BY FREDA MIKLIN
The first economist to address the 400+ members of the South Metro Denver Chamber (SMDC) and their guests was Henry Sobanet, whose long career in Colorado includes service in executive positions in state government for former Colorado Governors Bill Owens and John Hickenlooper. He currently holds the position of senior vice chancellor of administration and government relations and CFO for Colorado State University.
Sobanet pointed to the nationwide $13.7 trillion “massive fiscal and monetary stimulus” from the federal government that, he said, “achieved their nominal goals of getting the economy through the shutdown period.” Of that total, he reported that $9.6 trillion has already been committed. To provide context, Sobanet noted that $9.6 trillion is equivalent to 45% of the 2019 national Gross Domestic Product.
Before the end of 2022, Sobanet shared, “most economic activity will be back to pre-pandemic levels,” with the states of Arizona, Idaho, Texas and Utah having already recovered or surpassed pre-pandemic employment levels, partly due to in-migration from higher-cost states. Our own state budget still has significant one-time remaining American Rescue Plan Act funds which will continue to be utilized over the next few years. Although the state’s overall economic trends are positive, Sobanet noted that, “It wasn’t the same pandemic for everybody and it’s not the same recovery for everybody.” Industries with lower wage jobs, such as leisure and hospitality and entertainment have not come back the way other higher wage jobs have, many of which did not suffer significant disruptions and are now actually above pre-pandemic levels.
New and increased concerns over the past year include inflation, workforce availability and morale, supply disruptions, and the ever-present Colorado problem of housing availability and affordability.
According to Sobanet, the average increase in the consumer price index was 2.0% in 2020 and is projected to be 3.7% in 2021 and 3.4% in 2022. Regarding the “great resignation,” he told his listeners that the number one reason people quit their jobs was not pay, but culture, including possibilities for advancement. He further pointed out that quitting one’s job required confidence that the economy would allow employees to find better jobs. On housing, he pointed to the average closed price for a single-family residence in Colorado of $688,516 in 2021 compared to $483,777 in 2017, the decrease to 15 days an average listing was in the MLS in 2021 compared to 26 days for the last several years. Significantly, Sobanet noted that in 2021 there was an average of only two weeks of sales inventory in the MLS.
Overall, Sobanet predicted, “for the next six months it is most reasonable to expect pretty robust growth rates for the Colorado economy.” He also noted that CNBC still ranks Colorado eighth overall for its business climate, “leading the country in innovation and tech and workforce.” He pointed to Colorado’s tradition of collaboration as one of its most significant strengths.
Elizabeth Garner, state demographer with the Colorado Department of Public Affairs since 2004, told SMDC that the state’s population will continue to grow but at a decreasing rate. She also noted that the “largest share of future growth is the 65+”age group sector of the state and that “age impacts the economy, labor force, housing, and public finance.”
Colorado’s population grew at double the rate of the increase in the total population nationwide since 2010. Our state is also becoming more racially and ethnically diverse. Zeroing in locally, Garner noted that 95% of recent population growth has been in the Front Range. More specifically, between 2010 and 2020, Denver grew by 112,000 people, Arapahoe County gained 80,000 residents and Douglas County gained 72,000. She also noted that the increase of 744,500 in the total number of Coloradans between 2010 and 2020 was comprised of net in-migration of (approximately) 445,000 and 286,000 more births than deaths statewide. Garner pointed to the fact that of the total 744,500 population increase, only 38,000 were under the age of 18 as evidence of a continuing decrease in birth rates that will lead to a smaller workforce in future years.
Looking at housing, Garner said there were 405,000 new housing units added from 2000-2010, compared to 278,500 from 2010-2020, even though the population grew at a higher rate in the latter decade. She concluded, “We don’t do a very good job of building housing at the same rate as household formation…We’ve got to do a better job of marrying housing and population,” to prevent losing residents and workers. She said the supply is adversely affected by several factors including “anti-growth/density,” while the demand is impacted by youthful buyers wanting smaller homes and aging buyers who are empty nesters. She also noted that “institutional investors and cannabis firms” are buying up housing units and often holding them vacant, adversely impacting supply.
Lastly, Garner said that two-thirds of Colorado’s population growth from 2010-2020 was of people of color, which in the future “will be the largest area of growth in our labor force.” She predicts a statewide population of 7.5 million in 2050 with 1.6 million of the total increase of 1.8 million in the Front Range.
Tuhin Halder, vice-president of finance and business operations for Comcast Mountain West Region, told SMDC that the supply chain disruption has created problems at multiple levels for businesses everywhere. He gave an example of a Starbucks outlet who could not get paper sleeves for its hot coffee paper cups so they gave customers two cups instead. Halder pointed out that a paper cup costs twice as much as a paper sleeve, creating a sharp increase in product cost that was unplanned and uncontrollable.
According to Halder, another aspect of the supply chain problem is that many small business owners, including those in the transportation sector, quit what they were doing when the pandemic came and went to work for Amazon, where starting pay is $15 to $20/hour and benefits are good.
Halder also shared that Comcast expects interest rates to increase sharply in 2022. He also predicts continued transportation bottlenecks, especially of goods coming into the U.S. from other countries. Comcast also expects that the stimulus savings people have accumulated will lessen as spending increases, causing more people to return to the work force and unemployment rates to continue to decrease. He expects those activities to eventually resolve the supply chain problem, as long as COVID is brought under control.
Moderating the program was Dennis Huspeni, business reporter with the Denver Gazette. Whipplewood CPAs was presenting sponsor, Arapahoe County was a gold sponsor. The City of Castle Pines, Lone Tree Arts Center and Colorado State University were silver sponsors. Table sponsors were 1stBank, The Villager Newspaper, Xcel Energy, South Suburban Parks and Recreation, Alpine Bank, Academy Bank, Sky Ridge Medical Center, City of Lone Tree, Comcast, Denver Water, Hays a division of Brown & Brown Insurance and Unite Private Networks.