Recap of the 23rd Annual Denver Economic Forecast
Economic Experts Recommend Patience, Perspective and Planning in a More Volatile Economic Climate
While the media, many politicians and some economists predict a recession amid declining oil prices, a stock market correction and global volatility, at the 23rd Annual Vectra Bank Economic Forecast breakfast two well–respected economists saw a more optimistic view of the country’s and Colorado’s economic future.
Patricia Silverstein, chief economist for the Metro Denver Economic Development Corporation and Burt White, chief investment officer for LPL Financial , one of the nation’s leading investment and advisory firms, covered a wide range of monetary, growth and political projections during event last month.
Patty shared that Colorado would again be in the top 10 of fastest growing states in the country in 2016. And that unemployment in the state is back to pre-recession levels at 3.8 percent, and expected to fall to 3.5 percent by the end of 2016.
Part of the reason why Colorado’s employment rate remains low is because the state’s top nine industry clusters experienced growth last year; it’s largest being healthcare. The beverage market, which includes beverages beyond our healthy beer industry, was a new growth industry. In fact, Colorado now ranks second in the U.S. behind California. Another historically strong industry, Colorado’s Aerospace, grew 4.5 times the national average.
More good news is Colorado’s real estate market. Colorado continues to maintain its position as a state with one of the highest median home prices, now at $350K.
Those home prices could be a challenge for businesses, however, as with a heated housing market, low unemployment and high and fast-growing salaries, businesses will need to get creative about attracting and retaining talent, perhaps even beef up benefits.
The fear that oil, and the belief that falling prices will catapult the economy into recession, were largely dispelled by Burt White, who pointed out that the current price of oil (about $30 a barrel) is relatively normal.
According to Burt, contrary to popular belief higher priced oil ($90 to $100/barrel) is the anomaly. The 25–year–average price for oil is actually $33 a barrel.
He even went so far as to say that the entire concept of “peak oil,” the point in time when the maximum extraction rate is reached, is a farce. Our surplus of oil, along with the new technologies that make oil production so much more efficient, means we will not run out of oil for upwards of 50–100 years. In fact, Burt believes oil will become obsolete before it ever runs out.
One of the biggest takeaways from the event was to assure us that the country is not in a recession. And while Burt’s forecast is that we have a 20 to 30 percent chance that a recession will return, he added that if we do fall into a recession, it will be a minor one.
He urged attendees to remember that what we are going through is normal. In any given year, the market does drop up to 14 percent. That doesn’t place us in a recession. Plus, the consumer sector of the economy, which accounts for nearly 80 percent, still strong and growing.
Burt sees interest rates remaining low and urged businesses to simply stay focused. He says retain some perspective, keep investment and business routines in place, stick to a plan and be patient.
Now that’s good advice.
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