Drop in Colorado business filings heralds economic downturn

Phil Castle, The Business Times

Richard Wobbekind
Jena Griswold
Brian Lewandowski

A downturn in new business filings in Colorado during the first quarter heralds a downturn in the state economy caused the coronavirus, officials say.

The extent and length of downturn will depend on the spread of the virus; how quickly businesses reopen and whether or not people will feel comfortable to shop, eat out and travel.

“We’re going to feel the effects of this pandemic for many months to come,” said Richard Wobbekind, a senior economist and faculty director at the Leeds School of Business at the University of Colorado at Boulder.

Jena Griswold, Colorado secretary of state, agreed. “This pandemic has touched all of Colorado and will continue to do so for the foreseeable future.”

According to a report compiled by the research division of the Leeds School of Business, a total of 33,848 corporations, nonprofits and other entities filed initial documents with the Colorado secretary of state’s office during the first quarter. That’s a decrease of 5.6 percent compared to the first quarter of 2019.

New entity filings increased on a year-over-year basis in January, but then began to decrease. Filings fell more than 30 percent in the last two weeks of March.

A total of 125,090 new entity filings were recorded for the year ending in the first quarter. That’s a decrease of 1.4 percent over the same span last year.

Other numbers from the secretary of state’s office offered mixed results.

A total of 172,267 renewals for existing entities were recorded for the first quarter of 2020, a gain of 7.8 percent over the first quarter of 2019.

At 10,363, dissolution filings increased 6 percent during the first quarter of 2020 over the same quarter last year.

The overall number of corporations, companies and other entities in operation in Colorado continues to grow. For the first quarter of 2020, there were a total of 744,380 entities in good standing. That’s an increase of 3.7 percent of the first quarter of 2019.

New business filings constitute a leading indicator of job growth and economic conditions, Wobbekind said.

For March, the latest month for which estimates are available, nonfarm payrolls decreased 3,900 in Colorado from the month before. The unemployment rate rose two points to 4.5 percent.

More than 300,000 initial claims for unemployment benefits were filed in Colorado for the five weeks preceding April 18 — the equivalent of the last three years of claims combined.

The Leeds Business Confidence Index, a measure based on surveys of  business leaders across Colorado, dropped more than 21 points to 29.7 going into the second quarter. That reading is the lowest for the index since its inception in 2003.

Brian Lewandowski, executive director of the research division at the Leeds School of Business, said national indicators also offer a look at what’s likely to occur in Colorado.

Gross domestic product, the broad measure of goods and services produced in the country, contracted at annual rate of 4.8 percent for the first three months of the year — the first quarterly contraction since 2014 and largest since the Great Recession.

Retail sales dropped a record 8.7 percent in March. While sales jumped 26.9 percent at grocery stores, sales fell 26.8 percent in furniture stores and 50.5 percent at clothing retailers.

Wobbekind said the Colorado economy was slowing before the onset of the coronavirus pandemic and low oil prices have hurt the energy sector.

But the economy was stronger in Colorado than many other areas of the United States, which could portend a stronger rebound, he said.

A diverse economy in Colorado helps as well, Griswold said. “It puts us on a better footing.”

More federal assistance will be needed, though, she said. The response so far has been insufficient in helping those most in need.