Vectra Bank's 2026 Annual Economic Forecast

Tara Bayke - 

"One thing national forecasts often miss about Colorado is how sensitive the state’s economy is to migration and housing affordability.

Colorado’s growth has historically outpaced the national average. That outperformance was fueled in large part by strong in-migration and housing activity, but population growth has cooled, and affordability remains a structural constraint, especially along the Front Range.

Because Colorado’s economy leans heavily on real estate, professional services, and construction, slower household formation and reduced housing turnover have an outsized impact here compared to many other states.

National forecasts may show steady U.S. growth, but for Colorado, the outlook is more dependent on whether population momentum reaccelerates and whether housing affordability improves.

This means growth is likely to be more measured and selective than during the last decade’s boom years."

Richard Wobbekind - 

"Generally I would say the level of education and innovation which makes me more positive on the long term outlook."

Tara Bayke - 

"Based on the data, we are not currently in a broad credit tightening cycle, but we are in a more disciplined lending environment.

Bank credit continues to grow, financial conditions remain near historical averages, and business loan charge-offs are still low. That suggests the system is functioning and capital is available.

If tightening were to emerge, it would likely show up first in higher-risk segments, particularly unsecured consumer credit and credit cards. We are already seeing delinquency rates rise there from unusually low pandemic levels. That is typically where stress appears before it spreads into business lending.

For small businesses specifically, the biggest constraint right now is the cost of credit. With interest rates structurally higher than the 2010s, projects must clear a higher return threshold.

In short, we are seeing normalization and tighter underwriting standards, but not a systemic pullback in lending. The first signs of stress, if they develop, would likely appear in consumer credit before core commercial banking."

Tara Bayke - 

"Layoffs can rise and the labor market can still be tight at the same time.

Right now, what we’re seeing is layoffs in certain sectors, especially parts of tech and interest-rate-sensitive industries, while many other employers are still struggling to find qualified workers.

The tightness today shows up most clearly in skilled trades, healthcare, construction, manufacturing, and certain technical roles. In Colorado specifically, slower population growth and retirements mean the labor pool isn’t expanding the way it did a decade ago.

So, the labor market isn’t overheating like it was in 2021–2022, but it also isn’t loose. Some sectors are adjusting, while others still can’t hire fast enough. Also, as our economy grows, more jobs are added each quarter, yet the pool of available labor is shrinking as population growth cools and retirements increase."

Richard Wobbekind - 

"I would say the labor market is in balance based on the JOLTS data but the skills of the unemployed and open job may not match up.  That is why it winds up in certain sectors."

Tara Bayke - 

"The biggest factor is affordability, especially with housing.

Home prices across much of Colorado remain high relative to incomes. Even though price growth has cooled, the absolute price level is still elevated. When housing costs rise faster than wages, it naturally slows household formation and relocation.

Second, higher interest rates have reduced mobility nationwide. Fewer people are selling homes because they’re locked into lower mortgage rates. That limits both inbound and outbound migration.

Third, Colorado faces more competition from lower-cost states. Places like Texas, Florida, and parts of the Mountain West offer lower housing costs and, in some cases, lower taxes. That shifts migration patterns at the margin.

Finally, some of the pandemic-era surge into Colorado has simply normalized. The state saw strong in-migration during the remote-work boom. What we’re seeing now is a return to more typical patterns, but at a time when costs are higher."

Richard Wobbekind - 

"Slower population growth nationwide, Lower immigration to the US, and lower job growth."

Tara Bayke - 

"Yes, there will still be natural population growth in Colorado. However, natural growth alone is unlikely to recreate the rapid expansion Colorado experienced in the 2010s. Birth rates nationally remain lower than previous decades, and slower domestic in-migration reduces the overall pace of growth.

That said, slower growth does not mean fewer opportunities.

Over the next five years, potential opportunities for Colorado include:

• Infill and redevelopment as growth becomes more concentrated and selective.
• Workforce housing solutions, given ongoing affordability constraints.
• Productivity investment, especially in professional services and technology.
• Targeted manufacturing and aerospace, where Colorado already has specialized strength."

Richard Wobbekind - 

"There is an increase in natural increase on the ncharts that I showed and I believe that is based on the increasing M families.  We need to get our qluality job growth growth rate up and the domestic migration will follow.  That said the reality is the country is in a slower population growth phase unless there is a change in immigration polivcy."

Tara Bayke - 

"Colorado’s growth has recently converged toward the national average after a decade of outperformance. Several forces are contributing to that shift, including higher housing costs, slower in-migration, and a more rate-sensitive economic structure.

Business regulation can influence competitiveness at the margin, particularly when it affects labor costs, housing development, permitting timelines, or energy policy. When operating costs rise relative to neighboring states, some businesses and households may choose lower-cost alternatives.

However, it’s important to separate cyclical factors from structural ones. Higher interest rates, affordability constraints, and post-pandemic normalization are affecting many states, not just Colorado.

Colorado still benefits from a highly educated workforce, strong professional services sectors, and quality-of-life advantages. The question over the next several years is whether cost pressures from housing, regulation, labor, and taxes begin to narrow that competitive edge relative to faster-growing states in the region.

In short, regulation can contribute to slower relative growth, but it is only one piece of a broader cost and competitiveness picture. Policies also take quite a bit of time to take effect, so there may be some latent impacts that have simply not shown up in the data yet."

Richard Wobbekind - 

"I don't have a great answer to this question.  I do hear this from some audiences but in most rankings our business environment is well above average.  (that does not mean it couldn't be better)"

Tara Bayke - 

"Insurance feeds directly into business operating expenses, construction costs, housing affordability, and ultimately consumer prices. When insurance premiums rise sharply, whether due to weather risk, litigation trends, or rebuilding costs, those costs get passed through into rents, home prices, and service costs.

This reinforces one of the key themes discussed in the presentation: inflation may cool, but certain structural cost pressures are likely to persist.

Insurance is part of that structural layer. Even if goods inflation moderates, higher insurance costs can keep overall expenses elevated for businesses and households. That makes it harder for prices to fall quickly and supports the idea of a “higher-for-longer” cost environment.

For Colorado specifically, increased natural disaster risk and rebuilding costs make insurance particularly important to watch. Over the next few years, this is more likely to act as a steady upward cost pressure rather than a one-time spike."

Tara Bayke - 

"For retirees, risk management and income stability are the most important priorities going into the 2030s. In today’s higher-rate environment, fixed-income investments offer yields that were largely unavailable during the 2010s. However, investors should consider interest rate risk, credit quality, and geographic diversification when evaluating bond exposure.

For example, some retirees choose to diversify sovereign bond exposure beyond the United States to include countries such as Canada, Switzerland, Sweden, or Australia, due to their strong institutional frameworks and historically stable fiscal positions. That said, international exposure introduces currency risk and should be evaluated carefully.

The broader principle is diversification across asset classes, credit quality, and geographies, aligned with personal risk tolerance and income needs, ideally in consultation with a financial advisor. Additionally, ITR’s YouTube channel includes a “2030s Depression” playlist that provides further context on long-term cycle expectations."

Tara Bayke - 

"Onshoring should support certain areas of manufacturing and industrial construction, but the impact will likely be targeted rather than broad-based.

Bringing production back to the U.S. increases demand for industrial facilities and equipment, which supports investment. However, domestic production also comes with higher labor, land, and financing costs. As discussed in the presentation, we are operating in a higher-rate environment, so projects must make financial sense at today’s borrowing costs.

For Colorado, the benefits are more likely to show up in specialized sectors like aerospace and advanced manufacturing, rather than across-the-board factory growth.

Overall, onshoring supports steady investment, but it is unlikely to create a large manufacturing boom on its own. "

Tara Bayke - 

"The expectation that tariff-related uncertainty moderates in 2026 is based on two key assumptions.

First, that trade policy stabilizes rather than escalates. Markets can adjust to known rules, even if tariffs remain in place. What creates economic drag is constant change and unpredictability.

Second, the forecast assumes supply chains continue adapting. Over the past several years, many businesses have already diversified suppliers or reshored portions of production. That reduces vulnerability compared to 2018–2020.

If those assumptions do not hold, for example, if tariffs expand significantly or trade policy becomes more volatile, the likely impacts would be:

• Higher input costs
• Renewed upward pressure on goods inflation
• More cautious capital spending
• Increased volatility in financial markets

That would reinforce the “higher-for-longer” interest rate environment discussed in the presentation.

For businesses, preparation means focusing on flexibility: diversified suppliers, disciplined capital planning, and maintaining pricing power where possible."

Tara Bayke - 

"Open job postings have declined from the unusually high levels we saw in 2021–2022, but that doesn’t mean worker shortages have disappeared.

During the post-pandemic surge, demand for labor spiked far beyond available supply. What we’re seeing now is normalization- businesses have pulled back from aggressive hiring plans as growth has slowed and interest rates have risen.

So, the primary driver of the decline in open jobs has been cooling demand, rather than a sudden surge in labor supply.

That said, structural labor constraints still exist. Slower population growth, retirements, and reduced in-migration, particularly in Colorado, mean the available workforce is not expanding rapidly.

If job openings continue to trend lower, it will likely reflect slower economic growth rather than a flood of available workers. For Colorado, that could mean more measured expansion in sectors like construction, real estate, and professional services."

Richard Wobbekind - 

"This is really a supply and demand picture. Slower economic growth at the national and state level has dramatically reduced the number of open jobs from record setting levels.  You would obviously expect more significant worker shortgaes with more open jobs.  That said even with a 1 to 1 you have to have a skills match.  It clearly portends slower growth in the state and fewer job openings will attract less domestic migration."