It’s been a big week for economic news. But really, it was more of a planned news week — the monthly Colorado jobs report, the monthly housing sales update, Denver inflation numbers and, in predicted news, the Federal Reserve’s decision to pause raising interest rates again.
They’re all related. People with jobs spend money, leading to increased demand for goods and services, which can push prices up when supply is low or a labor shortage develops as businesses expand to meet growth. Higher prices, i.e. inflation, leads the government to increase interest rates to tamp down demand.
We’ve seen much of this play out since the COVID-19 pandemic, and there are signs that the disruptive economic change of the past three years is calming down. People have adjusted to higher prices in any way they can.
While What’s Working has been experimenting recently with a deeper dive into summer jobs and Colorado’s investment in startups, we’re back to the regular Colorado economic update, complete with handmade charts and data reporting.
More Coloradans are working
Colorado continues to employ more workers each month, including an additional 8,800 in May, according to the state’s job report released Friday. This helped the state return to its pre-pandemic employment-to-population ratio of 66.8%, which is how many Coloradans aged 16 and older are employed.
A notable highlight? Government workers are back on track. Many had lost their jobs at the start of the pandemic, but now the state’s government sector finally regained all of those lost jobs — plus 2,700 more — with about 464,700 government workers in jobs as of May.
Colorado’s unemployment rate was unchanged from April and ended May at 2.8%. By comparison, the U.S. unemployment rate was 3.7% in May, according to Bureau of Labor Statistics.
But while the state continues to add jobs, the job growth rate is slowing. The annual growth of employed workers has been around 1.2% to 1.4% per month this year.
“Prior to 2020, it had been running between 2.3% and 2.5% per year. We’re starting to see the impact on the labor market,” said Steven Byers, senior economist with Common Sense Institute, a conservative think tank in Greenwood Village. “The labor force participation rate is still slightly below where we were in January 2020 before the pandemic took over. But it’s much further down than where it was in 2008, when we saw the last peak.”
He has a theory as to why: “I think part of the reason is that people in the labor force are aging,” Byers said.
As Baby Boomers or their parents pass on, their families are inheriting the wealth and may be choosing to stop working. It’s just speculation, though, he said.
“They’re passing on one of the biggest wealth transfers in history to their heirs,” he said. “This is allowing people to, I think, work less or say I can retire sooner.”
Ryan Gedney, principal economist for the Colorado Department of Labor and Employment, said that prior to the pandemic, Colorado was averaging 4,900 new jobs per month. At that number, there was a projection that the state would have more workers by now. But, of course, the pandemic pricked a hole in that model. And the ongoing economic malaise hasn’t helped. Forecasts have since been adjusted.
“However, assuming that that pace of growth would have continued may not be realistic,” Gedney said in an email, adding that “forecasts at the time showed job growth slowing and … 2019 marked the end of a historically long economic expansion.”
They chopped the assumption at half the rate and estimated 2,500 jobs per month.
“Current payroll levels have exceeded that counterfactual scenario,” Gedney said.
Wages are still growing
Average hourly earnings in Colorado are up to $35.72, which is just under a 4% annual growth so far this year, Gedney said during Friday’s news conference. But that’s slower than the nearly 8% average increase workers received last year.
Last year, some sectors saw rapid wage gains, especially those workers in transportation and warehousing. That’s been softening this year, he added.
“We see that trending with inflation,” Gedney said. “Looking at wages adjusted for inflation … wages are down about 1.9% from a real perspective. We are certainly seeing some cooling there.”
Pay raises aren’t keeping up with inflation, but comparably, Colorado pays more than the U.S., which had average hourly earnings of $33.44, according to BLS data.
Denver inflation rate: Still high but less so, at 5.1%
At least the Denver-area inflation rate is slowing down. At 5.1% in May, that’s a decline from the nearly double-digit increases felt in Spring 2022 in the metro area last year, and down from 5.7% in March. At the same time, the U.S. inflation rate was 4% last month, down from 5% in March.
Denver’s inflation has grown faster than the nation’s for most of the year. That hasn’t always been the case. During most of the pandemic, Denver’s inflation rate was lower than the nation’s, only rising higher last spring as the recovery resulted in a labor shortage, higher wages and businesses raising prices to alleviate rising costs.
So why is Denver’s rate higher than the nation’s — and one of the highest in the country and in the West region, which came in at 4.5% last month?
“The fact that Colorado was a full percentage point above the United States is what I found to be caused by two culprits: food and shelter,” said Stephan Weiler, professor of economics at Colorado State University in Fort Collins.
Higher prices put a damper on eating out, at least for lower-income households that are most impacted when prices rise. But the cost to eat at home got hammered, too, with rising prices for eggs, bread and other regular consumer food purchases.
But shelter was a doozy. That category considers rents as well as the equivalent cost for a homeowner.
“Shelter went up 8% in the U.S. and 8.8% in the Denver-Aurora area,” Weiler said. “This is what people are talking about, that Denver really is becoming the most expensive place between the coasts in terms of living and it doesn’t show any signs of easing off. We thought there was going to be a sort of flattening, but an 8.8% year-over-year growth is a pretty good-sized percentage increase for shelter.”
Housing prices dip but still near all-time high
Speaking of shelter, the median price of a house sold in the Denver metro area fell 2.8% to $632,000 in May. Similarly condo median sales prices fell 1.4% to $430,000. While the slump has been expected — primarily due to higher interest rates for mortgage loans — prices are up significantly from before the pandemic.
Compared to May 2019, nearly a year before COVID-19 began disrupting the economy, the median sales price for a house has grown 45.3% in Denver and 45.6% in Colorado.
Despite the large increase in prices in the past several years, Colorado Association of Realtors data shows that house hunting is still a challenge because potential sellers are hanging on to their low interest rate mortgages and staying put. The number of houses listed for sale in Colorado is up 6% from a year ago, and up 2.4% in Denver.
In La Plata County, where median sales prices grew 2.6% in May from a year ago to $785,000, the number of houses for sale dropped 8.8% to 155. That took a toll in Durango.
“If you think scoring Taylor Swift tickets is tough, finding a suitable home in Durango seems just as demanding,” said Jarrod Nixon, a Durango Realtor in a CAR news release. “Overall, the market is challenging for buyers as they face limited inventory and rising prices.”
Some items do cost less
At least not everything costs more than a year ago. Most notably, the price of gasoline and motor oil dropped in May by 17.2% and 17.4% in a year, respectively, in Denver.
But the rub is that prices fell faster nationwide, with fuel oil down 37% and gasoline down 19.7%, Weiler said.
The numbers are from May. More recently, gas prices are creeping back up, according to AAA’s gas tracker for Colorado. An average gallon of regular gas was $3.55 on Friday, up 21 cents from last month. And Coloradans are seeing gas prices tick up more than their fellow drivers nationwide, who are paying about 5 cents more per gallon in the past month.
Overall though, gasoline prices are way down from last June. In Colorado, gas prices are down 28% from $4.91 a gallon, according to AAA, which cited less demand.
The slowing of inflation led the Federal Reserve on Wednesday to stop increasing interest rates for the first time in more than a year. But as the Fed iterated in a statement, the inflation goal is still 2% and it is “prepared to adjust the stance of monetary policy as appropriate if risks emerge.”
Weiler said it just takes time for policy decisions to have their intended impact. We’ve already seen the housing market slow down because it costs more to borrow money to buy a house.
“We had close to zero inflation rate in 2020,” Weiler said. “But since then, between January of 2021 and March of 2022, we went from virtually zero to about nine and a half. In essence, we increased prices at a really rapid rate during that recovery period. And in terms of recovering from that quick build up in prices, we’re actually now trending slower to reduce them in the country as a whole.
This week’s reader poll
Does anything cost less than it did a year ago? We want to know! Take the What’s Working reader poll at cosun.co/WWdeflation
Other working bits
➔ 52,232 Coloradans are on the state-managed retirement plan. The state-run retirement plan for nearly any worker without one, has enrolled 52,232 employees, as of June 6. This is the Colorado SecureSavings plan, which went into effect in January. Employers must register but aren’t required to match contributions. That’s on the workers, who have so far saved $3.75 million to date. Approximately 8,363 employers have enrolled while another 11,419 employers are exempt because they already offer a private retirement plan to their workers. >> Earlier story
➔ Denver home values grew 1.3% from April to May. That’s data from real-estate listings site Zillow. The company said that while the Denver market is “showing early signs of getting back to normal,” there just aren’t very many houses available and thus, fewer sales are happening. Other May data points from the company: the typical home is worth $592,325, down 4.3% compared to last year; inventory is flat and 37% below where it was in May 2019; but at least May had 20% more listings than April, which was down 35% from May 2019. >> Zillow market report
➔ Colorado renters need $32.13/hour to pay rent. Even though the city of Denver upped its minimum hourly wage to $17.29 in January, renters who’d like a “modest two-bedroom apartment” need to earn at least $32.13 an hour to afford one, according to the new “Out of Reach” report by the National Low Income Housing Coalition. Presumably, two full-time minimum wage earners could make it work but at that cost, Colorado ranks as the eighth highest in the nation for housing costs. California was number one, with the needed hourly wage at $42.25. >> Details
Miss a column? Catch up:
- What’s Working: Colorado’s summer jobs are disappearing
- What’s Working: Where a company that develops cancer tests, other startups are finding funding in Colorado
- What’s Working: Welcome to summer 2023 travel season, as airlines and labor issues collide
- What’s Working: Colorado’s April job growth is the best in 12 months, but it’s slower than the nation’s
- What’s Working: Front Range rents were mostly flat in April. Here’s how they’ve changed over four years
What’s Working is a Colorado Sun column about surviving in today’s economy. Email email@example.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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