Colorado business leaders are feeling better about their sales and profits going into the second quarter, lifting a quarterly business index into positive territory for the first time in two years.
That doesn’t mean they’re optimistic about the future — just neutral, according to the latest Leeds Business Confidence Index, which is compiled from a survey of 178 local business owners and executives by the University of Colorado’s Leeds School of Business. The index landed at 53.7 points out of 100 for expectations in the second quarter. It hasn’t been above 50, which is neutral, since the second quarter 2022.
“Items that are in the direct purview of the survey respondents — industry sales, industry hiring, industry profits and capital expenditures — three of those four components were very positive increases,” said Richard L. Wobbekind, faculty director at the school’s Business Research Division, during a news conference Tuesday. “And presumably, these are the things that people are actually seeing and that these business people are responding to and what they see in the overall state economy.”
The survey results echoed Pinnacol Assurance’s own business outlook, said Quincy Douglass, the company’s vice president of operations. That’s because as one of Colorado’s largest workers comp insurers, Pinnacol grows or contracts along with local companies. He said the Denver-based company is currently seeing growth in construction and transportation.
“Both our data and the report validate that Colorado’s economy is adapting and evolving to recent pressures, and we are pleased to begin seeing increased stability. We are optimistic toward continued growth and innovation of our state’s workforce,” Douglass said in an email.
Local hiring was the weakest, though the sentiment had improved somewhat. In the survey, 25.8% of respondents expect to hire more this quarter while 50.6% expect no change. That’s similar to earlier forecasts that job growth will slow this year, which Leeds said was 2.1% so far, compared with last year’s 2.5% growth. The latest Job Openings and Labor Turnover survey for Colorado had 1.7 job openings for every unemployed Coloradan in January, according to recent Bureau of Labor Statistics data.
Brian Lewandowski, executive director for the Leeds division, said there’s a mix of trends going on in the state, from a growing number of workers retiring to a slowdown in people moving to the state to work. Colorado already has one of the nation’s highest labor force participation rates, which means a greater portion of people age 16 and older are working compared with other states.
“Our migration numbers right now are one of the more concerning aspects of the Colorado economy. It’s been a source of labor for decades and it’s slowed so much over the past few years,” Lewandowski said. “And looking at the number of retirees we have exiting the labor market in Colorado … just to stay neutral at 0% job growth, we need to backfill those retirees to the amount of 30,000 to 40,000. And that’s regardless of any growth in the labor market.”
Two years ago, business leaders cited Russia’s invasion of Ukraine as the prime reason for their pessimistic outlook, which caused the Leeds index to fall to 39.8 for the third quarter from 53.9 in the second quarter 2022. Inflation concerns came in second, as the survey was done about the same time the Denver area’s inflation rate spiked to 9.1%, the highest in decades.
The war may still be going on, but businesses have since adjusted. Denver’s inflation rate has fallen to 3.5%, as of January, and businesses looked forward to the Federal Reserve making good on its promise to lower interest rates this year.
While there are signs that sales and profits at Colorado companies are doing better — nearly 45% of local companies expect moderate to stronger sales in the third quarter, as opposed to about 20% that expect worse — the mixed responses on open-ended questions economists asked pointed to other reasons why there’s still uncertainty. Politics was the second most common reason business leaders responded the way they did.
“One that jumped to 10% was comments about uncertainty and these tended to be more heavily focused on the upcoming election,” Wobbekind said. “A number of policies would be significantly different depending on which candidate wins the election.”