Economic Forecast: Metro Denver poised to achieve new economic milestones in 2016
The strength and diversity of Metro Denver’s economy will ensure the region continues to thrive in the upcoming year, according to the 2017 Metro Denver Economic Forecast presented on Jan. 24, 2017, at Vectra Bank's 24th Annual Economic Forecast breakfast. The event took place at the Marriott City Center.
Patty Silverstein, chief economist for the Metro Denver Economic Development Corporation (Metro Denver EDC), presented the forecast, which includes national-level analysis and estimates for the state economy as well.
“After a stellar 2016 where our region was truly hitting on all cylinders, our only challenge in 2017 will be maintaining the equilibrium of our market dynamics,” said Silverstein. “While strong job growth will continue and consumers remain confident, affordable housing and global economic uncertainty could impact our regional economy.”
Compared with the national average, Metro Denver's employment growth in 2016 was 1.2 percentage points higher at 2.9 percent, which included gains in each supersector. Silverstein forecasts Metro Denver's job growth in 2017 to be 2.4 percent, which represents the addition of about 39,000 jobs.
She anticipates that four supersectors of the regional economy will post strong employment growth in 2017: natural resources and construction (4.4 percent), education and health services (3.5 percent), financial activities (3.2 percent), and leisure and hospitality (3.2 percent).
“One of the greatest strengths in this region’s economic development strategy is its commitment to look ahead and build great infrastructure to support 50- to 100-year planning decisions in Metro Denver,” said Tom Clark, CEO of the Metro Denver EDC. “These investments have not only brought new jobs, but enhanced our brand internationally with business decision makers.”
Metro Denver’s unemployment rate is expected to average about 3.6 percent in 2017, up from 2016, but near levels not posted since before the recession.
The forecast also reports that strong net migration and positive economic activity will continue to push home prices higher.
"We do anticipate that continued residential construction activity, slower sales activity of existing homes, and potential interest rate increases will ease home price pressures,” Silverstein noted.
The forecast for Metro Denver includes the seven counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, and Jefferson. Economic indicators analyzed include: population trends, employment by industry, unemployment, retail sales growth, commercial real estate, and residential activity.
Notable national and state indicators from this year's forecast report include:
- The United States continued on an expansionary path through 2016 despite a slowdown in the first half of the year. The nation’s businesses generated nearly 2.5 million jobs, the unemployment rate fell to 4.9 percent, and income continued to rise. Several states were impacted by the decline in energy prices with preliminary data suggesting seven states lost employment in 2016 including energy states such as Alaska, North Dakota, Oklahoma, West Virginia, and Wyoming. The size of employment gains differed greatly across states, ranging from -3.1 percent in Wyoming to 3.4 percent in Oregon.
- Gross domestic product will grow at a 2.3 percent pace in 2017, below the historic average of 2.7 percent, but faster than 2016 with rising consumer confidence, increased consumption, new construction, and improved business investment. The unemployment rate fell to 4.9 percent in 2016, recording the lowest unemployment rate since 2007. As GDP and employment expand, the nation’s unemployment rate will drop to 4.8 percent and personal income will increase 4.8 percent in 2017.
- With significant improvement in the national employment situation and strong consumption measures, the Federal Reserve agreed to increase the target federal funds rate to a 0.5 percent to 0.75 percent range and it foresees three rate hikes in 2017. The increase in the federal funds rate is a reflection of the strength of the national economy, because the Federal Reserve believes the economy is expanding at a moderate pace allowing it to support higher interest rates.
- The price of oil is expected to rebound somewhat in 2017, averaging about $50 per barrel after falling dramatically to $30 per barrel in February 2016 from a recent peak of $106 per barrel in June 2014. The higher price will improve corporate profits and support industry employment. Higher prices will also be reflected in the overall level of consumer prices as inflation increases modestly.
- In addition to potentially rising interest rates and inflationary pressure, the greatest risks to U.S. economic growth may include anti-globalization policies and international political tension, global and financial market uncertainty surrounding Brexit, and ongoing conflicts in the Middle East. Additionally, unexpected increases or decreases in energy prices remain a risk. As these risks influence business and consumer confidence, which in turn influence overall spending patterns, stability in these situations is needed for the U.S. recovery to remain on track.
- Colorado will likely be among the top 10 states for employment growth during 2016 and will post a 2.2 percent increase in employment in 2016. The employment base is expected to increase by 2.1 percent in 2017 and reach 2.65 million workers, representing the addition of 54,500 jobs. The natural resources and construction, leisure and hospitality, and education and health services supersectors are expected to lead the state in employment growth through 2017.
- Personal income growth slowed in 2016 but will increase to 5 percent in 2017 due to increasing wages, rising housing prices, higher transfer payments, and increased investment. Low unemployment and rising personal income bode well for consumer spending in 2017. Retail trade sales increased by about 3.8 percent in 2016, reflecting a pullback in the first half of the year and a slower rate than 2015. However, retail trade sales are expected to increase at a faster pace of 4.6 percent in 2017. Colorado’s expanding employment base, quality of life, and increasing presence in the global business community continue to attract individuals and businesses to the state.
|Metro Denver||2016 (e)||2017 (f)|
|Employment Growth Rate||2.9%||2.4%|
|Non-Agricultural Employment (thousands)||Total: 1,620.7||Total: 1,659.6|
|Retail Trade Sales Growth Rate||5%||5.4%|
|New Residential Units||23,355||22,859|
» 2017 Economic Forecast for Metro Denver (national, state, and regional forecast, PDF)
» 2017 Economic Profile Brochure for Metro Denver/Northern Colorado (PDF)