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Even as the number of Coloradans filing to start a new business hit a new high this year, a “light” recession may come sooner than later, said economists from the University of Colorado during the Secretary of State’s quarterly economic update this week.
It was a week, after all, where another bank failed and the Federal Reserve increased interest rates. And it followed last week’s report that the nation’s economic growth saw a significant slowdown in the first quarter.
“It’s already increasing lending standards and it’s requiring the banks to be more cautious about making loans,” said Richard Wobbekind, senior economist and faculty director at the Business Research Division at CU’s Leeds School of Business. “That could really slow down small business in particular given the types of banks we’re talking about.”
The Leeds economists have been hinting at a recession for several quarters but were pinning it to the second half of 2023. “It was somewhat of a disappointing first quarter,” Brian Lewandowski, executive director of CU’s Business Research Division, said during the news conference Thursday.
A bright spot? Consumer spending. It grew at an annual rate of 3.7%, which was better than the fourth quarter growth of 1%.
“That’s notable because there are all of these headwinds on the consumer that we continue to be worried about, ranging from negative real wage growth to consumers facing higher inflation, taking on more debt and paying higher interest rates,” Lewandowski said. “These are all things that should logically point to a slowdown in consumption. But, in fact, first quarter consumption came in pretty strong.”
Next up is jobs and whether the slowing job growth in Colorado will improve. The state’s lagging job growth rate of 1.2% last year ranked Colorado as the second slowest state nationwide, behind West Virginia.
But the state Department of Labor and Employment said the number was likely undercounted and revisions of 17,400 are expected. That would improve Colorado’s outlook but still put the state around a 2% job growth rate last year, ranking it around 39th or 40th in the nation, Lewandowski said.
“A lot of this rests on hiring nationally,” he said. “I think what keeps us between slow growth and light recession is the pace of job growth.”
The number of job openings in the state translates to 2.4 job openings for every unemployed Coloradan.
➔ View the Quarterly Business & Economic Indicators 1Q 2023 report
➔ April job growth better than expected. The U.S. added 253,000 jobs in April, which beat forecasts. It was lower than the average monthly gain of 290,000 for the past six months but was unexpected considering the recent economic turmoil of the banking and tech industries. The nation’s unemployment rate came in at 3.4% for the month, down from 3.5% in March. >> NY Times
UCCS outlook on recession: Yes, no, maybe?
Translating economic data seems like a Sisyphean task and one that is most accurate in retrospect. Economist Joe Craig addressed the topic earlier this week during a public meeting for the University of Colorado Colorado Springs Economic Forum, where he serves as interim director.
“People always ask, ‘Are we going into recession?’” Craig said. “Maybe? Probably? I don’t know. If you guys have been paying attention to my dashboard, I swear I switch every month.”
The important thing, he said, is that people have jobs.
“Do you feel like you’re in a recession if you’re still employed and you can still meet all of your bills? Probably not,” he said. “A lot of what life is about is how do you feel about it? If you have a job, if you’re working, if you’re not worried about being evicted next month, even if you are in a recession, I’d argue that most people are OK with that situation. Maybe they’re not happy. They’re not taking all the vacations they want to take, but they’re still employed.”
El Paso County had a 2.8% unemployment rate in March, which he called “crazy low.” Unemployment rates are pretty low all over the place, including Colorado’s 2.8% and the U.S. at 3.6%. That’s showing that even though wages are up, it’s still hard for employers to hire, he said. Hence, the back and forth with the recession since more jobs show growth.
For now, data from the Pikes Peak Workforce Center is showing that there are 43,000 job openings compared to 10,000 unemployed workers in Colorado Springs. That’s four jobs for every unemployed worker. It’s the skills mismatch that causes the disconnect, so that’s why job training is a priority at the workforce center.
In Colorado Springs, the top types of job openings were registered nurses, software developers and computer workers.
“There’s a skills mismatch, and that’s a problem,” he said. “The upside is we do have people who want jobs.”
Take the poll: Are you spending more?
➔ Take last week’s poll: Has your paycheck changed? >> cosun.co/WWpaychecks
$1 new-business fee could end this month
Approximately 55,787 individuals filed to start a new business in the first three months this year, according to the latest report from the Colorado Secretary of State. That was the highest number on record and beat the previous high that was just set in the prior adjacent quarter by 14.3%.
While the first quarter tends to be the biggest each year as entrepreneurs look to start fresh in a new year, officials credited the continued surge to House Bill 1001, which reduced new business filing fees to $1 from $50. The state legislature also allocated $8.435 million to fund the act, which went into effect July 1.
That money is expected to run out this month, Secretary of State Jena Griswold said. Her office had expected the funding to last one year. Attempts to keep the program funded were not successful, Griswold said, and the new-business filing fee will return to $50 when the money is depleted, while the new trade name fee returns to $20, from the current $1.
“I do think it’s part of a mix of reasons that make Colorado a great place to open and operate a business,” Griswold said during a news conference Thursday. “And I do think it helps a lot of people. We almost have a million businesses registered in the state of Colorado. And remember, the vast amount of people who are business owners are very small business owners.”
But it’s difficult to pinpoint the exact cause of the increase. Or whether all the new businesses have gotten beyond filing the paperwork. People may be starting a business because the cost of living has increased and their current job doesn’t pay enough.
The report also shared that the number of companies that dissolved in the first quarter hit its own record of 13,999 entities, up 9.1% from a year ago. “The spike in dissolutions during the last recession occurred in Q2 2011, after the official end of the recession,” the report said.
➔ Start a new company, get a trademark, etc. in Colorado before the fee reduction is depleted. >> File
ICYMI: First-time Colorado home buyers do exist
Now that the growth of for-sale home prices has slowed a bit, first-time buyers are finding a way into the market without having to pay a half-million dollars, which was around the state’s median sales price in March.
I interviewed Ashley Knight, a Denver resident, who closed on her very first house April 28. She bought a two-bedroom townhouse in Aurora for $272,000. Her interest rate was relatively high, at 6.75%, but she was ready to become a homeowner.
She got a loan backed by the Federal Housing Administration, which meant a 3.5% down payment. Thanks to taking a first-time buyer class with the Colorado Housing and Finance Authority, she received a grant for the down payment and then her Realtor Kathy Casey managed to get the seller to cover the closing costs. Knight ended up getting some of her earnest money back at closing.
While not all first-time buyer stories have happy endings, let’s just say not yet. There are still multiple offers on houses but fewer of them. (Knight said she competed with three others and hers wasn’t the highest.) And apparently, there are more houses popping up below $500,000, even in Fort Collins, where the dip in median sales price in March was just 0.9% and down to $575,000.
Chris Hardy, with Elevations Real Estate, counted up 11 detached single-family homes below $500,000 this week. Prospective buyers are still competing with investors who have cash — and that’s difficult for any buyer with a mortgage to compete with. But prices have stabilized compared to a year ago when you couldn’t buy a detached home for less than $500,000.
“That being said, there are condos being sold in the mid-$200s — but most two-bed, two-bath condos are in the $300s,” Hardy said.
Reader poll results:
➔ READ: How first-time buyers are finding success — and frustration — in Colorado’s housing market. (Don’t miss the down payment assistance tips box at the bottom)
➔ Curious about your next property tax bill? Use our calculator to determine what your new property tax bill would be under the Colorado legislature’s relief plan >> Read
Other working bits
➔ United Airlines to hire 2,300 in Denver this year. Big expansions for the airline in Denver means United has more openings than originally anticipated. The company said it needs more ramp and customer service workers, maintenance technicians, and flight attendants and pilots. >> Search openings
➔ Coming soon: $2.7 million Intuit settlement. For the 89,375 Coloradans who paid for the “free” tax program from TurboTax’s owner Intuit, the company’s $2.7 million settlement with the state Attorney General will be mailed this month. Affected consumers will be notified by email, according to the AG’s office, with payments of $30 for each year between 2016 to 2018. >> Details
➔ 8 small business grants available. As compiled by the Ladies Who Launch organization, grants and awards from $10,000 to $1 million are shared on this list.
➔ 34% of small business “fully recovered” from pandemic. That leaves 66% of small businesses polled in the latest Alignable business survey saying they’re making less monthly revenue than before the pandemic. At least Colorado is doing better than the national average, though just barely, at 37% at full recovery. North Carolina is in the lead at 49%, while Kentucky is last, at 14%. >> Report
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Thanks for sticking with me for this week’s report. As always, share your 2 cents on how the economy is keeping you down or helping you up at cosun.co/heyww. ~ tamara
Miss a column? Catch up:
- What’s Working: Colorado women earned 85.4 cents for every dollar a man made in 2021
- What’s Working: When the CHIPS Act, education and jobs come together in Colorado
- What’s Working: As home prices drop, Colorado’s real estate industry looks to history to understand trends
- What’s Working: Colorado moves past bank failures, while startup industry reassesses
- What’s Working: Colorado entrepreneurs must make money to spend it as recession talk increases
- What’s Working: Colorado’s unemployment rates weren’t what you thought they were
- What’s Working: Tipping for fast food, to-go pick ups, pot and … wedding gowns?
What’s Working is a Colorado Sun column about surviving in today’s economy. Email tamara@coloradosun.com with stories, tips or questions. Read the archive, ask a question at cosun.co/heyww and don’t miss the next one by signing up at coloradosun.com/getww.
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