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A help wanted signs in the window of a businesses in Crested Butte on Aug. 14, 2021. (Dean Krakel, Special to The Colorado Sun)

Colorado’s economic recovery is going better than expected state labor officials said Monday, reporting that 98% of jobs lost when COVID struck have returned. 

However, January’s 4.1% unemployment rate, the lowest since the pandemic began, is still higher than the 2.8% in February 2020, the month before the first COVID-19 cases in Colorado were confirmed.

“That was historically low. That was after the end of a very long economic expansion,” Ryan Gedney, senior labor economist at the state Department of Labor and Employment, said during a news conference on Monday. “As long as these trends hold … I could see the state reaching that 3% level in one or two years for sure.”

His confidence is based on how many Coloradans are now part of the state’s labor force, which is larger than ever with more people employed or looking for work. The state’s labor force participation rate was 68.5% in January, or one-tenth of a percentage point higher than in February 2020. 

“Colorado’s labor force grew by over 17,000 in January. And since July of 2020 the state has added over 180,000 individuals to the labor force,” Gedney said. “On an annual basis, Colorado’s labor force participation rate increased from 67.4% in 2020 to 68.2% in 2021. That ranked as the fourth highest in the U.S. last year.”

By comparison, the U.S. rate last year was 61.7%.

While more people are part of the state’s labor force, Bureau of Labor Statistics data shows there are still around 132,000 Coloradans who are unemployed, compared with 86,000 who were unemployed in February 2020. 

That only counts people who are working or actively looking for a job, said Steven Byers, a senior economist for Common Sense Institute, a Greenwood Village think tank focused on the state’s fiscal policies.

“Some people would say that understates or overstates the true unemployment rate depending on which way you go,” Byers said. “But when people take themselves out of the labor force and they’re no longer looking, that impacts those numbers. But the way that unemployment is measured has been constant for a long time. They don’t change the methodology so it’s consistent over time for what it measures.”

The state’s unemployment rate fell from 4.2% in December, a rate that was revised downward from 4.8%, according to labor officials. Colorado’s January rate is also close to the U.S. unemployment rate of 4.0% in January

The falling unemployment rate reflects more people returning to work, especially mothers who had dropped out of the workforce early on, likely to deal with their children and remote schooling or lack of child care options during the pandemic.

Byers is among economists keeping an eye on rising inflation and its impact on small businesses and consumer spending habits.

“One other thing that we are kind of concerned about, though, is the house prices have just gotten exorbitant,” he said. “The question would be, is it just going to end up being a disadvantage to Colorado employers being able to lure people here and bring them in from out of state? That’s an area that is of concern as well.”

But Colorado’s pandemic economy hasn’t fully recovered yet, said Kathy A. White, executive director of Colorado Fiscal Institute, an organization that also focuses on fiscal policy.

“Colorado has recovered all but 5,500 jobs lost during the pandemic, but it needs another 38,100 jobs in order to keep up with the 1.4% growth in population that the state has experienced in the 23 months since the recession began,” White said in an email.

“Also, the fastest job recovery happened in industries with high income earners and lagged in industries with lower pay. poor quality jobs,” she added. “Those industries tend to have a higher percentage of women and people of color, who again, entered the pandemic with higher rates of unemployment and lower earnings. In short, the recovery has been uneven, despite these broad indicators, and so policymakers should be targeting resources and aid to the people who need it the most.”

There’s also uneven recovery in certain parts of the state. Strong job growth in Grand Junction and Colorado Springs amounted to job recovery rates of 124% and 113%, respectively. But the Greeley region has recovered just 44% of the jobs lost in the early pandemic. 

That’s due to Greeley’s high concentration of oil and gas, an industry that hasn’t recovered as fast as the leisure and hospitality industry or the professional and business services field, Gedney said. But Greeley’s a small part of the state. It lost roughly 11,700 jobs at the start of the pandemic and has regained 5,100. The Denver area lost 199,600 and has recovered 196,100.

“The state’s recovery rate is going to trend pretty closely with Denver’s, as that (region) represents over half of the state’s employment,” Gedney said. 

He added, “There’s still some room in the unemployment rate, but I think the unemployment rate is going to drop relatively quickly in 2022 as there’s still a huge demand for labor and for filling jobs.”

This story was updated at 2:51 p.m. to add comments from the Colorado Fiscal Institute.

Tamara Chuang writes about Colorado business and the local economy for The Colorado Sun, which she cofounded in 2018 with a mission to make sure quality local journalism is a sustainable business. Her focus on the economy during the pandemic...