Economists at Vectra Bank’s 25th Annual Economic Forecast Event Predict a Return to a Traditional Business Cycle and 50,000 New Jobs in Colorado in 2018

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Economist Dr. Richard Wobbekind of the Leeds School of Business and Futurist Thomas Frey provided economic forecasts and future disruptive trends that will affect businesses

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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.

At the Vectra Bank Colorado 25th Annual 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.”

Dr. Richard L. Wobbekind, Executive Director of the Business Research Division, Associate Professor of Business Economics and Finance, and Associate Dean for Business and Government Relations at the Leeds School of Business at the University of Colorado-Boulder, and Thomas Frey, futurist, founder and executive director of DaVinci Institute, provided a strong economic forecast for north Metro Denver and discussed technology trends that will affect businesses in the future.

At the northern event presented in partnership by Vectra Bank Colorado and the Metro North Chamber of Commerce, Rich Wobbekind discussed how people are saving less in an economy with a strong stock and housing market. Once at 7 percent after the recession, the savings rate has decreased back to pre-recession rates of 2.9 percent.

“We got hit with a baseball bat, but I guess it wasn’t hard enough,” Wobbekind stated. He said that because interest rates are still low and monthly income to service debt is at attractive levels, people are taking on more debt because they can afford to service that debt. Right now, people have the income to handle their debt burden and a “healthy consumption pattern.”

Wobbekind reminded attendees of the movement with the Federal Reserve to raise short-term interest rates and to reduce its balance sheet, burning off $20 billion a month. A decreased balance sheet will decrease liquidity and interest rates will begin to rise consistently. That shift will add financial pressure to people with too much debt-to-income. Another factor attendees were told to consider is inflation. It has become a larger issue over the past several months, increasing a half percent in a month and a little over 2 percent year-over-year.

With low unemployment and as state in-migration slows, Colorado businesses will need to keep a close eye on wages and housing prices, which has singularly impacted Colorado’s ability to attract talent. More than ever businesses will need to ensure wages are commensurate to remain competitive. Wobbekind credited state demographer Elizabeth Garner, who recently reported that Denver’s increase in wages, compared to increase in housing cost over last eight years, places Denver metro as the second worst city for housing behind Washington DC.

Good for northern businesses, Weld County is number one in the state for population increases, with Arapahoe and Adams County also seeing higher population growth compared to the state overall. These “boom counties” have seen total employment growing 3.3 percent. Professional and business services, construction and healthcare are attributed to the strongest employment growth, with trade, transportation and utilities also remaining strong.

Futurist expert Thomas Frey then transitioned attendee focus to how technology growth will disrupt current business models in the future.

“By nature, we are backward looking, almost as if we are walking backward into the future,” Frey began. “The future gets graded by those in the minds. If we change someone’s vision for the future, we change the way they make decisions today.”

Frey reminded attendees that all industries are a bell curve, that all industries will eventually end. By example, he predicted that by 2030 over 2 billion jobs will disappear.
“Every time we download a mobile app we eliminate a tiny piece of a job,” he added.

According to Frey, Oxford researchers say 47 percent of today’s jobs will be automated out of existence, but he ensured attendees that just because our jobs disappear doesn’t mean we run out of work to do. Most of the next generation jobs will come from future micro industries. One of those is the sensor movement. The first iPhone had five sensors; today’s iPhones have 20 sensors. It’s predicted that by 2022, we’ll see the first trillion sensors being used in products, which will lead to many jobs.

Another future micro industry is the “internet of things,” where all things will be connected to internet. Already, smart jeans are being designed with GPS and smart hairbrushes will tell consumers when their hair is dry and offer products. Crypto currencies like Bitcoin, the expansion and use of flying drones, all-encompassing search engines—to learn things like which dog has rabies, where stalker activity is high or which intersections are most dangerous—will be commonplace by 2028, Frey said.

Driverless technology will make driving safer than it is today, eliminating an entire area of transportation jobs. “Driverless technology will be the most disruptive technology in all of history,” Frey added. “It will disrupt in a shorter period of time than anything else, more than automobiles or electricity. There will be over $500 billion lost in the healthcare industry by the elimination of auto accidents alone.”    

Frey predicted that 3D printing will be equipped to work with 10,000 different materials by 2025. And teacherless education will change the role of education completely. By 2030 he believes the largest company will be the one that drives the future of internet education, and it will be bigger than any others we know now, like Google and Apple. All of these industry changes will require people to reboot their career eight to ten times by 2030.

A division of ZB, N.A. (NASDAQ: ZION), Vectra serves clients through 37 convenient bank locations across the Rocky Mountain region from Front Range urban communities to the mountain resorts. The bank’s website address is http://www.vectrabank.com. Member FDIC.

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