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Low unemployment, high housing prices pose challenge for Boulder economy

Posted on: Jan 19 18

by: admin

BOULDER — Boulder has come off a record economic year in 2017, with soaring home prices, record employment, record-low unemployment, and a 10-year high in venture capital and private investment.

But many of those same factors represent a threat to the long-term health of the local economy, according to presenters at the Boulder Economic Council’s 11th Annual Economic Forecast: Boulder & Beyond, held at the Embassy Suites in Boulder, Wednesday.

Clif Harald, executive director of the Boulder Economic Council, noted the record year, including more than $300 million in venture capital and private financings.
“By almost every economic indicator that we measure, 2017 was an historic year,” Harald said.
But he noted that the entire Denver metropolitan area is experiencing historic shortages of labor, housing, office and industrial real estate, and transportation infrastructure, issues that the BEC will seek to address in 2018.

Those concerns were highlighted by two keynote speakers: Elizabeth Garner, state demographer in the Colorado Department of Local Affairs, and Rich Wobbekind, executive director of the Business Research Division at the University of Colorado Boulder’s Leeds School of Business.
Garner said that an aging population presents significant challenges for the Front Range, including Boulder. Baby Boomers are exiting the workforce, and the high cost of housing makes it more difficult to attract young, talented workers from out of state.

“It’s also a really hard age to live here and buy here and rent here,” she said.
Colorado now includes 5.6 million residents, growing at an annual rate of 1.4 percent, No. 9 nationwide.
“We can see that this growth has been concentrated along the I-25 corridor, along the Front Range,” she said. One challenge is that the birth rate has declined, with 70,000 births compared with 40,000 deaths, for a net increase of 30,000.

Garner said that age matters, as Colorado is potentially entering a “phase of natural decline, where you’re going to have more deaths than births.”

Even as Boulder County’s growth-rate flattens, population is expected to soar to the north, especially in Weld County, which Garner described as “the big elephant in the room.”

“They really will influence a lot of what’s going on in this region over the next 20, 30 years,” she said, noting that growth will also be high in neighboring Larimer and Adams counties.

Wobbekind provided a snapshot of the national, state and local economies, with the United States posting growth in gross domestic product of 3 percent in recent quarters, far higher than the 2.1 percent of the previous decade.

Colorado fares well in unemployment, at about 3 percent compared with the U.S. unemployment rate of 4.1 percent.

But he agreed with Garner that baby boomers exiting the workforce will present a challenge, especially amidst a labor shortage.

“Employment forecasts continue to show a decline in job growth year over year, generated by lack of available workforce in many industries,” he said. “Almost every industry sector reported shortages of labor, losing 55- to 60-year-old engineers, construction workers, ag workers.”

He said the recent federal tax cuts might not have much impact on consumer spending, as individuals use additional cash to pay down debt — something unlikely to stimulate economic growth.
But businesses likely will spend money on fixed investments, raises, bonuses and stock buybacks, all of which should stimulate economic growth.

Wobbekind said that housing appreciation will limit Colorado’s ability to attract workers from other parts of the country. Colorado recorded the second-highest housing appreciation in the United States over the past 10 years, he said.

And he warned that soaring federal budget deficits pose a significant challenge for the nation.
“To me, this is one of the biggest threats,” he said. “This is something we really have to be focused on going forward as a country.”

He predicted further interest-rate hikes by the Federal Reserve in 2018, as well as higher inflation in the Denver-Boulder area.

And he said that many of the jobs being created in Colorado are in low-wage sectors, including retail and hospitality, although some fast-growing industries — including professional services, government and mining — pay higher wages.

Wobbekind lamented the loss of corporate headquarters in Colorado, as companies mergers, acquisitions or bankruptcies eliminate local administrative salaries.
For Boulder, Wobbekind said that the city — described by some as “25 square miles surrounded by reality” — now “is surrounded by competition,” with Longmont, Broomfield, and neighboring counties attracting jobs and residents.


Source: BizWest Morning Edition by By Christopher Wood — January 18, 2018

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