Colorado’s unemployment rate remains above the national level, though that likely is more of an indicator of its higher-than-average labor-force participation rate than a particular weakness in the local economy, a key regional economist said this week.
Nick Sly, vice president and Denver branch executive of the Federal Reserve Bank in Kansas City, spoke Wednesday at a Colorado Chamber of Commerce Chair’s Roundtable event, giving attendees an in-depth analysis of several major economic factors now in play. Economic conditions remain solid, although the economic policy environment has been “dynamic” — particularly around tariff rates that have increased substantially but have had only modest effects on consumer prices so far, he said.
Federal tariff collections have risen from an estimated $10 billion in March to about $28 billion in June, yet consumer goods’ prices are up less than 1% over that time, Sly told the crowd at the Denver branch of the Federal Reserve Bank. U.S. firms’ elevated profit margins have allowed some companies to absorb tariffs if they can’t pass costs along to consumers, Sly explained.
However, changes in profit margins tend to lead to changes in planned capital expenditures, and anecdotal indicators point to slimming margins, Sly continued. That too could impact hiring activity, which is cooling, he said.
Why Colorado unemployment rates are higher
Colorado’s unemployment rate sat at 4.7% in June, up from 4.2% one year earlier and 3.2% during June 2023, according to the U.S. Bureau of Labor Statistics. That compared unfavorably to the U.S. as a whole, which reported a 4.1% unemployment rate last month — an unusual juxtaposition for a state that for many years has maintained an unemployment rate below the national average.
Sly explained later, however, that the gap reflects, in part, an age difference between Colorado’s workforce — specifically its tech workforce, which has seen an unusual number of layoffs recently and that of the national labor force.
While more than half U.S. residents who lost jobs recently left the labor force — having retired or stopped looking temporarily for new employment — more Colorado workers are staying active and looking for jobs, he said. Colorado’s labor force participation rate remains among the highest in the county, just below 68%, while the U.S. participation rate is just above 62%.
That said, employment levels in the Fed’s Tenth District — which includes Colorado Wyoming, Kansas, Nebraska, Oklahoma and parts of New Mexico and Missouri — grew slightly over the past month, according to the latest Beige Book produced by the Fed. Wages grew moderately, although the number of job seekers in most fields aside from construction is outpacing the number of available positions.
Coming price hikes could impact economy
“Most contacts reported more applications for a dwindling number of open positions, though labor availability was reportedly more limited in leisure and hospitality and particularly scarce among the skilled trades,” the Beige Book, released Wednesday, said.
Prices have continued to grow modestly, but most manufacturers and service providers say the cost of inputs is increasing more than retail prices, leading to profit-margin compression. As such, a number of firms report planning broad-based prices increases across their lines of products to maintain profitability, which could impact inflation numbers in the coming months, according to the Beige Book.
Such price hikes could come as consumers already are slowing some of their purchasing, showing an unwillingness to spend much more on goods and services.
Hotels, national parks, and restaurants all reported customers are spending less and staying shorter amounts of time than is typical, according to the Beige Book. Manufacturers reported that the number of canceled orders rose “significantly” as consumers balked at price increases. And home repair and remodeling activity, often associated with periods of economic slowing ,picked up.
Sly added in his talk that current conditions point to a “potential slowing of growth in coming quarters,” as heightened uncertainty typically weighs on capital expenditures and on consumption.