Consumers are spending less, productivity is dropping and there are still a ton of job openings. Is that why a recession may be coming?
But first, let’s get to business. Colorado continues to invest in attracting startups and small businesses, if you recall last week’s dive into the state’s own venture capital agency. This week, the city of Colorado Springs shared its own deal to provide up to $5,000 per new worker that new or expanding companies in town employ.
The city’s Deal Closing Fund has caveats because it is, after all, public money. The $3 million fund will be managed by the Colorado Springs Chamber & Economic Development Corporation.
“Just as you have state dollars and incentives that are used when a company is looking to add new jobs or capital investment, the city is wanting to be proactive and assertive in supporting companies with high-paying jobs coming to our region,” said Johnna Reeder Kleymeyer, the chamber’s president and CEO. “They are entrusting this to us to evaluate the projects to make sure they meet the criteria.”
That criteria is similar to the state’s Job Growth Incentive Tax Credit program, which provides a tax credit — not cash — to eligible companies that pick Colorado for relocation or expansion and then proceed to hire a certain number of workers. Last year, the state approved 34 such awards, or double the number in the prior year.
In both cases, the corporate applicant must create a minimum number of higher-paying jobs. They must consider other locations outside the region. And the new jobs must be created within a certain time period — the city requires seven years, the state eight. Both provide the credit or payment as the companies meet performance goals.
The Deal Closing Fund plans to grant $1,000 to $5,000 per net new full-time job created. Jobs must pay at least the city’s average annual wage, which is about $57,500, according to Bureau of Labor Statistics data. And there will be an emphasis on companies in the aerospace and defense, health care and medical technology, cybersecurity and information technology, and manufacturing industries. Applications are now being accepted by the chamber’s economic development team.
There’s a minimum of 10 net new jobs, which is intended to attract small businesses. It’s also independent of any state incentives, so this could sweeten the deal for companies considering Colorado and Colorado Springs (but not El Paso County, which “isn’t participating and I hope to change that in the future, when we show great success,” Kleymeyer said. This is the first corporate-relocation incentive that Colorado Springs has offered, she added.
“The point is to support the company when it is a competitive decision with another state,” Kleymeyer said. “This front-end money could help them with moving expenses or it could help them with expansion expenses.”
The money is coming from the city’s general fund. It will be budgeted each year and may come from the city’s share of the American Rescue Plan Act, which is Mayor John Suthers’ preference, according to city officials.
“The city plans to fund the initial $3 million from ARPA funds, but the general fund may make contributions in the future. We have not yet provided the funds to the Chamber. ARPA funds do not go into the general fund. They are held and accounted for separately,” the city’s Chief Financial Officer Charae McDaniel said in an email.
Where will workers come from?
When the pandemic hit in the spring of 2020, Colorado Springs lost 36,100 jobs. But since the recovery began, the city has led the way for job growth statewide. As of July, the city had recovered 126% of lost jobs, or 45,400 jobs.
By comparison, the Denver region has recovered 108% and the state is at 111.6%, according to data from the state’s Department of Labor and Employment.
In other words, it’s very difficult for Colorado Springs to find enough workers. So where will all these new workers come from?
Well, said Cecilia Harry, the chamber’s chief economic development officer, the labor market is tight everywhere.
“And just because that’s a national trend that is touching on (Colorado Springs) doesn’t mean we stop pursuing growth opportunities,” Harry said. “One of the ways to address labor needs long term is to spur more innovation and investment in the community through employers, which have the potential to strengthen the pipeline when it comes to degree programs and training opportunities for individuals coming in through our K to 12 pipeline.”
Colorado Springs’ population has been steadily rising, growing 16% in the past decade to the U.S. Census Bureau estimate of 483,956 in July 2021. Along the way, it was named the ninth most popular destination that college grads want to move to (bested by Denver at No. 4), according to a study by Axios and The Generation Lab. It also made WalletHub’s list of cities to start a business, landing at ninth out of the top 100 cities nationwide (Denver, again, ranked sixth).
The city is getting noticed and is making the most of it.
“There is so much R&D and innovation going on that the more people these companies can attract to work on this innovation and problem solving, the faster they can provide solutions for commercial and military applications,” Harry said.
The approaching “shallow” recession
Long-time Colorado economist Gary Horvath shared his analysis of the state and nation’s economy, and despite the incredible job growth the state has seen, we’re heading into a recession that will hit by the end of the year or early next year.
But it’ll be a shallow one, said Horvath, at CBER.co. That means not everyone is going to notice it.
“Everyone is impacted by inflation, but I don’t think it’s equal. The lowest-wage earners are hit the hardest,” he said. “The pandemic was a blue collar recession. The white collar workers kept their jobs during the pandemic. They came through it in pretty good shape. … It’s been a struggle for everyone else.”
The pandemic created an even greater divide between the lowest and highest income earners. Even as gas prices hit $5 a gallon this summer, white collar workers could skip the commute. Many blue collar workers could not.
So when the shallow recession hits, it will impact people differently.
“I have to think that people are spending less,” Horvath said. “You can only spend so much on food. Let’s say I spend 20% of my income on food. If you were Elon Musk, who’s much richer than I am, he’s not going to spend 20% of his income on food because that would be a lot of food.”
The hope is that the Federal Reserve’s increase of interest rates will keep consumer prices in check. The state and nation is still dealing with a labor shortage, which has been a positive economic sign that we can’t be in a recession.
While Colorado lost about 370,000 jobs in the first two months of the pandemic, those have all returned and then some, as noted in the Colorado Springs section above. According to BLS data, Colorado has added 475,701 jobs since the pandemic low in April 2020.
But strong job growth just cannot continue, he said.
“We’ve added a gazillion jobs,” he said. “We can’t keep up that rate. And we can’t keep at that rate because our unemployment is 3.3% right now. Where are we going to find people to work?”
Blame it on the pandemic that caused workers — or at least pundits — to proclaim last year’s Great Resignation, a term to describe people who quit their jobs to find something that paid more or was more fulfilling. That’s morphed into the current “quiet quitting” trend of workers who aren’t quitting, but do no more and no less than the job requires. That could lead to a decline in productivity.
“You’ve got boomers who supposedly quit, the quiet quitters, which is like wow, that’s a different take on things. You’ve got remote workers. Everything is different now,” Horvath said. “What we’re not going to see is strong GDP growth, we’re not going to see strong employment growth. Next year, we may add 25,000 to 30,000 jobs, which is positive but that’s about half of what normal is.”
Horvath’s forecast for real GDP growth this year is at 2.6%, compared to last year’s 5.8%.
Other working bits
Speaking of jobs, the state’s job board had 123,535 job openings listed as of Friday. That’s down from the 151,320 on Aug. 11. But it’s about double the number of openings back in April 2021.
Some of the biggest changes in the past two weeks? The number of computer and math jobs has declined about 60% to 14,861 while building cleaning and maintenance jobs is up 20% to 3,007. >> ConnectingColorado.com
→ CDOT apprenticeships: The Colorado Department of Transportation has been hosting job fairs all summer. Now it’s hoping it to can attract more apprentices to fill its openings. The two-year training program for a career in public safety pays $16 an hour, offers full benefits including 11 paid holidays, paid leave and a retirement package. >> Apply (type “apprentice” in the search bar)
→ Need tools for your small business? The U.S. Small Business Administration has a bunch of resources to help support small companies in America. And now it has a webinar series dubbed “The Bottom Line” to highlight and connect better with local businesses. >> Register
→ Who qualifies for Biden’s student loan forgiveness plan? The New York Times has a primer. >> Read
More economic news from The Colorado Sun
→ Subsidized health care education in Colorado: Sun reporter Erica Breunlin reports on a new program called Care Forward Colorado that pays for the two years of schooling to get certified as a nursing assistance, emergency medical technician and several other occupations. >> Read
→ Western Slope real estate boom continues: A real transfer tax adopted before The Taxpayer’s Bill of Rights was passed brought in an 84% increase in revenues for 12 Colorado communities, reports Jason Blevins. >> Read
→ Thrift stores are hopping: During the pandemic, people decluttered. Now, folks are just trying to save a buck. Reporter Kevin Simpson navigates the economy of thrift shopping. >> Read
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