Colorado's 2018 Economic Outlook
A data dive into the Philly Fed’s State Coincident Index
At the national level, the economy continues on an upward path – at a slower rate from a jobs perspective. The potential for positive (e.g tax reform) and negative (e.g. stock market correction) shocks changing consumer and business perspectives definitely exists.
The real surprise will be if we politically come to grips with the longer-term fundamental challenge of labor force size and quality. Creating “more jobs” is a dubious endeavor when there are labor shortages. While there is cause for some encouragement with a larger percentage of American adults participating in the labor force, thanks to the Millennials, this will continue to be a challenge with more Boomers retiring.
Colorado’s Q1 outlook from the Philadelphia Federal Reserve’s Leading Index is muted compared to much of the nation.
Colorado has seen greater volatility in the coincident index in the last year, but it appears Colorado is becoming more average as opposed to a stellar performer. Over the last couple of decades Colorado’s coincident index more closely tracked California and Texas than the nation as a whole.
I expect the relative cooling of the state’s economy to persist in 2018. Some of the factors to consider include:
- Low unemployment, housing costs and transportation challenges will constrain growth.
- Investment in healthcare, tourism, and infrastructure will help create capacity.
- Tourism, food service, agriculture, housing and real estate, health, professional and technical, and national defense should do well.
- Retail marijuana will peak with expansion in other states and possible federal confrontation
Click here for a more detailed look at my forecast with links to other statewide forecasts for 2018.