Phil Castle, The Business Times

Mesa County has recovered from a pandemic, but could face additional challenges from rising inflation and interest rates as well as other national and international trends, according to an update from a Colorado Mesa University professor.

“I do think we’ll see a softer economy. I don’t know how soft it will be,” says Nathan Perry, an associate professor of economics at CMU.

Perry tracks a variety of indicators for quarterly economic updates he compiles for Mesa County and other Western Colorado counties. He presented an update at the recent Western Colorado Human Resource Association membership meeting in Grand Junction.

Perry says the Mesa County labor market has fully recovered from the effects of the COVID-19 pandemic and related restrictions. Other indicators also offer encouragement, he says. “The Mesa County economy is really doing pretty well.”

The news is less encouraging for the national economy given a combination of factors that include rising inflation, slowing growth and higher interest rates. The war in Ukraine only compounds the problems, Perry says. 

Those national forces likely will exert local effects, he says.

The Consumer Price Index, one measure of inflation, rose 8.6 percent between May 2021 and May 2022. That’s the biggest increase in more than 40 years.

Surging food, gas and energy prices all contributed to the gain, as did the cost of shelter, Perry says. “Inflation is all over the place.”

He attributes rising inflation to a number of contributors, among them strong consumer demand, supply chain issues and higher wages. 

Gross domestic product, the broad measure of goods and services produced in the United States, declined at an annual rate of 1.5 percent in the first quarter of 2022. 

That raises the possibility of a recession by the end of the year, he says. “If we don’t see a recession, at least we’re going to see slower growth over the next six to nine months.”

In an effort to slow the economy and curb inflation, the Federal Reserve raised its benchmark interest rate three-quarters of a percent to a range of 1.5 percent to 1.75 percent. The increase was the largest since 1994.

The federal funds rate applies to overnight transactions between banks. But the rate also influences how much consumers pay to borrow and how much they’re paid to save, affecting everything from credit cart and mortgage rates to yields on certificates of deposit. 

The average rate on the 30-year fixed mortgage has topped 6.25 percent, in turn increasing monthly payments for mortgages and pushing some potential homebuyers out of the market.

In Mesa County, the labor market has recovered even as median household income has increased and the poverty rate has decreased, Perry says.

As of May, the latest month for which estimates are available, Mesa County payrolls had increased 3,382 over the past year to 75,721. That’s a gain of nearly 4.7 percent. The seasonally unadjusted unemployment rate edged down a tenth of a point between April and May to 3.3 percent. At this time last year, the rate stood at 5.8 percent.

“We’re seeing a really strong employment recovery,” Perry says.

If anything, the local labor market remains too tight, he says, making it more difficult for employers to fill job openings. Challenges persist, he says, including the retirement of members of the baby boom generation, a lack of child care and a mismatch between jobs and skills. Applicants expect not only higher wages that keep up with higher costs, but also more uplifting workplace cultures.

The labor market could soften over the next three to four months, Perry says.

The median annual household income rose in Mesa County to a record $64,141 in 2020, up 6.46 percent from 2019 despite the effects of the pandemic.

The proportion of the Mesa County population below the poverty line fell to 11.1 percent in 2020, he says.

Tax collections, one measure of sales and retail activity, have increased in Mesa County and other West Slope counties over the past four to five years, Perry says. The latest gains also could reflect the effects of inflation, however.

Higher prices for oil and natural gas should promote increased energy production in Western Colorado, although the number of drilling permits that have been issued don’t yet reflect more activity, he says.

Mesa County remains one of the top counties in Colorado in terms of its health care industry.

The Leeds Business Confidence Index for Colorado was lower for the second quarter and third quarters, in large part because of less upbeat expectations for the national economy, he says.

Perry says he also expects slowing in the Mesa County real estate market as a result of higher prices and higher interest rates on mortgages. Since January 2017, Mesa County home prices have appreciated 80 percent. 

Nathan Perry provides quarterly economic updates for Mesa County and other West Slope counties on the website at https://www.coloradomesa.edu/business/economic-newsletter.html.