Colorado’s unemployment rate increased by a tenth of a percentage point nearly every month last year. Then in January, the increase shot to 4.7%, up three-tenths of a point.
While it may seem like something changed in January, it wasn’t as big of a jump as you’d think.
Blame the increase on data revisions. As it does every March, the U.S. Bureau of Labor Statistics revises the data when new information comes in, such as “new population controls, re-estimation of models, and adjustment to new census division and national control totals,” said Tim Wonhof, program manager for the Colorado Department of Labor and Employment’s division of labor standards and statistics.
Still, Wonhof added, this was pretty noteworthy.
“It was a large revision,” he said in an email. “The January 2025 unemployment rate of 4.7% is elevated compared to a year ago, but it is still below the state’s historical average of ~5.2%.”
Everything rose — the number of adults in Colorado’s labor force, the number employed and the number unemployed. More people joined or rejoined the state’s workforce in January, putting the state’s labor force participation rate at 68%, the sixth highest nationwide.
The revisions led Colorado to change its average unemployment rate in 2024 to 4.3%, from 3.9%. Wonhof gave no explanation for the increase other than it’s the result of the usual data benchmarking process. Colorado tied with Alaska for seventh highest jobless rate in the U.S.
The increase in January runs counter to Colorado’s recent past, at least compared to the national trend. Colorado’s jobless rate had been lower than the U.S. for most of the past decade and most of the past three years. As Colorado’s unemployment rate rose in January, the U.S. went the other direction, falling a tenth of a point to 4%.
Caitlin McKennie, director of research at Common Sense Institute, a conservative think tank in Greenwood Village, called the opposing direction “significant.”
“For a considerable amount of time we have seen Colorado outpace the nation in terms of lower unemployment levels,” McKennie said in an email. “Colorado has boasted lower unemployment levels relative to the U.S. averages in nearly all state reports for years. We don’t know just yet whether this is a data bug or a true indictment of Colorado’s job growth.”
How unemployment rates are determined
The monthly unemployment rate isn’t based on how many people file for unemployment benefits each month, since some folks run out of benefits before finding a new job. The rate is based on the Current Population Survey by the BLS and U.S. Census Bureau. It surveys about 59,000 households nationwide every month, asking questions of the whole household about their work status. It has an average response rate of 75%, one of the highest for a government survey.
The unemployment rate is essentially an estimate of how many working-age adults are unemployed compared to the labor force.
As new data from other sources comes in — including the Quarterly Census of Employment and Wages, which employers must share employee counts and wages for state unemployment eligibility — revisions occur. The BLS suspended Colorado’s QCEW data last fall to investigate data quality concerns but resumed publication last month after issues with the state’s overhaul of its unemployment system were addressed.
The additional data helps provide a more complete understanding of local economies, down to the city. Otherwise, there’s a high chance that very few people, if anyone, was surveyed in any given city in Colorado, said Brian Lewandowski, executive director of the Business Research Division at the University of Colorado Leeds School of Business.
He uses an anecdote to help people better understand local unemployment rates. In a city like Westminster, the BLS may have surveyed 13 people or zero people for any given month. But the city is still assigned an unemployment rate because it has more than 25,000 people. (Westminster’s estimated December unemployment rate was 4.9%.)
“I think that’s sort of remarkable when you think about how small that sample likely is for a place like Westminster,” he said. “It’s a handful of people. And the same for Boulder. It just demonstrates how they’re using a large sample (at) a national level but they’re inferring a lot about local areas.”
The latest revision put Colorado’s unemployment rate higher than the U.S. for nearly the entire year, except for February when the two were the same.
January’s rising unemployment rate
Since data is always getting revised, economists caution about using a single month’s number, like January’s 4.7%.
“But is it exactly 4.7%? That’s immaterial,” Lewandowski said. “It’s elevated and it’s been rising. … I hesitate to say this out loud but it’s sort of like a recession threshold. I look at it creeping up to 4.7% and I’m like, we’ve got to keep an eye on it.”
The other aspect is that after the revisions, there are now more people in Colorado’s labor force, so it’s not just about people losing a job. With growth in the labor force, there’s more people working, possibly creating a tighter labor market.
McKennie shared data from labor research firm Lightcast, which estimated that Colorado employers posted 1.3 million unique job postings last year while there were 630,531 active job seekers in the state.
“While labor force participation and job growth are both strong in 2025, it is likely that the state’s labor market continues to be tight — with a mismatch between what employers are looking for and the available talent,” McKennie said.
January’s increasing rate in Colorado is still something to watch. During the month, industries seeing the biggest job gains were private education and health services, up 2,500 jobs. The government sector was up 2,100 jobs compared with December.
But the month also saw a higher than usual loss of jobs in the leisure and hospitality industry, which was one of two sectors with job losses of more than 1,000.
Wonhof said that while this industry, which includes hotels and restaurants, tends to see slight job gains in January, it’s difficult to pinpoint a specific reason for the monthly decline.
However, he said, “inflation for food and beverage in the Denver MSA (our best proximate estimate for inflation in the state) has been ticking upward since September 2024, which could be dampening demand and therefore impacting hiring for the sector.”
According to the revised data, the state’s leisure and hospitality sector has shed 3,600 jobs since October. At the national level, the sector is down 30,000 jobs since December.
“Since we’re also seeing national losses in leisure and hospitality, there are likely other factors at play,” Wonhof said.