Colorado registered a record number new business filings during the first quarter, but economists say that the slowing of job growth, along with other indicators, point to a general cooling in the state.
Colorado Secretary of state Jena Griswold stated in a press conference that more than 55,000 new businesses were formed in the first quarter 2023. The report was conducted by her office in conjunction with the University of Colorado Boulder Leeds School of Business.
According to the report, the filings represent a 27,6% increase of new businesses over the past year -- mainly LLCs -- as well as a 14% rise in the last quarter.
These new numbers follow a record-breaking year for business filings in 2022. Griswold said that the increase in new business filings can be attributed partly to the lowering of the $50 fee to $1. This initiative was started last year by the state legislature with an allocation of $8.4 millions.
Griswold expects that the allocation will run out in the next few months, and the filing fees then increase.
"It is just one of the many reasons Coloradans have opened up their businesses in a large portion of the state over the past year," Griswold explained, adding that other factors such as the cost of living and wage can also influence the filing numbers.
Griswold cited a few indicators, including the creation of new businesses, that indicate a slow-but-steady economy in Colorado. GDP, wages and personal income are all on the rise in Colorado, while inflation in the Denver metro region has slowed to a year-over-year growth rate of 5.7%. Growth rates are lower than last year.
Brian Lewandowski is the director of Leeds Research Division. He said that conflicting data on labor continues to raise some alarms.
Colorado's employment growth in March was only 1.2% year over year, putting the state at the second slowest rate of job growth in the nation, Lewandowski stated.
He said that these numbers are likely to be revised upwards, but they still paint a picture of hiring that is less than stellar. Lewandowski also said that Colorado is still leading the nation for job openings, many of which cannot be filled.
He said that Colorado has 2.4 jobs for each unemployed person, which indicates a sense of growth and innovation, despite the fact the state is running short of workers. The ratio of 1.6 jobs per unemployed person is the national average.
Lewandowski believes that this ratio will not change any time soon if Colorado's net migration downward does not change.
He said, "We have squeezed out as many workers as possible from the sidelines."
Lewandowski stated that the 1.1% growth of the GDP in the first three months was lower than expected. However, the growing consumption defied the expected slowdown due to negative real wage growth and higher debt.
Colorado's housing market also follows national trends in a downward direction. Lewandowski has been keeping an eye on the banking situation nationwide following the failure of San Francisco's First Republic Bank this week.
He said that "a month ago we were hopeful or optimistic that the banking crises could be contained." There are now elements of what we are watching that show some contagion.
He and Richard Wobbekind, senior economist, said that they did not expect a financial crisis as widespread as the one the country experienced in 2008.
Wobbekind stated that Colorado's tech sector, despite having fared well in light of the recent failure of technology-focused banks is still at risk as banks tighten lending standards and become more cautious.
He said that this could impede the growth of small businesses in particular. Lewandowski and He said that they keep a close eye on the business and professional services sector.