CU midyear outlook: Despite economic recovery, headwinds foster pessimism

BOULDER — Colorado’s economy has bounced back impressively since the COVID-19 downturn, outpacing the nation and most states in job recovery and growth. Still, more recent headwinds that threaten to halt the recovery process have business leaders spooked.

“With arguably the worst of the COVID virus in the rearview mirror, consumers and businesses have moved on to new economic crises, ranging from lingering supply chain shortages, rapid inflation, and rising interest rates led by restrictive Fed policy,” Rich Wobbekind, associate dean for business and government relations at the University of Colorado Boulder’s Leeds School of Business, wrote in an editor’s note that accompanied CU’s Colorado 2022 Midyear Economic Update, released Friday. 

According to the report, Colorado “recorded 2,855,000 jobs as of May 2022 — 1.2% above the pre-recession peak and 4.6% above May 2021 levels.” This performance puts Colorado among the 14 states that have eclipsed pre-COVID job totals. 

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CU economists project that Colorado will add 104,000 jobs (3.8% growth) in 2022, with growth across all major industry sectors. 

“The Boulder [metropolitan statistical area] observed the highest year-over-year employment growth in May 2022 (5.3%), followed by Denver-Aurora-Lakewood (4.7%), Pueblo (4.7%), Grand Junction (4.2%), Fort Collins-Loveland (4.2%), Colorado Springs (3.9%), and Greeley (3.6%),” the CU report said. 

While this growth should be reassuring for those skittish about the economic outlook, CU economists say many of these jobs had already been added earlier this year. 

Brian Lewandowski, executive director of the Leeds Business Research Division, said he expects the trendline to flatten in the fourth quarter, “which really marks a slowdown in employment growth.”

Another seemingly positive metric — wage growth — could also be a mirage. Workers are taking home paychecks that are around 9% fatter this year, but increases in the price of goods and housing are negating those gains.

Lewandowski said he expects real wage growth to be “flat-to-negative” for the back half of the year. 

CU’s quarterly Business Confidence Index released late last month indicates that optimism among the Centennial State’s business leaders dropped by the second-steepest margin in the 20-year history of the index heading into the third quarter of 2022.

Still, local economists aren’t ready to smash the panic button quite yet. 

“Despite the headwinds, Colorado has a history of outperforming the nation,” the CU report said. “While the Business Research Division acknowledges headwinds will have a slowing effect on the economy, researchers remain optimistic that Colorado will continue to be a leading state in the national economy.”