All sectors of employment up – but one
– Colorado’s oil and natural gas industry is expected to keep shedding jobs in 2016, perhaps between 1,000 and 2,000. But even with such losses, the state’s overall unemployment has gotten so low that in-migration of new residents will be critical to Colorado filling all of the new jobs expected to come online, noted University of Colorado Boulder economist Richard Wobbekind said.
Wobbekind made the remarks in discussing the Colorado Business Economic Outlook for 2016, which was released Monday morning by CU for the 51st year in a row. The Business Research Division at CU’s Leeds School of Business compiles the report.
Colorado employment in The natural resources and mining industry, which includes oil and gas, is the only major industry in the state that the CU researchers are predicting will lose jobs in 2016. The state as a whole is expected to gain 65,100, an increase of 2.6 percent. While that growth rate is slightly slower than in 2014 and 2015, it would stand up historically – and nationally – as quite strong.
The good news for the oil and gas industry in Colorado – and Weld County, where much of the industry is centered – is that Weld County has weathered the drastic fall of oil prices in 2015 better than CU researchers had expected.
Weld County, fueled in large part by the oil boom, has boasted one of the top rates of job growth in the country since the recession. Wobbekind said the county has done a good job of diversifying its growth in areas like manufacturing and technology, a major factor in the county’s ability to limit the impacts of the oil slump.
“We had anticipated a more significant slowdown … for Weld County due to the slowdown in oil prices,” Wobbekind said in a phone interview. “But they have continued to maintain fairly good numbers. There have been a few months where they’ve dipped, but Weld County is doing just fine.”
With U.S. crude oil prices languishing below $50 per barrel for much of the year in 2015, CU’s report projects a wide average price range of $50 to $75 for 2016. Wobbekind said he’s expecting the lower end of that range to be more realistic, though that’s still much more optimistic than some prognosticators who are projecting prices to dip even further than their current levels of just less than $40 per barrel.
Wobbekind said he expects to see oil and gas production, which reached record levels in Colorado in 2015 despite the price drop, to level off in 2016. And he expects to see more mergers and acquisitions as smaller companies find it tough to stay afloat.
“We’ve seen a bit of that,” he said. “My feeling is in the next six months you’ll see even more of that.”
As for the rest of the state, life will be good.
The professional and business services sector is expected to lead the charge, with CU projecting 15,500 new jobs in that category. Education and health services, is also expected to add more than 10,000 jobs, along with the trade, transportation and utilities sector. Construction, meanwhile, won’t be far behind, with an expected 9,700 new jobs coming on board as homebuilders try to keep up with the state’s increasing population.
Wobbekind said technology will also continue to fare well as Colorado’s entrepreneurial spirit drives innovation.
In all, strength in those industries means plenty more growth in Boulder and Larimer counties in addition to Weld.
“A lot of the things that are doing well are kind of nestled (north of Denver),” Wobbekind said.
While the agriculture sector will suffer some from depressed commodity prices and the strength of the dollar, Wobbekind said the impacts won’t cause major issues as far as putting a lot of farmers out of business.
The state is expected to add 95,000 new residents in 2016 to bring Colorado’s total population to 5.5 million. However, Colorado’s labor force participation rate is actually declining as many baby boomers exit the work force sooner than expected and the 25-to-34 age bracket also shows low participation.
Those factors, Wobbekind believes, will finally begin to drive up wages as the state begins to deal with a talent gap. The talent gap, in fact, is the biggest challenge the United States is going to face as a country, Wobbekind said.
“Right now, (Colorado’s) growth is very dependent on migration into the state, and I think it’s an interesting question whether we will maintain that same level of migration from working individuals going forward given how tight the labor force is going to be in all parts of the country,” Wobbekind said.
That means more housing price gains. However, an increase of new housing stock coming online in Denver and other areas like Erie and Northern Colorado, should slow rental rate and housing price appreciation overall. Boulder, where housing stock is still quite restrained, remains a wildcard in that regard.
“I think next year we’re back into single digits, maybe 5 or 6 percent (growth) for the state,” Wobbekind said.
Adapted from an original article by Joshua Lindenstein in BizWest