Colorado’s unemployment rate fell for the sixth straight month to 3.3% in July, the lowest (again) since the pandemic began but not quite down to its pre-pandemic low of 2.8%. However, a state economist thinks we’ll get back to that low rate, despite talk of recession, by the end of the year.
But first, last year’s $1.9 trillion American Rescue Plan keeps on doling out dough to Colorado.
The latest was announced Friday as U.S. Department of Treasury officials awarded Colorado up to $104.7 million as part of a program that started 12 years ago. Some of the funding will serve as collateral for small businesses that don’t have enough but need a loan. Most will be invested in the state’s venture capital funds — which expect returns and don’t rely on taxpayers.
Called the State Small Business Credit Initiative, the program was reauthorized and expanded under ARP last year so the money has been expected. About $31 million was deposited into state coffers Tuesday, said Jeff Kraft, deputy director in charge of business funding and incentives for the Colorado Office of Economic Development and International Trade.
“We’ve been planning for this SSBCI infusion now for a year plus and have been putting the mechanics in place,” Kraft said. “We just did two (requests for proposals) and have selected some winners that haven’t been publicly announced. But one of them is for a follow-on rural fund to focus on venture investing in rural Colorado. The other one has a focus on urban distressed areas, under-resourced communities and a DEI (Diversity, Equity, And Inclusion) lens.”
To back up a bit, the $10 billion SSBCI infusion is aimed at creating jobs within small businesses by providing capital, investment or just a loan. The money is being split nationwide. So far, nearly 20 other states have been awarded money. Colorado’s share was 1% of the $10 billion. Part of the goal is also to assist small businesses statewide in underserved areas.
“As a former business owner myself — I was a brewpub guy — I know firsthand how hard it can be to meet payroll and grow your business,” Sen. John Hickenlooper said during an online news conference Thursday alongside Wally Adeyemo, U.S. Deputy Secretary of the Treasury. “(This) is going to provide venture capital to entrepreneurs and startups, provide working capital to small firms to meet payroll as they’re growing … and for overall general lending to small businesses. Over 10 years, this could create and I hope it will create over 11,000 jobs in Colorado alone, and not just create but retain them.”
Colorado, which had to apply, plans to split the money among three small business programs to provide loans,venture investment and credit to small businesses:
- Up to $35 million is going to the state’s Cash Collateral Support Program, which helps lenders provide loans to small businesses. When a small business doesn’t have enough collateral to secure a loan, the program covers it by providing cash to the lender. The program, administered by the Colorado Housing and Finance Authority, has helped support 376 small business loans and “has never experienced a loss of capital,” according to state officials.
- Another $10 million is headed to the CLIMBER Fund, short for Colorado Loans to Increase Mainstreet Business Economic Recovery. The state works with community lenders, credit unions and nonprofit lenders to provide working capital loans to small businesses negatively impacted by the pandemic.
- And the largest chunk, at $59.8 million, is for Colorado’s Venture Capital Authority, an independent state agency established in 2004 by the state legislature. Allowed under the Taxpayer’s Bill of Rights, the enterprise has reinvested the $50 million originally raised when the state sold tax credits to insurance companies. It continues to operate on the money raised and no taxpayer money is involved.
Yes, Colorado has its own venture capital fund
States putting money into venture capital funds isn’t new and many of the states receiving SSBCI awards do have a VC arm. In Colorado’s case, it picks professionally managed funds and it isn’t the sole investor. It’s also not a grant.
“It is absolutely looking for a return, generally a market return,” Kraft said. “The philosophy that the General Assembly adopted (in 2004) and what the very statute said is it can only invest in seed and early stage investments. … And there are some rules. There are geographic rules where it has to invest 25% of its capital in rural Colorado and 25% in urban distressed areas. And 50% can be invested statewide.”
The first fund, which was started in 2005, is the only one that has run its course. It included investments in Boulder cybersecurity firm LogRhythm, which went on to raise $126 million in funding and was later acquired by private equity investor Thoma Bravo. By 2019, Colorado Fund 1 was dissolved after having an internal rate of return of 14.81% and creating 884 jobs, according to VGA’s annual update.
“We returned all of our capital and substantially more. In fund two, we’re probably going to return all of our capital but we don’t know yet,” Kraft said. “My best assessment between fund one and fund two, we will get all of our capital back plus a return.”
One of VCA’s active funds is the Greater Colorado Venture Fund, which started in 2018 and focuses on rural companies. The fund is run by brothers Cory and Jamie Finney who are partners at Kokopelli Capital. According to an announcement when the fund started, the state put in $9.1 million with other investors bringing in a total of $15 million.
The newest one, FirstMile Ventures, focuses on technology companies.
“GCVF so far is doing well, given that they’re investing in only rural areas, which is absolutely unheard of. And FirstMile is really early,” Kraft said. “We’ve more than broken even so far. And it’s mission driven. It keeps just reinvesting into the state.”
The new SSBCI money will expand the program, which requires the state to find new investment funds that look for Colorado startups to invest in. OEDIT is in the process of selecting two new venture capital funds that focus on underrepresented startups.
SSBCI rules require that some of the funds be made available to socially and economically disadvantaged individuals, or SEDI, which include women, people of color, veterans and rural entrepreneurs. SSBCI funds aren’t limited to SEDI groups but if Colorado meets certain goals, the state will get an additional $5 million in SSBCI funds, Kraft said.
“We wanted fund managers that would proactively seek out businesses that were founded and run by women and people of color. But it’s not exclusive and we’ll invest in someone that doesn’t fit those categories,” he said. “We have several funds, more than two, that we’re looking to sign contracts with very quickly and start putting this SSBCI money to work.”
Colorado adds jobs (again), sees jobless rate fall (again)
Not only has the state’s unemployment rate continued to fall this year — it’s dropped one-tenth of a percentage point from June to 3.3% in July — jobs are still being added. What recession, you may ask? Here are growth numbers:
- Colorado has recovered 112% of the jobs lost since the start of the pandemic. Number wise, that’s 417,800 jobs added after losing 374,500 in March and April 2020.
- The state’s labor force, which counts people who work or are looking for work, is now at 69.5%, which ranked Colorado second to Nebraska for the nation’s top labor force participation rate. Colorado added 1,700 in July to end with a labor force of 3,250,500 people. That’s the highest in a decade.
- The leisure and hospitality industries also added more jobs than previously thought, after more companies reported in. The state revised June data to show that the leisure and hospitality industries added 5,000 jobs, up from 2,000.
- The government sector, which hasn’t recovered lost jobs in the pandemic, finally added more than 2,000 jobs. That’s attributed to schools hiring for the new year.
But not all sectors of the state’s economy added jobs. Manufacturing and the trade, transportation and utilities sectors both lost more than 1,000 jobs in July.
That’s because retail is part of the trade and transportation sector and it’s having some big problems, said Ryan Gedney, senior economist at the Colorado Department of Labor and Employment. Of the 2,300 job losses in the trade sector, 2,100 were in retail.
“That does line up with a slowdown in retail, retail employment and sales nationally since March,” Gedney said. “Colorado’s retail employment returned quickly to pre-pandemic levels by late 2020 and that was thanks to a strong demand for essential pandemic services. … While those employment levels for retail stabilized for most of 2021, they appear to have peaked in April 2022.”
As consumers saw gas and grocery costs inflate in the spring, they appeared to cut back on shopping and purchases regardless if their own job was at risk. Such inflation fears fueled recent financial reports by national retailers.
On Wednesday, Target said its quarterly profit fell 90% because customers cut back on shopping as they dealt with inflation. A day later, Kohl’s blamed the same thing as it announced its profits fell 62.5%. And the pain wasn’t limited to traditional brick and mortars. Online furnishings site Wayfair had previously said sales had also fallen but on Friday, it took steps to offset the loss. Wayfair said it would cut 900 jobs, or 5% of its global workforce.
Gas prices have come down since their summer highs, and July’s inflation rate slowed to 8.2% in the Denver area, from 9.1% last March. As the Federal Reserve has tackled inflation by increasing interest rates, it will be interesting to see how this impacts the next jobs report.
Gedney predicted that the state’s unemployment will fall back down to 2.8% by the end of the year, matching its February 2020 low. Because in spite of everything that is happening economically, employers are still hiring.
“This is the sixth consecutive month that the unemployment rate dropped. Also our labor force participation rate and employment to participation ratio are really at the highest levels we’ve seen in over a decade. With the remaining unemployed, you’re going to see a fast absorption from unemployed status to employed status,” Gedney said. “There are certainly things that can happen that can reverse these trends but at this point, it does look likely that if not 2.8%, I think falling below 3% is very likely.”
→ Silver lining? Deals galore, apparently, as retailers discount their inventory. “Target’s Profit Sinks as It Offloads Inventory Shoppers Don’t Want” headlines the New York Times story. >> Read
→ Colorado’s average hourly earnings increased to $34.60 in June, up from $31.92 a year ago and more than $2 above the national average, according to the Bureau of Labor Statistics business establishment survey. >> See the Dept. of Labor’s latest job data
Minimum wage is increasing, but not for everyone
As reported earlier this week, Denver’s minimum wage is increasing to $17.29 an hour while the state’s wage is going up to an estimated $13.68.
That’s up 9% or more than $1 each because both are now based on the change in the Denver-area Consumer Price Index.
But some workers will see more and some will see less.
State law preempts local laws so some state workers in Denver make less than the city’s current $15.87 an hour wage. State employees, represented by the Colorado WINS union, did get a boost last year to $15 so statewide, all state workers are paid at least that much. But Denver’s revised municipal code doesn’t apply to the state of Colorado.
And figuring out how many state employees in Denver make below the city’s minimum wage appears impossible. The state doesn’t track wages city by city, according to Doug Platt, a spokesman for the Department of Personnel and administration. But 52 job classifications statewide are under the $15.87 minimum wage. And the state can’t really do anything about it.
“We manage a statewide workforce so must have uniformity and consistency with employees across the state in compliance with the state constitution,” Platt said in an email. “Denver’s ordinance is preempted by Colorado’s statutes providing that the General Assembly has the ultimate authority to set compensation levels for employees of the State of Colorado.”
As for workers who will see a larger increase? Tipped workers. Denver employees who work in the food and beverage industry and get tips will see their base rate increase 11% to $14.27 an hour, from the current $12.85.
That’s an issue for the restaurant industry, which struggles to hire non-tipped workers. Tipped staff can make quite a bit from customers but other staff cannot, which creates a growing inequity for restaurant workers. While customers may be generous with their attentive servers, they often balk at higher menu prices, which come as owners adjust to pay for higher-priced food and non-tipped staff.
Katie Lazor, executive director at EatDenver, which helps local restaurants, said that one thing that would help is for restaurants to have a bigger tip credit. Right now, restaurants pay tipped staff $3.02 less than minimum wage. If it were larger, that would help a restaurant’s bottom line.
“I hope that there could be collaboration between city officials and organizations like ours to work with the state on increasing the flexibility so that the city can continue increasing the traditional minimum wage without the tension between the (tipped staff),” she said. “We all want to make restaurant jobs and all the jobs in our city better. We all want everyone here to earn a livable wage. It just has to come from somewhere.”
→ What’s behind next year’s 9% minimum wage increase in Denver and Colorado >> Read
→ Denver’s minimum wage calculator >> Estimate wages
→ Underpaid? Submit a wage complaint. >> Denver, Colorado
Other working bits
Speaking of jobs, a few national employers shared some local job fairs happening in the next week in the Denver area:
- CarMax has 30+ job openings in the Denver area for auto technicians and service professionals. The used car dealer is holding job fairs nationwide on Thursday. One is at the Parker location at 18220 Ponderosa Drive. The event is from 10 a.m. to 2 p.m. >> Details
- Beyond pizza. Pizza comes from somewhere. And for Domino’s Pizza, it’s at its supply chain center in Denver, which needs customer service, production, warehouse and maintenance and drivers. The company is hosting a job fair on Wednesday from 11 a.m. to 4:30 p.m. at its supply chain center located at 10252 E. 51st Ave. in Denver. >> Details
More economic stories:
→ Been to Leadville recently? Sun reporter Jennifer Brown stopped by to witness the impact of Front Range transplants and out-of-state tourists with their fancy bikes on the community. “No, you cannot leave your bicycle in here,” read a sign in a downtown coffee shop. “Everyone has a $10,000 bike.” >> Read in The Sun
→ Don’t overlook this internet discount. The federal Affordable Connectivity Program provides $30 to $75 to pay for monthly broadband service for low-income households. About 80% of eligible Coloradans are ignoring it. >> Read in The Sun
→ Lower-cost drugs? Colorado moves another step closer to importing lower-cost prescription drugs from Canada, reports John Ingold. >> Read in The Sun
→ The $750 TABOR checks have been mailed. But not everyone is getting one. >> Denver Gazette
Share your two cents on how the economy is keeping you down or helping you up at cosun.co/heyww. See you next week! ~ tamara