25th Annual Economic Forecast Event Recap
Experts at Vectra Bank's Annual Economic Forecast event get back to basics for 2018.
Since padded shoulders, pleated pants, and double-breasted business suits were high business fashion, Vectra Bank has been providing expert economic forecasts for its business clients. At the Vectra Bank Colorado 25th Annual Economic Forecast event, "Back to Basics in 2018: Returning to the Core Drivers of Economic Growth," economic experts John Lynch, Executive Vice President, Chief Investment Strategist for LPL Financial and economist Patricia Silverstein, Development Research Partners, predicted a shift back to business basics, 50,000 new jobs and strong corporate earnings growth for 2018.
With job creation comes labor shortages. According to Silverstein, of the new jobs, 31,100 of them will be in Denver. Companies will need to consider carefully what their top talent will need to be able to attract the best workers. Fort Collins saw the strongest growth in 2017, with Greeley coming in second. Technology, oil and gas, and construction are all industries that are supporting strong northern growth. With 62 percent of Colorado's workforce living in the Denver area, its growth remains strong. Colorado Springs also continues to grow, but at a slower pace. Impacted by the low price of natural gas, Grand Junction continues to shave jobs and has not yet replaced the jobs lost in the recession, as it works to find its footing in a changing economy.
Fifty percent of people moving to Colorado are Millennials 18-34 years old. This is the workforce that will fill the labor shortage, as Denver competes for jobs from cities like Atlanta, Austin, Dallas, Portland, and Seattle, all cities seeing similar high growth.
"We are confident, and we are out there spending," Silverstein added. The consumer confidence index increased 25 percent in 2017, the highest increase since 2000, but Denver's greatest challenge continues to be housing. At $600,000 median home price in Boulder, it's the 7th most expensive market in country, with Denver ranked at 14th, as median home prices inched up to $435,000 in 2017.
Rental rates are tempering though, with just an increase of 3.5 percent, compared to more than 10 percent in past years. Silverstein predicted a rental rate increase of 4 percent in 2018. While hard for some Denver residents to believe with all the apartment construction downtown, Denver is still underserved for housing units by 32,000. As of 2017, 9.9 million units of office, industrial and retail were added to the marketplace, the most since 2000, with 12 million in the pipeline and expected to be added by the end of 2018. Multi-family housing represented 52 percent of Denver's construction last year.
John Lynch focused on the national economic forecast and investing. A return to the traditional business cycle means new monetary and fiscal policy coordination for U.S. economic growth, with some combination of infrastructure spending, tax reform, and regulatory relief. To remain successful at this point in the cycle, businesses will need to invest in property, plants, and equipment. Earnings growth of upwards of 10-12 percent is predicted due to improved global growth, a pickup in business spending and lower corporate taxes. Lynch also sees a return to fundamental investing — where investors can determine winners and losers based on earnings, sales and cash flow, leading to more active management in 2018. Bonds will remain an important part of well-balanced, diversified portfolios and can help mitigate portfolio risk should we experience any equity market pullbacks.
Lynch predicted that the country's GDP will stay at about 2.5 percent or a bit more depending business growth. With deregulation, infrastructure spending and increased business investment, Lynch sees a healthy U.S. economy for the next two years, forecasting a recession in 2020 or 2021. Because of the expectation of measured growth, unhurried interest rate increases and slow inflation growth, the eventual recession will be mild, stating "The next recession will have occurred before we realize it."
"We are thrilled to bring these world-class economic experts in to help our business clients learn how to anticipate changes in the market and plan for growth in this strong economy," said Bruce Alexander, CEO of Vectra Bank Colorado. "It will be key for businesses to anticipate the future. Rising interest rates will unmask and separate the weak businesses from the strong ones, and our clients need to anticipate those coming changes in the business landscape."
Celebrating small business achievement and business leaders at its conferences, Vectra Bank announced a $5,000 donation to the Women's Bean Project, which believes all women have the power to transform their lives through employment.
"Companies from throughout the U.S. are increasingly looking to Metro Denver for expansions, relocations, and capital investments," said J.J. Ament, CEO of Metro Denver Economic Development Corporation. "The Metro Denver Economic Development Corp. and all of our private sector leadership are working collaboratively throughout the region to protect and invest in what has made us such an attractive destination: transportation infrastructure, education, and housing to be specific."
Speaker presentations, a full video of the event, and individual speaker interviews can be found here.
If you need more information about banking in Colorado; please contact your local Vectra Bank.