2020 Boulder Economic Forecast Presentation from Dr. Richard Wobbekind

Growth with Uncertainty

Boulder Economic Forecast

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Richard Wobbekind Senior Economist and Associate Dean for Business and Government Relations January 30, 2020

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#COBizOutlook

Real GDP Growth 2.1

Quarterly Real GDP

2.0

10 8

Percent Change, SAAR

6 4 2 0 -2 -4

Average 1990-1999

Average 2000-2009

Average 2010-2019

-6 -8

-10 1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Sources: Bureau of Economic Analysis and Consensus Forecasts.

2012

2014

2016

2018

2020

Economic Growth Government Spending

Personal Consumption Expenditures 5 Year-over-Year

4

Quarterly SAAR

3

5 4

Year-over-Year Quarterly SAAR

3 2

2

1

1

0

0

-1 Net Exports

Fixed Business Investment 10 8 6

Year-over-Year Quarterly SAAR

4 2 0 -2 -4

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021

7 6 5 4 3 2 1 0 -1 -2 -3

Imports YoY

Exports YoY

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021

Sources: Bureau of Economic Analysis, the National Bureau of Economic Research, Moody’s Analytics, and Consensus Forecasts

National Employment

176

Month-over-Month Change, 12-Month Average 60 300 200

-100 -200 -300 -400

Recession 18 Months

0 Recession 8 Months

Thousands

100

-500 -600 2000

2002

2004

2006

2008

2010

2012

2014

2016

Sources: Bureau of Labor Statistics (Seasonally Adjusted), Moody’s Analytics, and the National Bureau of Economic Research.

2018

2020

State Employment Growth Year-over-Year December 2019

Sources: Bureau of Economic Analysis (Seasonally Adjusted).

Labor Underutilization Percentage of Labor Force 18 16 14 12

U-6

Average U-6

10 8 6

6.7%

Average U-3 U-3

4

3.5%

2 0 1995

1997

1999

2001

2003

2005

2007

2009

2011

Sources: Bureau of Labor Statistics (Seasonally Adjusted).

2013

2015

2017

2019

Labor Force Participation Rate Percent of Population, 16 and Over 68 67 66 65 64

63.2

63 62 1980

1984

1988

1992

1996

2000

2004

Sources: Bureau of Labor Statistics (Seasonally Adjusted).

2008

2012

2016

2020

U.S. Income and Consumption Percent Change 4

Real Disposable Income

Percent Change

Real Personal Consumption

4

3 2.1%

2

3 2.4%

1

2

0 1 -1 -2

2010

2012

2014

2016

2018

2020

0

2010

Source: Consensus Forecasts

2012

2014

2016

2018

2020

Household Wealth $ Trillions 140 120 100

Other Assets

80 60

Mutual Funds

40

Corporate Equities

20

Real Estate

0

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: Federal Reserve Board, Balance Sheet of Households and Nonprofit Organizations (B.101) (Not Seasonally Adjusted).

2018

Household Debt Burden Percent of Disposable Income DSR

FOR 18.5

13.5 13

18

Financial Obligations Ratio (Right Axis)

17.5

12.5

17

12

16.5

11.5

16

11 10.5

Debt Service Ratio (Left Axis)

15.5

10

15

9.5

14.5

9 1994

1999

2004

2009

Source: Federal Reserve, Household Debt Service and Obligations Ratios.

2014

2019

14

Index of Consumer Confidence 160

Mountain Region

140

1985=100

120

United States

100 80 60 40 20 0 1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

Sources: The Conference Board and National Bureau of Economic Research.

2013

2015

2017

2019

Consumer Confidence Plans to Buy within Six Months

70 62.3%

61.6%

60 Vacation

Percent

50

49.0%

48.6%

Major Appliance

40

30 Automobile

20 13.1% 10

0

12.9% Home

5.9%

Dec 2018

Jan 2019

Feb 2019

Mar 2019

Apr 2019

May 2019

Jun 2019

6.0%

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec 2019

Vehicle Sales and Retail Sales Vehicle Sales 20,000

10

18,000

Annual Percent Change

16,000 14,000

Thousands, SAAR

Retail and Food Services Sales

12,000 10,000 8,000 6,000 4,000

5

0

-5

-10

2,000 0 2004 2006 2008 2010 2012 2014 2016 2018 2020

-15 2004

2006

2008

2010

2012

Sources: Bureau of Economic Analysis, Moody’s Analytics, U.S. Census Bureau (Seasonally Adjusted Annual Rate).

2014

2017

2019

Nominal Corporate Profits and Business Fixed Investment Nominal Pre-Tax Corporate Profits

Percent Change

Business Fixed Investment

Percent Change

30

10

25 8

20 15

6

10 5

3.4%

0

4 2

1.2%

-5 -10

2010

2012

2014

2016

2018

2020

0

2010

2012

Sources: Bureau of Economic Analysis, Moody’s Analytics, Consensus Forecasts.

2014

2016

2018

2020

ISM Manufacturing Index 90

Steel Strike End of Peace Korean War Time Monetary Policy

Monetary Policy OPEC

Oil Interest Embargo Rates

Savings and Loan

Tech

Financial

Diffusion index, SA

80 70 60 50 40 30 20 10 0 1949

1954

1959

1964

1969

1974

1979

1984

1989

Source: Institute for Supply Management (ISM).

1994

1999

2004

2009

2014

2019

Expectations for the U.S. and Colorado Economies Q2 2005 – Q2 2020 Index (50=Neutral) 75 70 65

Colorado

60 55 50 45

United States

40 35 30 25

Q2 2005 Q2 2006 Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Source: Business Research Division.

Federal Budget Balance 2000 to 2020 $ Billions 400 200 0 -200 -400 -600 -800 -1,000

-$984 -$1,053

-1,200 -1,400 -1,600

2000

2002

2004

2006

2008

2010

2012

Sources: Office of Management and Budget and Consensus Forecasts.

2014

2016

2018

2020

Committee for A Responsible Federal Budget On the C.B.O. Budget Projections released Tuesday The budget deficit will total $1.02 trillion (4.6 percent of GDP) this year – the first trillion-dollar deficit in history not caused by the Great Recession. Deficits will further rise under current law to $1.7 trillion (5.4 percent of GDP) by 2030.

Under current law, debt held by the public will rise from a post-war record 80 percent of GDP today to above 98 percent by 2030. That represents a $14.3 trillion increase, from $17.2 trillion today to $31.4 trillion in 2030.

Deficits are $160 billion higher though 2029 than in CBO’s prior baseline. This is the net effect of roughly $500 billion in new debt from tax cuts in December’s appropriations package, partially offset by economic and technical changes.

The fiscal situation will continue to deteriorate over the long term. CBO projects budget deficits to average more than 10 percent of GDP in the 2040s and debt to reach 180 percent of GDP by 2050.

CBO did not include an Alternative Fiscal Scenario, we estimate that extending expiring tax cuts and maintaining discretionary spending as a share of GDP would lift debt to 107 percent of GDP by 2030 – an all-time record.

CBO projects real economic growth of 2.2 percent this year and an average of 1.7 percent in future years.

CBO’s latest budget projections confirm our country is on an unsustainable fiscal path due to the rising and underfinanced cost of Social Security, health, and interest spending as well as the passage of multiple rounds of unpaidfor tax cuts and spending increases.

International Trade Export Destinations

Index Jan. 1997=100

Trade Weighted U.S. Dollar, 2000-2020

135 Canada 18%

Rest of World 32%

130 125 120

Mexico 13%

South Korea 7% China 6%

Taiwan 3% United Kingdom 3% Germany Netherlands 3% 4%

Japan Malaysia 5% 6%

115 110 105 100 95 90 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Sources: World Institute for Strategic Economic Research, Board of Governors of the Federal Reserve System, Broad Dollar Index, and National Bureau of Economic Research. Data through January 1, 2020.

Global GDP Growth Forecasts China ASEAN Sub-Saharan Africa World

Forecast 2021 Forecast 2020

Middle East Eastern Europe Latin America United States Euro Area 0

1

2

3

4 Percent

Source: International Monetary Fund, World Economic Outlook, January 2020.

5

6

7

Money, Interest Rates, and Prices

Interest Rates 9 8 7

Percent

6 30-Year Conventional

5 4 3 2

10-Year T-Note

1 0 2000

3-Month T-Bill 2002

2004

2006

2008

2010

2012

2014

Sources: Federal Reserve and Moody’s Analytics.

2016

2018

2020

Federal Funds Rate Outlook 4

3

2

Current Target Range

1

0

2020

2021

2022

Source: Federal Reserve, December 2019 Meeting

Longer Run

Loan Delinquency Percent of Balance 90+ Days Delinquent by Loan Type 16 Mortgage

HELOC

Auto

Credit Card

Student Loan

Other

All

14 12

Percent

10 8 6 4 2 0 2003 Q1

2005 Q1

2007 Q1

2009 Q1

2011 Q1

2013 Q1

Source: FRBNY Consumer Credit Panel (Q3 2019).

2015 Q1

2017 Q1

2019 Q1

Inflation 3

Denver-Aurora-Lakewood MSA United States

2 1 0

2013

2014

2015

2016

2017

All Items Less Shelter

3 Percent Change

Percent Change

4

All Items

2018

2019

2 1 0 -1

2013

2014

Percent Change

Percent Change

4 2

2014

2015

2016

2017

2018

2019

2017

2018

2019

Medical Care

6

2013

2016

-2

Shelter

0

2015

2017

2018

2019

6 4 2 0

2013

2014

Source: Bureau of Labor Statistics (Not Seasonally Adjusted).

2015

2016

Colorado Employment and Wages

Colorado Employment Growth 100 80

Jobs Added, Thousands

60

51.1

40

40.1

20 0 -20 -40 -60 -80

-100 -120

2000

2002

2004

2006

2008

2010

2012

2014

2016

Sources: Colorado Department of Labor and Employment and the Colorado Business Economic Outlook Committee.

2018

2020

Colorado 2020 Employment Change Percent Change

Jobs Added Professional and Business Services Trade, Transportation, and Utilities Education and Health Services Government Leisure and Hospitality Construction Financial Activities Other Services Manufacturing Natural Resources and Mining Information -2

0

2

4

6

8

10

12

14

-1

0

Sources: Colorado Department of Labor and Employment and Colorado Business Economic Outlook Committee.

1

2

3

Employment In Current Decade Percent Change from January 2010 50

Greeley

40 Ft. Collins Denver Boulder Colorado Colorado Springs

30 20

National Grand Junction Pueblo

10 0 -10 2010

2011

2012

2013

2014

2015

2016

2017

Source: Bureau of Labor Statistics (Seasonally Adjusted).

2018

2019

Regional Growth and Unemployment Employment Growth Rate, December 2019 YoY

Unemployment Rate December 2019 Colorado 2.4%

Colorado 2.1%

Greeley

Greeley

Colorado Springs

Colorado Springs

Boulder

Boulder

Denver-Aurora-Lakewood

Denver-Aurora-Lakewood

Fort Collins-Loveland

Fort Collins-Loveland

Grand Junction

Grand Junction

Pueblo

Pueblo 0

1

2 Percentage

3

4

0

Sources: Bureau of Labor Statistics CES (Seasonally Adjusted) and LAUS (Not Seasonally Adjusted).

1

2 Percentage

3

4

•

LFPR on the rise:

•

4th-highest nationally

•

Colorado peak = 74.5% (1998)

3,500

76

3,000

74

2,500

72

2,000

70

1,500

68

1,000

66

500

64

0 1977

1984

1991

Sources: Bureau of Labor Statistics, Current Population Survey.

1998

2005

2012

2019

62

LFPR (Percent)

• 66.6% November 2015 • 69.1% November 2019

Labor Force (Thousands)

Colorado Labor Force

Colorado Wages 2019 Q2 (4Q Rolling Average) Sector Above Average Total Management of companies and enterprises Utilities Information Professional and technical services Finance and insurance Natural Resources and Mining Wholesale trade Federal Government Manufacturing State Government Construction All Industries Real estate and rental and leasing Transportation and warehousing Health care and social assistance Local Government Administrative and waste services Educational services Other services, except public administration Arts, entertainment, and recreation Retail trade Accommodation and food services Below Average Total

Total Employment Year-over-Year (Thousands) Employment Growth 1,106 3.0% 42 4.3% 8 0.7% 76 3.0% 230 4.4% 113 0.7% 48 4.8% 109 1.5% 53 -0.3% 149 2.2% 105 3.2% 176 4.2% 2,704 2.3% 53 3.2% 80 7.1% 301 1.5% 265 1.9% 160 0.8% 37 3.0% 83 2.6% 58 2.4% 273 0.3% 284 1.1% Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

1,594 1.7%

Average Wages $86,709 $140,400 $108,005 $107,040 $99,634 $98,137 $89,789 $87,930 $84,627 $72,647 $66,121 $63,295 $60,341 $60,267 $58,125 $52,001 $49,223 $45,413 $42,019 $41,804 $38,887 $33,088 $24,125 $42,021

Sources: Colorado Business Economic Outlook Committee and Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

Year-over-Year Wage Growth 3.7% -1.6% 6.0% 5.7% 4.2% 3.3% 3.7% 4.3% 4.8% 3.7% 2.8% 4.2% 4.3% 3.5% 3.5% 3.1% 3.5% 8.2% 2.7% 4.1% 4.3% 3.8% 6.2% 4.5%

Boulder County Wages 2018 Annual Figures Sector Above Average Total Information Utilities Finance and insurance Professional and technical services Management of companies and enterprises Federal Government Wholesale trade Manufacturing State Government All Industries Construction Real estate and rental and leasing Health care and social assistance Local Government Natural Resources and Mining Administrative and waste services Transportation and warehousing Other services, except public administration Educational services Retail trade Arts, entertainment, and recreation Accommodation and food services Below Average Total

Total Employment 80,181

Year-Over-Year Employment Growth 0.0%

Average Wages $100,913

Year-Over-Year Wage Growth 4.8%

8,234 180 4,031 28,063 1,565 2,005 6,533 19,057 10,513

$122,282 $117,194 $115,626 $114,501 $111,043 $110,822 $101,545 $82,301 $71,932 $67,669

-2.0% 7.6% 2.8% 6.5% 3.5% 7.3% 9.0% 3.2% 5.4%

183,518

2.3% -15.9% -0.8% 3.1% 8.5% -2.6% 3.9% 3.4% -2.0% 2.1%

5,646 2,670 22,797 16,554 782 6,199

2.8% 0.0% 1.6% 1.5% 11.2% 5.9%

$57,546 $56,295 $52,203 $49,743 $47,450 $45,054

5.1% -1.5% 2.7% 3.0% 6.3% 2.6%

1,366 5,377 2,909 17,583 3,271 18,183 103,337

5.8% 2.0% 7.5% 0.5% 3.9% 1.3% 3.7%

$44,048 $40,998 $39,318 $35,556 $27,215 $22,702 $41,874

4.5% 3.2% 8.4% 6.0% 0.0% 5.9% 3.9%

Sources: Colorado Business Economic Outlook Committee and Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

4.3%

Construction & Real Estate

Photo courtesy of Denver International Airport.

National FHFA Home Price Growth Year over Year Q3 2019

Source: Federal Housing Finance Agency Home Price Index, All Transactions Index.

Colorado Residential Building Permits 39k

33%

60,000

Multifamily Single Family

Permits

50,000

66%

40,000 30,000 20,000 10,000 0

40k

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Sources: U.S. Census Bureau and the Colorado Business Economic Outlook Committee.

2018

2020

Colorado Value of Construction $25

$19.1B

Value in Billions

$20 Non-Building Non-Residential Residential

$15

$17B

$10

$5

$0

1996

1998

2000

2002

2004

2006

2008

2010

2012

Source: McGraw-Hill Construction Dodge Research and Analytics.

2014

2016

2018

2020

Colorado Ranking Among Other States Metric Real GDP Growth Employment Growth Population Growth Personal Income Growth PCPI Growth PCPI Average Annual Pay % Growth Average Annual Pay Unemployment Rate Labor Force % Growth LFPR FHFA Home Price Index Growth

1-Year 7 10 7 9 26 11 5 9 5 24 4

3-Year 4 8 7 2 3 14 5 11 4 2 2

5-Year 5 8 8 9 18 13 8 13 7 3 9

10-Year 6 5 3 2 NA NA 13 11 29 3 11

16

5

2

2

Data Sources: Bureau of Economic Analysis (2019), Bureau of Labor Statistics (11/19), U.S. Census Bureau (2018), Bureau of Labor Statistics (2019), Bureau Federal Housing Finance Agency All Transactions Index (Q2 2019), BRD calculations. Note: 3-year, 5-year, and 10-year are based on the compounded annual growth rate.

Photo courtesy of the University of Colorado.

Boulder

Real Gross Domestic Product Boulder MSA 8%

25,000 4%

20,000 15,000

0%

10,000 5,000 0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Bureau of Economic Analysis.

2013

2014

2015

2016

2017

2018

-4%

Percentage Change

Millions of Chained 2012 Dollars

30,000

Employment Boulder MSA 250 YoY growth: 2.8% or 5,500

Employment, in thousands

200

150

100

50

0 2009

2010

2011

2012

2013

2014

2015

2016

Source: Bureau of Labor Statistics, CES (SA), November 2019.

2017

2018

2019

City of Boulder Employment Total Employment ~93,300 Professional and Technical Services Government Manufacturing Accommodation and Food Services Health Care and Social Assistance Retail Trade Information Wholesale Trade Other Services Administrative and Waste Services Finance and Insurance All Other Educational Services Arts, Entertainment and Recreation Construction Real Estate and Rental and Leasing

0

2,000

4,000

6,000

8,000

10,000

Source: Colorado Department of Labor and Employment, QCEW, 2018.

12,000

14,000

16,000

18,000

Boulder County Employment Total Employment ~183,466 Government Professional and Technical Services Health Care and Social Assistance Manufacturing Accommodation and Food Services Retail Trade Information Wholesale Trade Administrative and Waste Services Construction Other Services Finance and Insurance All Other Arts, Entertainment and Recreation Educational Services Real Estate and Rental and Leasing

0

5,000

10,000

15,000

Source: Colorado Department of Labor and Employment, QCEW, 2018.

20,000

25,000

30,000

Government

0 Source: Bureau of Labor Statistics.

Mining

Transportation and Warehouse

Utilities

Agriculture

Management of Companies

Admin and Waste

Finance

Construction

Education

Retail

Wholesale

Healthcare

Other

Real Estate

Accomm. and Food

1 Manufacturing

2 Arts and Ent.

3 Information

4

Professional

Location Quotient

Industry Location Quotients Boulder County compared to the U.S., 2018 Annual

Boulder County Wages Total Wages, 4-Quarter Average $ Billions 14

1-Year Growth: 8.7%

13 12 11 10 9 8 7 6

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: Bureau of Labor Statistics, QCEW Data Series, NSA.

2014

2015

2016

2017

2018

2019

Boulder County Average Wages Trailing 4-Quarter Average 1-Year Growth: 6.3%

Annual Wage in Thousands

$70

$66

$62

$58

$54

$50

2010

2011

2012

2013

2014

2015

2016

Source: Bureau of Labor Statistics, QCEW Data Series, NSA. Based on data through Q2 2019.

2017

2018

2019

Average Annual Wages Front Range Counties $100,000 $90,000 $80,000 $70,000 $60,000

Colorado: $57,937

$50,000 $40,000 $30,000 $20,000 $10,000

Source: Bureau of Labor Statistics, QCEW, as of Q2 2019.

Median Price of Single Family Detached Homes Sold City of Boulder $1,000,000

1,100

$900,000

1,000 900

Dollars

$700,000

800

$600,000

700

$500,000

600

$400,000

500

$300,000

400

$200,000

300

$100,000 $0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Boulder Area Realtor Association. *YoY through Aug 2019. Excludes condos and townhomes.

200

Number of Homes Sold

$800,000

Commercial Vacancy Rates: City of Boulder 21

Office Warehouse

18

Flex Retail

Percent

15 12 9 6 3 0

2006

2007

2009

2010

2011

2012

2013

2014

Source: Newmark Grubb Knight Frank.

2015

2016

2017

2018

2019

Boulder County Value of Construction 1,600 1,400 1,200

Nonbuilding Nonresidential Residential

$ Millions

1,000 800 600 400 200 0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sources: McGraw-Hill Construction Dodge Research and Analytics.

2018 YTD Nov.

2019 YTD Nov.

Sales Tax Collections City of Boulder $ Millions, 12-Month Rolling Sum 120

100

Year to Date Growth Figures

80

60

City of Boulder

4.3%

Longmont*

3.6%

Broomfield

3.8%

Colorado

4.9%

40

20

0 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: City of Boulder (October 2019), City of Longmont (October 2019) *Includes higher tax rate, City of Broomfield (September 2019), State of Colorado (December 2019).

Sales and Use Tax Collections City of Boulder, 12-Month Rolling Sum 160

Construction Use -14.8% YTD Consumer and Vehicle Use -8.4% YTD Sales +4.3% YTD

140

$ Millions

120 100 80 60 40 20 0 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: City of Boulder, October 2018.

2014

2015

2016

2017

2018

2019

Venture Capital Investment City of Boulder $300 Sample 2019 Deals

$200 Millions

Inscripta ArcherDx JumpCloud PanTheryx Edgewise Therapeutics Techstars Stedi Anonos

$250

$150 $100 $50 $0

2007

2008

2009

2010

2011

2012

Source: CB Insights.

2013

2014

2015

2016

2017

2018

2019

Potential Headwinds International/National •

Global growth

•

Value of the dollar

•

Trade/tariffs

•

Election year

State and Local •

Talent shortage

•

Housing affordability

•

Commodity prices/cycle

•

Drought and weather

•

Real wage increases