Colorado’s economy will see increased job growth in 2024, economists predict, and its labor force participation is near record levels.

But concerns still persist around commercial real estate, rising interest rates and inflation.

That’s according to the 59th Annual Colorado Business Economic Outlook by the Leeds School of Business at the University of Colorado Boulder released Monday.

“Employment in Colorado is estimated to have increased 2.2%, or 64,500 jobs, in 2023 once data revisions take effect in March 2024, pushing the economy to new peaks,” according to the report.

That job growth will continue in 2024, economists predict, with another 41,900 jobs to be added in seven of the 11 industry groups tracked.

“Professional and business services is at the top of that list of industries projected to grow jobs,” said Brian Lewandowski, executive director of the Business Research Division, in an interview with The Denver Gazette. “Those are for highly trained, highly educated positions with high-paying industries. So that’s a really good leader to have of the whole pack.”

The four industries predicted to shed jobs in 2024, largely because of high interest rates, are financial activities, construction, information and manufacturing, Lewandowski said.

“Colorado is projected to have both labor force growth and a higher number of people unemployed looking for work in 2024,” according to the report.

“Our labor force is growing,” Lewandowski said. “We have more people who have decided to re-enter the labor force. We’re hovering at record levels of labor force in Colorado.”

Even though Colorado’s unemployment rate ticked up through 2023, it’s still considered low at 3.3%, said Richard Wobbekind, associate dean of business and government relations. The U.S. unemployment rate in October was 3.9%.

“Economists believe anything below 4% is considered below the natural rate of unemployment,” Wobbekind said. “So what that means is essentially there’s not adequate people flowing between jobs in the economy. That tends to create some employment distortions … One of the reasons the Fed raises the interest rate is trying to slow down job growth to actually increase that unemployment rate. Not to blow it sky-high, but get it closer to that 4% number.”

Headwinds could come via uncertainty with commercial real estate, especially office space, inflation and high interest rates.

“Buildings are coming up for re-financing and some of those buildings are going to get foreclosed on,” Wobbekind said.

Lewandowski pointed to continued worker shortage issues in Colorado, and the ability of residents to consume as much. Purchasing power is dwindling.

“We still have had many months of negative real wage growth, where inflation is higher than wage growth,” he said. “That’s a concern.”

Both pointed to lower savings rates and depleted savings accounts coupled with rising credit card debt.

“With real wages continuing to be negative most months, that’s eroding purchasing power and how much people can consume,” Wobbekind said. “Credit card debt is definitely on the rise and we’ve seen credit card delinquency rates start to increase.”

Interest rates have dinged the number of new car sales, and higher mortgage rates have “put a dampening on the housing market nationally,” Wobbekind said.

The report shows housing construction could slow in Colorado in 2024.

“Housing unit growth did not keep up with household formation during the last decade due to the Great Recession, creating the tight housing market and escalating home prices,” according to the report. “Since 2018, Colorado has built more housing units than new population growth, making a dent in the housing shortage. In 2022, housing growth increased by 56,000, and in 2023, housing is expected to increase by 48,000 and then slow to 42,000 in 2024 due to the higher interest rates.”

But overall, Colorado’s economy continues to shine when compared to other states, the report shows.

“Colorado has arguably been a leading economy since the Great Recession, outperforming most other states in terms of unemployment, labor force, population and GDP growth,” according to the report.