Phil Castle, The Business Times

Employment is expected to continue to increase in Colorado in 2023, but at less than half the pace of 2022.

Although the state boasts the second highest labor participation rate in the country, worker shortages likely will hamper employment growth, says Brian Lewandowski, executive director of the business research division of the Leeds School of Business at the University of Colorado.

According to the Colorado Business Economic Outlook the division prepared for 2023, nonfarm payrolls are projected to increase 57,100 — or 2 percent .

The increase is expected to build on what Lewandowski says was a good year in 2022 that enabled Colorado to recoup the jobs lost in 2020 because of the COVID-19 pandemic and related restrictions.

However, the 2023 gain will be less than half of what’s anticipated will be an increase of 120,800 jobs in 2022, he says.

Employment is forecast to grow in nine of 11 industry sectors in 2023. Professional and business services is expected to lead the way with 20,300 additional jobs. Employment is expected to increase 11,000 in leisure and hospitality; 6,400 in trade, transportation and utilities; 5,800 in education and health services; 4,100 in other services; 3,000 in natural resources; 1,400 in information and 500 in manufacturing. Moreover, government payrolls are projected to grow 10,600.

Employment is expected to decrease in two sectors, Lewandowski says, with a loss of 4,000 jobs in financial services and 2,000 jobs in construction. He attributed those declines to the effects of higher interest rates and, in turn, slowing residential construction.

The Colorado population is expected to grow 55,500 in 2023 with an estimated net in-migration of 35,000. But labor shortages are likely to persist, he says.

The number of people who work multiple jobs — often in the retail and hospitality sectors — has decreased, he says.

In addition to labor shortages and higher interest rates, other possible economic headwinds expected to blow in 2023 include higher inflation and supply chain disruptions.

Rich Wobbekind, senior economist at the Leeds School of Business, says there’s a risk of recession in 2023.

But even if the economy doesn’t contract, growth will be slow until interest rates and prices — including fuel prices — retreat, he says. “It’s a very slow growth scenario.”

Gross domestic product, the broad measure of goods and services produced in the country, is expected to grow 1.8 percent in the United States in 2022, but slow to a gain of just six-tenths of a percent in 2023.

Lewandowski says consumers have remained resilient and used savings and credit cards to maintain their lifestyles. But  consumption could slow as inflation further erodes purchasing power.

Higher interest rates have slowed private investments, although government spending on infrastructure has increased, he says.

The strong value of the U.S. dollar compared to foreign currencies make U.S. goods and service more expensive and could dampen exports, he says.

Colorado will remain an economically competitive in 2023 with above average growth in GDP, income and employment, he says.

Professional and business services likely will lead the way with continued growth in the high-tech sector, Lewandowski says.

The leisure and hospitality sector sustained the biggest employment losses in the pandemic, but subsequently recovered. What’s projected as increases in travel, tourism and outdoor recreation will spur additional growth, although labor shortages could moderate growth, he says.

Increases in retail sales and air travel likewise will bolster the broad trade, transportation and utilities sector even as labor shortages remain a headwind.

Higher prices for crude oil and natural gas have helped the natural resources and mining sector. The total value of oil and gas production is expected to reach a record $25 billion in 2022.

While manufacturing in Colorado outperforms national growth for the sector, higher interest rates and inflation as well as slowing demand could pose challenges.

In the construction sector, residential building has slowed even as work on infrastructure  has grown to record volume.

Drought remains a concern for the agriculture sector in 2023. While market prices have increased, so have the cost of fuel, fertilizer and other inputs. Net farm income is expected to fall to $772 million in 2023, the lowest level in 20 years.

Government payrolls have rebounded, but governments face the same challenges in labor shortages and increased costs. Federal spending will help the government sector remain stable in 2023.