National economic concerns strain Colorado business confidence heading into fourth quarter

BOULDER — After months of projecting confidence that Colorado’s economy will be in full bounce-back mode by late 2021, state business leaders are now tempering their expectations heading into the fourth quarter.

The University of Colorado Boulder Leeds Business Research division’s quarterly Business Confidence Index, released Thursday, indicates that while leaders still have a positive impression of most aspects of the economy, concerns over the national business climate are dragging down overall confidence. 

The quarterly report marks Colorado business leaders’ expectations for the state and national economies, industry sales, industry profits, hiring and business spending. More than 260 business leaders responded to the latest survey, run between Sept. 1 and Sept. 20, 2021.

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The LBCI score heading into the fourth quarter was 56.1., down 11.2 points from the record high recorded during the previous period. A score of 50 is considered neutral and the index stood at a record low 29.7 in the first quarter of 2020.

“While panelists expressed concerns about COVID variants, inflation, and the supply chain, they also expressed optimism about increased demand and the relative improvement in COVID cases and the supply chain,” according to the CU report.

Anecdotally, leaders in industries such as professional and business services, biotechnology and life sciences, and cloud computing “are very, very strong in terms of optimism” as compared to sectors with slimmer margins, Rich Wobbekind, CU senior economist and associate dean for business and government relations, said Thursday.

Larger companies appear to be more optimistic than smaller operators, likely due in part to their ability to ride out or adjust to the tight labor market, according to Leeds Business Research Division executive director Brian Lewandowski.

Colorado business people across industries were most pessimistic about the national economy (48.9 points on the LBCI) and most bullish on hiring within their respective industries (61.6 points).

Global supply chain snags, which have been an issue for a range of industries throughout the COVID-19 pandemic, are a major contributor to that pessimism, Lewandowski said.

“Back in June, people were saying that the supply chain issues would be over by September,” he said. That hasn’t happened.

Further emphasizing a skittishness about the national scene, 81.8% of those surveyed said they think the state economy will remain neutral-to-positive in the fourth quarter, compared to just 65.5% who said the same about the U.S. economy. 

Despite this belief, some statistics indicate that an overconfidence in the state economy compared to the national economy may be a bit off base. 

Colorado is 16th in the nation in terms of the jobs recovery and 18th in terms of year-over-year job growth performance, according to the LBCI report.

Colorado’s August unemployment rate of 5.9% was good for 35th best in the country and higher than the national rate of 5.2%.

On the plus side, Colorado ranks fourth in the nation in overall labor force participation, Wobbekind said.

Still, Colorado business leaders see reason for optimism, pegging their confidence in the first quarter of 2022 at 57.2 points in the LBCI.

““There are a lot of reasons to be optimistic going forward,” Wobbekind said. “There are some challenges, clearly, but we hope the optimism expressed in the survey will continue to carry the Colorado economy forward.”

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