By February 15, 2015 Read More →

Vectra forecast: Colorado economy doing well, but changes ahead

, Reporter-Denver Business Journal. Colorado’s economy has a lot going for it, but changing demographics, rising housing costs and quirky state budget laws could be a drag on the state’s success in coming years.

Three Colorado experts on economic and demographic trends — Elizabeth Garner,Henry Sobanet and Patty Silverstein — discussed where the state’s economy is headed in the annual Vectra Bank Economic Forecast breakfast Wednesday at the Seawall Grand Ballroom at the Denver Performing Arts Complex downtown. (Bruce Alexander, president and CEO of Vectra Bank, offers his takeaways from the forecast in the video above.)

The state is “getting older and younger at the same time,” said Garner, the state’s demographer, because it’s attracting lots of millennials, while the 65-plus age bracket grows faster than any other demographic. Colorado is “getting old fast” because it has always attracted young people, who first started moving here in significant numbers in the 1970s, she said.

“Between 2010 and 2020, we’re getting old at the fastest rate,” Garner said. “The 65-plus category is increasing four times as fast as the general population.”

The state’s racial mix also is changing significantly — Colorado’s population was 85 percent white in 1970, 70 percent white in 2010 and is expected to be 55 percent white in 2014.

The changing demographics mean the occupational mix in the state will change, Garner said, with a bigger split in the economy between the haves and the have nots.

“Youth and underemployment will have a significant impact on the economy,” she said. “It raises questions over whether they will ever be able to reach what their parents’ attained because they missed an important part of their education in the workforce.”

Silverstein, chief economist for the Metro Denver Economic Development Corp., noted that millennials have outnumbered baby boomers in metro Denver for some time.

Highly educated millennials also have a lot of student loan debt and want flexible work environments, so employers need to be more flexible if they want to attract younger talent, Silverstein said.

“The metro Denver region will have an average unemployment rate of 4 percent in 2015,” she said. “It’s going to be a very tight labor market.”

Also posing a challenge to the state’s economy going forward will be steadily rising housing costs, Silverstein said.

“Home buying has returned to normal levels …but the market is constrained,” she said. “There were 4,300 homes on the market [in metro Denver] in December. That’s it. That’s down 45 percent from a year ago.”

Median home prices in Denver surpassed $300,000 for the first time in 2014, and are expected to hit $325,000 this year, Silverstein said.

“Denver is perceived as a very expensive housing market. Because of that we’re seeing a lot of interest in apartments,” spurring the multifamily construction boom, she said.

Metro Denver also is experiencing a resurgence in the industrial real estate sector, with low vacancy rates and more construction, and “it’s not just because of an expansion in [marijuana] grow operations,” Silverstein said.

The metro area is experiencing growth in manufacturing and even starting to see speculative industrial construction. “Did you think we’d ever see that day again?” Silverstein said.

As for the recent dramatic drop in oil prices, she said low prices could slow the state’s growth in 2015, but not significantly.

“Even as we do our happy dances when we fill up our gas tank … we’re still a little concerned there are areas of the country where those low prices aren’t as much of a benefit … such as Colorado,” Silverstein said. “We look at that as slowing our growth a little bit.”

Sobanet, the director of Colorado’s Office of State Planning & Budgeting, was tasked with explaining how the TABOR (Taxpayers Bill of Rights) Amendment, passed by Colorado voters in 1992, continues to affect the state budget.

Revenues collected by the state that exceeded the TABOR cap must be refunded to taxpayers, which means, for example, that the increase in revenue collected by marijuana taxes here may have to go back to taxpayers, Sobanet said.

In addition, Amendment 23, passed by Colorado voters in 2000, basically said that taxpayers “want spending at the state level to grow even if you don’t have sufficient revenue to meet the [budget] target,” he said.

“Having a cap on the money we can keep and a formula for spending more than we’re taking in will have absurd results,” Sobanet said.  >> Read full article

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