Longmont economy: clear, cloudy vision in 2020

LONGMONT — Patty Silverstein, president and chief economist of Littleton-based Development Research Partners, seemingly requires bifocal glasses as she gazes into the future of the economy in 2020: The vision is both clear and cloudy.

“2020 Vision” was the theme of her remarks at the 2020 Advance Longmont Economic Forecast, Thursday, at The Wild Game Entertainment Experience. The event was organized by the Longmont Economic Development Partnership.

Overall, Silverstein, who delivered the keynote address at the annual event, said the economy likely will continue to grow, but at a slower pace.

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“We are not calling for recessionary conditions in 2020,” Silverstein said. “We are calling for a slowdown in economic activity. We are still expecting that it’s all systems go, although at a slower pace.”

She advised business leaders in the audience to “know what your vulnerabilities are” during the new year and to operate accordingly.

“We are in a situation where things can change very quickly right now,” she said.

Producing cloudiness on the economic horizon are national and international factors, including tariffs and trade disputes, Brexit, the coronavirus and the U.S. elections.

Colorado exports totaled $8.1 billion in 2019, down 2.7 percent from the prior year, Silverstein noted. And although international trade represents less than 5 percent of the state’s economy, many companies are in the supply chain for international trade, with some of their products not counted as an export.

As trade tensions remain high, “It cannot be overstated just how important our trading partnerships are,” she said.

The coronavirus represents a significant but temporary threat to the global economy, which could filter down to Colorado and Boulder County, Silverstein noted.

“This is the greatest one to be aware of,” she said, noting that it’s already had an impact on stock markets, tourism activity and the manufacturing supply chain.

“This is truly one of those really cloudy things,” she said. “We don’t expect that this will have a significant long-term impact, but we are definitely watching this as a short-term influence.”

Additionally, uncertainty about the outcome of the presidential election could cause many businesses to pause spending as they wait to see the outcome of the election, including its effect on tax policy, health care and other issues.

Overall, Silverstein predicts slower growth in gross domestic product nationally. U.S. GDP increased at 2.3 percent in 2019, with the expectation that GDP growth will slow to 1.8 percent in 2020.

“Don’t be surprised, though,” Silverstein said, if the first quarter shows “very limited growth” because of the global situation.

Silverstein said that employment and commercial real estate benefit locally from stable interest rates, increasing wages and an active construction market. Creating uncertainty — or cloudiness — are trade tensions, geopolitical risk, uncertainty in the energy sector and the prospects for a slow-growth initiative on the state ballot in November.

Colorado ranked as the No. 9 state in the country in terms of nonfarm employment growth from December 2018 to December 2019, with Boulder County recording the fastest employment growth last year, at 2.8 percent.

But employment growth is expected to slow in the metro-Denver region and the state through 2020.

One challenge is the concentration of growth along the Front Range, even as other parts of the state lose jobs. She noted that 90 percent of the state’s job growth in the past decade has been along the Front Range.

With that job growth, labor availability remains a critical challenge, with historically low unemployment rates.

“The situation is not necessarily going to get any easier,” Silverstein said. “It is a very tight labor market, and that’s not expected to change any time soon.”

That tight labor market is beginning to drive up wages.

“Colorado had the fastest increase in average weekly wages in the country,” Silverstein said, with Boulder County recording the greatest increase nationwide from September 2018 to September 2019.

“We are in an era of rising wages,” she said, noting that past concerns about “stagnant wages” are “no longer valid.”

Commercial real estate has been in a boom, with significant new industrial construction. Retail, however, is experiencing rising vacancy rates and declining lease rates as purchases shift toward online sales and away from brick-and-mortar retailers.

The metro-Denver area saw 9 million square feet of new commercial space come on line in 2019, down slightly from 11 million square feet in 2018.

Industrial space has been particularly strong, with 77 percent of new industrial space being built in Adams County, mainly along the Interstate 70 and I-76 corridors.

Silverstein said that residential real estate prices are beginning to moderate after soaring appreciation in recent years. Boulder County’s median home price increased 1.8 percent in 2019, to $631,000 — far slower than double-digit increases of recent years.

Apartment rental-rate increases also have moderated, as new projects have come online.

“Finally, now, we have built enough units to fill in the gap,” she said.

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