Colorado’s economy strong, may get peckish
Colorado’s economy will continue to grow over the next year or so, but it won’t be as good as in recent years, economic forecasters told state lawmakers Tuesday.
At the same time, the specter of a recession continues to loom, said Natalie Mullis, chief economist for the Legislative Council.
Mullis said that while available revenues to the state for the last fiscal year that ended June 30 came in about $70 million higher than anticipated, the current year’s spending plan is expected to be about $330 million short in revenues to fully fund the budget.
At the same time, while a tight labor market and modest wage increases are signaling full employment statewide, lower business investments and weak exports are showing a possible economic contraction, Mullis said. “The amount of uncertainty in the economy is rising,” Mullis told the Legislature’s Joint Budget Committee. “Business investment (could) rebound faster than we expect, and the economy (could) grow faster than what is in this forecast. However ... the opposite could be true.”
Mullis said economic forecasting is an inexact science, saying that even when the economy is in a recession, economic indicators don’t always show it.
That’s why no forecast ever predicts a recession.
“Most economic forecasts do not acknowledge a recession in their official broadcast until after a recession is already underway,” she said. “History tells us that economic data will show mixed signals for the potential of a recession well into the time period after which a recession has already happened.”
The last two recessions in 2001 and 2008 were exactly like that, Mullis said, adding that such signs are difficult to read because economic indicators often can offset each other.
For example, while the private sector is “exercising restraint” in spending in order to cover an increase in labor costs, those pay raises to workers are helping to fuel a rise in consumer spending, which is helping to sustain economic growth.
Mullis and Henry Sobanet, director of the governor’s Office of State Planning and Budgeting, agreed that while the state’s oil and gas industry seems to have reached bottom, it isn’t expected to get worse and likely will remain at subdued levels for some time to come.
In a way, that’s good, at least as far as the rest of the state’s economy goes, Sobanet said.
“Mining and logging employment growth has been, you know, bad, but overall the rest of the sectors are growing,” Sobanet said. “We won’t have a drop of similar magnitude in the oil and gas sector, and to the extent it stays low, it won’t be dropping and dragging down other income, and other performance and spillover spending.”
With the exception of the more fossil fuel-heavy counties of Garfield, Delta and Rio Blanco, the stabilization in the extraction industry has helped the Western Slope see some recovery because it has been buoyed by a “robust” tourism industry, the two said.
“Persistently low natural gas prices and a struggling coal industry have impeded economic growth in many parts of the (western) region,” Mullis said in her forecast. “On the other hand, popular tourist destinations, such as Ouray and San Miguel counties, continue to show employment growth. The labor market is slowly improving in the region.”