The number of new businesses filing to start in Colorado hit a third-quarter record and attracted more newcomers than in the second quarter — an unusual feat since there’s usually a lull after the second quarter, according to data from the Colorado Secretary of State.
There’s a good reason for the late summer turnaround, said Secretary of State Jena Griswold on Tuesday. Filing fees dropped to $1 on July 1, saving filers $49. Registering a trade name dropped to $1, from $20.
Since July, more than 49,000 new limited liability companies have formed in Colorado, up 25% from the same quarter of 2021, and nearly 14,000 new trade names were filed, up 5%, Griswold said during an online news conference.
Economist Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business, University of Colorado Boulder, said the third-quarter growth was a surprise because of past trends. New business filings were higher in the third quarter than in the second only four times in the past 17 years, including this year.
Lower fees likely had something to do with the increase, but not all third-quarter trends were positive, he said.
“The existing entity renewals were down for the quarter. That led us to wonder if there are some headwinds that are causing real strain for existing businesses,” said Lewandowski, who worked on the quarterly report.
The number of companies that were late on filing periodic reports or that had dissolved their business also increased. Bankruptcies, which unexpectedly declined in the pandemic (likely due to federal relief), are steadily rising again.
“That perhaps is consistent with the rising delinquencies and dissolutions,” he said. “I think there is still a question mark about the current environment that we’re in and how businesses will sort of thrive over the next year.”
The impact of recent layoffs at large technology companies hasn’t shown up in Colorado’s economic data yet. Denver and Boulder have offices for most of the major companies that have announced layoffs. Twitter fired about 3,700 people, or half its staff, after getting acquired by Elon Musk. Facebook parent Meta said it was laying off 11,000 employees last week. And this week, Amazon reportedly plans to cut 10,000 jobs. Salesforce, Lyft and Stripe also announced this month that they would cut a few thousand workers.
“We are not seeing (the) effects of big layoffs,” Colorado Technology Association CEO Frannie Matthews said in an email.
Colorado continues to rank among the better economically performing states. Its labor force participation rate, which is how many working-age adults are working or looking for work, was the nation’s second highest in September.
While inflation is still high, large contributors — like the price of gasoline — have dropped from the July highs. Lewandowski said that when he checked earlier in the morning, the price of a gallon of gas in Colorado was one penny less than it was a year ago. Nationwide, inflation growth slowed to 7.7% from a year earlier, from 8.2% in September.
New data coming for the fourth quarter shows that existing business renewals rebounded in October and new business filings are still growing, according to state data. Colorado employers continued to add jobs all summer. But Lewandowski is cautious about the state’s future economy.
“Our expectation is that we’ll see a net job growth in the fourth quarter of the year,” he said. “We’re operating under the assumption that there will be a slowdown in the first half of 2023 nationally. We’re concerned about decreased investment in general, given the higher cost of capital and higher cost of borrowing. We’re concerned about the exchange rate impacting exports in general nationally. Colorado is not a heavy exporting state. And we’re concerned about how inflation can chip away at real consumption growth. That sort of the backdrop to why we’re thinking there could be a mild recession or flattening of economic growth in the first half of 2023.”