Colorado will remain one of the fastest-growing states in 2016 with continued gains across a range of industry sectors.
While there’s a possibility the United States economy could slip into recession, growing consumer spending combined with low oil prices and interest rates limit that likelihood, an economist and investment officer predict.
Patricia Silverstein, chief economist for the Metro Denver Economic Development Corp., and Burt White, chief investment officer for LPL Financial, shared their state and national outlooks for the coming year during an annual economic forecast event Vectra Bank Colorado hosted in Denver.
Colorado will once again rank among the 10 fastest-growing states in 2016, Silverstein said. Most of the top industry sectors in the state have experienced growth, she said, led by the health care sector. The aerospace industry in Colorado is growing at 4.5 times the national average, while the beverage industry has become a another growth industry.
The statewide unemployment rate has retreated to pre-recession levels, and Silverstein said she expects the jobless rate to continue to decline.
Colorado also should maintain its position as a state with one of the highest median home prices at $350,000, she said.
Low unemployment, high salaries and a challenging housing market means Colorado businesses must be creative in attracting and retaining talent, Silverstein said.
White estimated the probability of the national economy slipping into recession at between 20 percent and 30 percent. But several factors limit that possibility, he said.
Consumer spending, which accounts for nearly 80 percent of economic activity in the country, remains strong and growing,
Moreover, other factors that are historically in place before a recession are not in place now, he said.
Oil prices, which typically increase before a recession, have retreated, he said. Oil prices at $90 to $100 a barrel are actually an anomaly when the average over the past 25 years has been $33 a barrel.
Low oil prices are like a “contagion” that affects other sectors of the economy, including manufacturing and transportation, White said. Ultimately, oil will become obsolete before supplies are exhausted as technology changes, he added.
In Colorado, oil and natural gas development constituted the fastest-growing industry sector in 2014. In 2015, though, it was clean energy technologies, he said.
Interest rates also tend to go up before a recession, White said. In 2007, the Federal Funds rate was 4.25 percent. Today, that same short-term rate is just 0.25 percent.
Given slowing in the manufacturing sector in the United States and economic slowing in China and elsewhere, White said the Federal Reserve could halt what was planned as a series of small increases in interest rates.
Regardless of what happens in 2016, Silverstein and White said it’s important for business owners and managers to remain focused on their operations rather than let news affect they way they run their ventures. Meanwhile, investors should maintain their routines — and perspectives — stick to their plans and remain patient.
White called negativity the country’s greatest addiction. Business owners and manager should try to stay positive, avoid getting caught up in media coverage over economic conditions and focus on being a leader in their businesses and communities.
For more information about the Vectra Bank Colorado economic forecast, including speaker presentations and a full video of the event, log on to the Web site at www.vectrabank.com/denver.