BizWest Northern Colorado Economic Forecast: Is a recession on the horizon?

NORTHERN COLORADO — Despite the prevalence of fairly positive economic data points, the question on everyone’s mind these days seems to be whether a recession is inevitable in 2023.

Rich Wobbekind, faculty director and senior economist at the Business Research Division of the University of Colorado Leeds School of Business, weighed in Thursday at BizWest Northern Colorado Economic Forecast event in Loveland and predicted that 2023 will be characterized by “not a recessionary scenario, but an extremely slow-growth scenario.”

Economists at the BRD project 0.5% gross domestic product growth in 2023, with slower growth “particularly in the third and fourth quarter,” he said.

Still, there’s reason for cautious optimism as there were “lots of signs of health” in Colorado’s bounce-back from the COVID-19 pandemic, Wobbekind said. “We’re clearly outperforming the U.S. economy.”

While the real estate market in Northern Colorado weathered the COVID-19 storm well, certain sub sectors are likely to feel impacts for years.

“There is hardly any new construction of retail,” said Jake Hallauer, president of NAI Affinity Real Estate Partners Inc. “… I’m not going to sugarcoat it; it’s tough right now” for owners and operators of retail and office buildings.

High-tech manufacturing and flex-industrial facilities such as distribution warehouses are likely to be bright spots for real estate professionals, developers and property owners in 2023, he speculated. 

With interest rates on the rise, the banking sector is top of mind for business leaders and economists in 2023.

“There’s probably going to be another rate increase or two before this is done,” Bank of Colorado president Shawn Osthoff said.

Thanks in part to the COVID-era stimulus packages, commercial bank deposits are up.

“Those deposits are available to lend and help grow the economy,” Osthoff said. 

There are some troublesome signs for the economy, however, he said, citing ballooning household debt levels, driven in large part by credit card spending.

“The prospects look a little more challenging than we’ve seen in past years,” but there’s reason to remain optimistic, Osthoff said. 

Few parts of society were tested during the COVID-19 pandemic more than the health care field, an industry that has continued to struggle to provide patient care while maintaining profitability. 

In 2023, Kevin Unger, CEO of UCHealth Poudre Valley Hospital and UCHealth Medical Center of the Rockies, expects to see a continuation of recent trends toward consolidation, with small practices joining large health systems and large systems partnering with one another. 

“A lot of shifting and changes are happening” he said.

Costs are rising across health care organizations, with labor expenses leading the charge.

Rising costs, combined with dwindling insurance reimbursements, is “not usually the best business mode,” Unger said. But that’s the business model hospitals have in 2023. 

The accounting field is having labor issues of its own as older professionals retire and schools fail to train enough students to take their places, according to Ryan Sanger, a partner at BDO USA LLP.

The accountants and tax experts who do exist could be busier in 2023, as policy decisions in Washington could make audits more common than they’ve been in recent years, he said.

The policy headwinds from Washington are “trending toward higher taxes” with ensuring corporations pay their share taking higher priority, Sanger said.

Sanger, Unger, Hallauer and Osthoff participated in a panel discussion Thursday that was moderated by University of Northern Colorado business professor and economist Constantin Gurdgiev.

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