By Paul J. Kozlowski
All of us celebrate birthdays and anniversaries. We also consider the ages of our cars and roofs on our houses. We are less likely, however, to recognize economic markers even though they set an environment for decisions by households and businesses. Should we be concerned, or should we celebrate, the age and health of the current economic upswing, which will be six years old by mid-year? Over the last fifty years, economic expansions have ranged in duration from one to ten years, so this one is now middle-aged.
Performance reflects healthy conditions. Real personal income per capita, for example, has increased about 17%; retail sales are up nearly 30%; and, after a sluggish start, employment has risen almost 8% from its low six years ago as job openings expanded significantly. U.S. Bureau of Labor Statistics (BLS) data show that women account for about 50% of employment and represent an increasing share of an expanding professional and business services sector. In short, labor market conditions have improved a lot.
Financial markets reflect improving trends as well. Households have de-leveraged so private debt burdens have dropped, and rising stock prices have increased the value of financial assets. On the price front, inflation is running below 2% and 30-year conventional mortgage rates are hovering in the low 4% range. The Federal Reserve reports interest rates on 48-month auto loans at commercial banks in that range also.
Improved conditions for households boosted demand for housing and big-ticket items like autos. The U.S. Bureau of Economic Analysis (BEA) reported sales of light vehicles and trucks at an annual rate of more than 16 million at the start of this year, up from just over 10 million in 2009. Overall, real final sales of motor vehicles to domestic purchasers increased about 11% per year.
Colorado’s upswing has been more rapid. In the last five years, the state’s population rose 24% compared to 13% nationwide, making Colorado is one of the fastest growing states. Employment has also expanded faster than in the nation as a whole, 12% compared to 8%. Although the state’s personal income per capita grew at close to the national rate, it remains almost 6% above the national level ($48,730 vs. $46,129).
The U.S. Department of Housing and Urban Development (HUD) recently reported labor market conditions tightening significantly in Colorado, with shortages of workers occurring in construction. Low inventory-sales ratios for houses and low vacancy rates for apartments in the state’s urban areas have put considerable upward pressure on home prices and rents. The HUD report showed Colorado with the highest rise in home prices among the Rocky Mountain States. We can expect that to continue through 2015.
Colorado possesses other attractive features in addition to its robust economy. The Gallup-Healthways, State of American Well-Being in 2014, for example, ranked Colorado number six among the fifty states in its well-being index, which covers social, financial, community and physical attributes. Gallup-Healthways also noted that Colorado and Hawaii were the only states in the top ten every year since the survey began in 2008. With high rankings, the state’s demography office measured considerable net migration to Colorado, especially for the millennial age group of 20 to 35-year olds.
The state also attracts retirees. Bankrate.com’s Best and Worst States to Retire ranked Colorado number two in its 2015 assessment that includes cost of living, crime rate, community well-being, health care quality, tax rate and weather. The state’s demography office projects a 10% increase in population from 2015 to 2020, with the sixty-five and over age group expanding 25%. One in four residents will be in the senior age group by 2020. Two big counties in the Denver Metro Area, Arapahoe and Denver, have a smaller share of senior-age residents now, but in five years more than 20% of residents will be in the older group.
Challenges going forward involve not only sustaining a high quality of life but also adjusting to changes in the age composition of the state’s residents. Even in a middle-aged economic upswing, strong performance and attractive features are moving Colorado toward a brighter future.
Dr. Paul Kozlowski is professor emeritus of business economics and finance at the University of Toledo, and past-president of the Mid-Continent Regional Science Association. He has served as an advisor to business and government organizations for over thirty-five years, and his articles have appeared in a variety of economic publications and books. He holds a Ph.D. in economics from the University of Connecticut and lives in Denver.