow by 5,600, a gain of 1.6 percent.” 

Leisure and Hospitality

Tourism, unsurprisingly, plays an outsized role in Colorado’s economy as compared to most other states.

Total direct travel spending in Colorado during 2018 exceeded $22.3 billion, a 6.7 percent increase from the prior year, the report said. 

The state is becoming an increasing popular destination for travelers from other countries. “Colorado attracted more than 1 million international visitors to the state, at 1,048,000 visitors,” the report said. “This represents year-over-year visitor growth of 7.4 percent, while international visitor spend increased 6.8 percent, to $1.85 billion.”

The ski industry has been on a tear in recent years. “In Colorado, the state’s 31 ski areas had a breakout season in winter 2018–19, hosting a record 13.8 million skier/snowboarder visits,” according to the report. “Visitation was up 14 percent from 12.1 million visits in 2017–18.”

Restaurant businesses, which are also included in this industry sector, are expected to continue to “grow at a steady pace,” the report said. But the industry is not immune from challenges that face many Colorado business groups.

Recruitment and retention is the number one challenge for restaurant owners in 2019, according to the National Restaurant Association. This was true across all segments of the industry — family dining, fine dining, fast casual, quick service, and casual dining — and was especially pronounced among casual-dining and quick service operators,” according to the report.

DENVER — Since the Great Recession in 2008, Colorado has enjoyed a full decade of strong economic growth. While that growth is expected to continue in 2020, the economy will likely grow more slowly than in recent years, according to the latest Colorado Business Economic Outlook. 

University of Colorado Business Research Division executive director Richard Wobbekind and Denver Metro Chamber of Commerce CEO Kelly Brough presented the Colorado Business Economic Outlook during a conference held Monday in Denver. Lucas High/BizWest.

The 55th annual report, compiled by the University of Colorado Business Research Division of the Leeds School of Business, examines recent economic trends and offers a glimpse at what may be in store for the coming year. Business Research Division executive director Richard Wobbekind and Denver Metro Chamber of Commerce CEO Kelly Brough presented the findings of the 2020 Colorado Business Economic Outlook during a conference held Monday in Denver. 

Colorado will face a “slowing state economy but not an economy in recession” during 2020, Wobbekind said.

In total, the Colorado economy is expected to add 51,000 new jobs across industry sectors in 2019. Next year, that job growth total is expected to drop to around 40,100.

“The United States is currently in its longest economic expansion in post-[World War II] history, exceeding the record set during the technology boom of the 1990s,” according to the report. “Real gross domestic product is estimated to…