Colorado’s jobs growth “cooled” significantly this year, while other economic indicators suggested a slowdown in the economy, according to a new economic report from the University of Colorado Boulder and the Colorado Secretary of State’s Office.

This “cooling” of job growth is occurring even as inflation in Colorado remains higher than the national average. A finance site said Denver is now No. 1 among cities with “the biggest inflation problems.”

Still, Colorado’s economic indicators remain positive.

Economists who prepared the second quarter report surmised that, given Colorado’s unemployment stood below 3%, the slowdown in job growth appears to be a symptom of a worker shortage, rather than a “softening” of demand for workers. That is, the state simply does not have enough people to fill job openings.

Indeed, Colorado’s jobs market only grew by 1.5%, putting the state near the bottom of the states at No. 44, although economists suspected an undercounting of jobs uncovered in December might have persisted in 2023.

Economists wondered if Colorado is seeing a “labor market paradox.”

In particular, they noted that Colorado has been a leading job growth state in the last 12 years, ranking in the top half of the country for job creation. But, since November 2022, the state has found itself at the bottom half, registering No. 40 — or worse — in the past six months.

Yet the employment slowdown is also happening even as Colorado ranks No. 14 in the rate of job openings, No. 4 in labor force participation rate, and No. 14 in growth in labor force, while also seeing the highest number of people in the labor force in state history.

Secretary of State Jena Griswold said the evidence “suggests that this is a signal of a supply constraint rather than easing demand.”

“In other words, demands for workers in Colorado remain high, but Coloradans are employed, and the so called ‘Great Resignation’ appears to have slowed,” she said.

The state’s unemployment rate of 2.8% in June remains below the national rate of 3.6%.

Brian Lewandowski, executive director of the Business Research Division at Leeds, also noted that the growth in establishments, coupled with “strong underlying components of the labor market,” suggests the slowdown is a “labor supply issue rather than a signal of business distress.”

In releasing the report, Griswold focused on business filings, where new entity filings continue to set records, “surging” 39.1% year-over-year.

The state saw 55,000 new business entities form, Griswold noted, adding that reducing fees for filing to $1 — a policy she pushed for and repeatedly touted following its passage — likely contributed to that increase.

That law is expected to cost state coffers $8.4 million.

More than 171,000 business entities renewed their licenses in the second quarter, a slight decrease (0.6%) year-over-year but a bigger drop (11.8%) compared to the previous quarter, the report said.

All told, there are many positive signs for the state, said Richard Wobbekind, the senior economist and faculty director for the University of Colorado Boulder’s Leeds Business Research Division

Colorado’s 4.1% job growth rate seen last year was the fastest rate of jobs added since 1997, he noted.

Echoing Griswold, however, Wobbekind said the state does not have the bodies to fill the jobs.

And while inflation in Colorado may be improving some, people will only move to Colorado if they can afford to, and the local cost of living is incredibly expensive, Griswold said. The number of new businesses could reflect people taking on second or third jobs to pay bills, she said.

The return of student loan payments will add another burden on residents, she said, calling interest on loans “unconscionable.”

The consumer price index in the Denver-Aurora-Lakewood region increased 5.1% year-over-year in May, compared to the national rate of 4%.

The personal finance site WalletHub.com, which periodically looks at which cities in the nation are seeing the biggest rise in inflation, said while cities in Florida saw the most dramatic change in the past year, Denver now ranks first when examining both a two-month snapshot and year-over change in rates.

WalletHub relied on two metrics in its analysis, comparing the consumer price index from the most recent Bureau of Labor Statistics data (there is a one-month lag) with data from two months prior, and data from one year prior. The company looked at 23 metropolitan statistical areas.

The Denver-Aurora-Lakewood region showed a 1.3% change in inflation from two months prior and a 4.7% change from one year ago, according to the August report. The Atlanta area came in second overall, with 1.2% and 4.6% changes in the consumer price index respectively.

U.S. inflation has been declining after it hit a 40-year high in 2022. Federal Reserve rate hikes stymied some of that rise, the WalletHub report noted, although inflation is still relatively high. The year-over-year inflation rate fell to 3.2% in July.

Still, local experts said Colorado’s inflation rates are trending in the right direction. The 4.7% rate in July was lower than the 5.1% seen in May and 5.7% in March, they noted.

“Still elevated, but trending in the right direction,” Wobbekind said.

Lewandowski said the state’s consumer price index is higher than the national level largely because of higher price inflation for housing and transportation.

“The housing component of CPI represents 44% of the overall basket,” he said, adding the Denver area saw an 8.8% year-over-year increase, compared to 6.2% for the nation and 7.1% for the mountain region.

As for gross domestic product, Wobbekind said it has been overperforming nationally from what was anticipated, with 2% growth in the first quarter and 2.4% in the second quarter.

“It appears that the economy is continuing to operate at a particularly good level but there are some, I don’t know, warning signs that are out there,” he said.

Consumption in the economy is slowing, he said, “something we are watching very, very carefully.” A better than expected GDP still comes with concern about future growth in regard to consumption and investment, he said.

Retail sales are slowing at the state and national level, he said — a critical discussion point for local communities that rely on sales tax revenue.

“We follow this very closely just in terms of whether or not we will avoid a recession or whether there will be a mild recession if consumption falters further than it has so far,” Wobbekind said.

On a positive note, there is national employment growth and wages are growing faster than the rate of inflation, he said. Job growth has slowed significantly in the past two years, though, and household savings have dwindled since the pandemic.

The vast majority of savings in deposit accounts is held by the top 40% of income bracket earners in the country, he said, meaning a large number of people “have nothing really to fall back on and are not going to be able to sort of continue to consume.” Delinquency rates among auto loans and credit cards have risen, and student loan repayments will resume soon, he noted.

As for investment concerns, Wobbekind said, banks are being more stringent with their credit and charging higher interest rates, creating challenges for small businesses. Larger businesses’ profits “have not been all that strong this year” either, he said.