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Colorado's roaring economy, though still a national leader, may be beginning to calm somewhat, while pressures in the state — such as stagnant wages and skyrocketing housing prices — as well as national concerns continue to bear down.
That was the message at the annual South Metro Denver Chamber of Commerce 2018 Economic Forecast Breakfast, held at CU South Denver in Lone Tree on Jan. 19.
The breakfast featured a slate of speakers from the upper echelons of financial research, who painted a complex portrait of a strong economy not without its challenges.
Colorado can expect to add around 175,000 jobs this year, a rate a little diminished from previous years, said Richard Wobbekind, the executive director of the Business Research Division at the University of Colorado Boulder.
“Colorado is still clearly among the fastest-growing states” in terms of job growth, Wobbekind said. “We're ranked about 20th right now. These aren't the kind of numbers as in the last few years, where we were consistently a top five state, but it's very consistent with our forecasts.”
Among the biggest problems facing employers is finding enough skilled workers, Wobbekind said.
“There's no sector of our economy that can find enough skilled workers,” Wobbekind said. “This isn't all about CPAs or computer scientists. It's about plumbers, electricians and construction workers.”
Colorado's economic growth is uneven, with the northern Front Range leading the way with strong growth in the energy and tech sectors. Grand Junction and Pueblo, however, are growing at a rate slower than the national average, Wobbekind said.
Despite strong growth, Wobbekind said, Colorado's economy will have to wrestle with two stubborn problems: relatively slow wage growth and rising housing prices.
A recent report from the Bell Policy Center — a Denver-based group that works to "advance economic opportunity in Colorado," according to its website — found that when adjusted for inflation, wages in Colorado are up only about 3 percent, or $33 a week since 2000. Meanwhile, housing prices have soared and inventory has plummeted. Colorado's statewide home value index showed an average of $344,000 in December, up from just over $200,000 in 2012.
“We have the second-worst ratio of wage growth to the growth of housing prices, behind only Washington D.C.,” Wobbekind said. “Housing prices are really significantly outstripping wages, and this is the red flag we're paying a lot of attention to.”
Close to two-thirds of the jobs being created in the state are below the average annual wage, he said, which stood at $54,664 statewide last year, slightly above the national average of $53,621.
Housing inventory remains a problem. Between 2001-07, Colorado had 119,895 more housing units than households, but in recent years the numbers flipped: from 2008-16, the state had 107,409 more households than housing units.
One number that spurred some optimism is the average rent statewide. While the state saw double-digit percentage hikes in average rent for several years, rent increases are expected to hover around 4 percent in 2018, with average rents at the end of 2017 at $1,346, up from $848 in 2008.
The national problem
Looming federal issues could come to bear on Colorado and the nation, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, a pair of Washington-based nonpartisan public policy institutes.
“Federally, we may be entering a period of budgeting week-by-week,” MacGuineas said. “It would be amusing if it weren't so horrifying. This is a country, the biggest economy in the world, that's regularly operating without a budget.”
The federal budget affects all sectors of the economy, MacGuineas said.
“When President Trump entered office, he inherited the worst fiscal situation of any president other than Truman,” MacGuineas said. “Now, that's not to trash the previous administration. They inherited one of the worst economies of any president. They were just trying to keep us from going into a deeper recession.”
The national debt is 77 percent of the country's gross domestic product, MacGuineas said, twice the historical average, and twice where it was when the recession hit.
“In all likelihood, we're closer to the next recession than the last one,” MacGuineas said. “We'll be going into it with the debt twice what it has been. We're tying our hands for responding.”
MacGuineas outlined some bleak points: The country is on track to borrow $12 trillion. The federal disability, highway and Medicare trust funds are on track to go broke. The country is having to respond to more frequent and more damaging natural disasters.
“We're in a fiscally unsustainable situation, where the debt is growing faster than revenue,” MacGuineas said. “That's predicted to happen every single year, forever. Republicans kept insisting on passing a balanced budget, but the one they put forward didn't even try to reach balance.”
The recently passed federal tax bill will cost the country $1.1 trillion in revenue over the long term, MacGuineas said, which will complicate the president's goal of rebuilding infrastructure.
Meanwhile, she said, the tax bill's goal to offset revenue losses with economic growth is improbable.
“When you hear people say we can grow the economy at four, five or six percent, well, we can't,” MacGuineas said. “Now we're predicting the effects of the tax bill to be 0.01 percent or 0.02 percent.”
Tax reform rather than tax cuts would have been more beneficial to the economy, MacGuineas said.
“Reform would have involved getting rid of the $1.6 trillion in tax breaks we have every year,” she said. “We didn't get rid of any major tax breaks, and we didn't offset the cost. We didn't broaden the base and lower the rate. When you're in a fiscal hole, the first thing you do is stop digging.”
The taxman cometh
The bleak condition of the federal revenue situation notwithstanding, Colorado is well-situated to take advantage of the discrepancies in tax structures between states, argued Tim Jones, media and communications director of First Rule Media, an author of books on tax policy and a radio talk show host.
“Low-tax environments receive more wealth, and high-tax environments lose it,” Jones said. “If you want more of something, tax it less.”
Jones said that a number of companies are looking to leave California and its relatively higher taxes, and hunting for new homes. Jones also cited economic stagnation in New York, New Jersey and Illinois as evidence of the stultifying effects of high taxes.
Jones also said that companies are responding positively to the federal tax bill, with several high-profile companies handing out bonuses to employees or making new investments.
Colorado is well-poised to lure companies looking for low-tax environments, said Travis Brown, CEO of First Rule Media — a Missouri-based film and TV production company — and a frequent commentator on "Fox & Friends," a news/talk program on Fox News.
“Arizona is your number one competitor,” Brown said. “A lot of companies consider Colorado a flyover state on the way to Arizona, but you can help change that. Are you laying down the track to prepare for new businesses and investment?”
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