United States

The U.S. economy has experienced uneven growth in 1995. Deficit reduction efforts and global competition have helped suppress inflationary pressure. The economy appears ready for continued growth in 1996.

Economic growth, or real Gross Domestic Product (GDP), showed a 3.0% growth in 1995. The GDP deflator registered 2.1% annual growth. Projected changes for 1996 indicate slower, but steady, economic growth (the so-called "soft landing"). Real GDP growth is expected to grow at 2.6%, based on a GDP deflator of 2.5%.

Unemployment fell from 6.2% in 1994 to 5.6% in 1995 and is expected to rise slightly in 1996, to 5.7%. The economy continues to undergo a fundamental restructuring. Labor absorption continues to be strong under the current expansion. The slowing of the expansion accounts for the slightly higher unemployment rate. Employment costs will rise by 3.3% in 1995 and 3.6% in 1996, reflecting tighter labor markets.

Consumer confidence appears to be steady amid continued signs of economic slow-down. Inflationary pressure, as measured by the CPI and PPI, is well under control; nonetheless, the Federal Reserve Board has been reluctant to ease interest rates too much, since the federal budget accord is not firmly in place. We project a 3.0% CPI-U increase nationally for 1996. From 1984 to 1991, the cost of living in Colorado, as measured by the CPI-U, was well below that of the nation; however, since 1992 the Denver-Boulder CPI has been almost a full point higher, reflecting stronger statewide growth. A 3.9% increase is forecast for Colorado in 1996.

Colorado

On the average, for the past five years (1990 to 1994), nonagricultural wage and salary employment in Colorado grew by approximately 57,200. This has been extremely strong growth, fueled by large numbers of immigrants. Nonagricultural wage and salary employment totaled 1,814,800 in 1995. This represents and additional 60,000 jobs, a 3.4% rate of growth. Colorado has experienced eight consecutive years of solid job growth, with the last three showing extremely strong job growth. Only one sector lost employment in 1995. Oil, Gas, and Mining. Sectors exhibiting strong growth in 1995 include Services, Wholesale and Retail Trade, and Manufacturing.

The state economy has prospered this year, in spite of the slowdown in infrastructure expenditures and in federal and state government expenditures, and despite the slowing of the national economy.

In the individual sections that follow, a summary of 1995 and a forecast for 1996 will be presented. We hope that this data and analysis prove useful in your business decision-making process.

POPULATION, LABOR FORCE, AND PERSONAL INCOME

Colorado's economy is expected to grow at about the national economic pace for 1996.

The performance of the Colorado economy is directly related to the composition of its population and labor force. Population growth in the United States has averaged about 1.0% per year throughout the 1980's and 1990's. Colorado's rate of population growth has been extremely cyclical in nature, far exceeding the national rate during the early 1980's, but falling below the national average from 1986 to 1990. Since 1991, Colorado has once again experienced a population growth rate greater than the nation's. Migration, the catalyst, has been particularly strong during the 1992 to 1995 period. Net migration is expected to be a positive 35,000 in 1996. Population is projected to grow by approximately 63,000, to 3.79 million, a 1.7% increase.

In 1996, Colorado's labor force is projected to grow by 56,500, to 2,141,500, after a gain of 89,000 in 1995.

The 1996 employed population is expected to rise by 50,200 people, to 2,051,700. An increase of 89,500 workers occurred in 1995. This estimate of employed people includes the self-employed, unpaid family members, domestic workers, nonagricultural wage and salary workers, agricultural workers, and persons involved in labor disputes. This increase reflects the movement toward more self-employment and consulting brought about the changing structure of the American economy.

Unemployment should rise from 83,500 in 1995 (for an estimated annual rate of 4.0%) to 89,800 in 1996 (for a projected annual rate 4.2%). This will be the seventh consecutive year that Colorado's unemployment rate is below the nation's.

The nation's rate of increase in personal income will be approximately 5.6% in current 1996 dollars. Growth in 1996 Colorado personal income will be slightly higher, at 7.0%. After adjusting for inflation, however, the real personal income increase will be 2.6% in the United States and 3.1% in Colorado. Per capita personal income in Colorado should reach $24,665 in 1996, reflecting a stronger state economy with continued in-migration. Even with our high rate of population growth, Colorado continues to have a higher per capita personal income than the nation.


Source: Colorado Business Economic Outlook
Sponsored by the University of Colorado at Boulder
Special permission granted for use of this information - special thanks to Richard Wobbekind, Director, Business Research Division, College of Business Administration, University of Colorado at Boulder.