It appears younger people may be the most pessimistic about their economic future.
At least that’s what Fort Lewis College economics associate professor Nate Peach alluded to during his presentation about the local economy during the 32nd Annual Southwest Economic Outlook on Tuesday.
This could stem from a number of problematic issues that many are facing in Southwest Colorado, such as cost of living and insufficient wages to match that cost. Peach and Richard Wobbekind, associate dean of University of Colorado Boulder’s Business and Government Relations, updated attendees on the state of La Plata County’s and Colorado’s economies.
Peach said the events of 2020, including the COVID-19 pandemic and the political issues surrounding it, have “cast a long shadow.” He said part of the reason for pessimism is cost of living rising 20% since April 2020.
“They’ve really been dealt a bad hand, so to speak,” he said during his presentation.
However, he reminded spectators at the event about inflation. Using a mountain biking analogy, he said the current state of inflation has been very steep.
“We need to think about the income that we’re bringing in, not just what we’re spending,” Peach said.
He said local incomes have not kept up with inflation since the start of the pandemic. However, he said there is good news in that 2010 showed a reversal of fortune. Wages were outpacing inflation.
“The mark of our economy is that income grows faster than inflation, right? So at the end of the day, you are gaining ground (on inflation),” Peach said.
He said people currently tend to think the wage versus inflation data from 2010 isn’t going to happen, adding that another element to people’s pessimism is the notion that Durango does not offer enough high paying job opportunities to match its high cost of living.
“And as you might imagine, the cost of living is a big drag on our sentiment and what we feel about this area,” Peach said.
However, when looking at a map from the Federal Reserve Bank of St. Louis revealed Southwest Colorado has similar housing circumstances to other places along the Western states, including other parts of Colorado, California and the Pacific Northwest, when it comes to people who are considered burdened households. A household is considered burdened when 30% of a family’s income goes toward housing expenses, regardless of whether they own or rent.
Peach said the issues regarding housing costs are not unique to Durango. La Plata County is at a near 40-year low for housing listings, according to data provided by the La Plata Economic Development Alliance.
The real issue is that home prices are increasing at a faster rate than wages. Peach said in 2022, a livable wage for a family of four was $98,000 per year but in 2023, it had risen to $106,500
This means a family of four would need a 9% wage increase in order to keep up.
“That is not trivial. The 9% raise is fantastic. It is significant. That’s not what we have seen at the national level,” he said.
Earlier in the presentation, Wobbekind said national wages had increased by about 4% in 2023.
However, Peach said there is optimism for Southwest Colorado. Evaluating a survey taken by the city of Durango, he said people generally want to live in the area, regardless of the cost of living.
“If we really thought that the cost of living challenges that we faced were insurmountable, we’d leave,” he said.
He said the region was actually better than other regions when it came to holding substantial subprime credit card loans, which is a positive sign in a community with such a high cost of living.
When comparing the housing burden map with the subprime loan map, the results were mirror images. In Southwest Colorado, the housing burden was high while states in the southeastern United States were low. However, subprime credit card loan numbers were alarming in the southeastern and Midwestern states, while Southwest Colorado was relatively low.
Nevertheless, Peach estimated unemployment rates will remain low in 2024, but it will be a challenge for employers to find and retain local talent in the region because of the high cost of housing.
At the state level, Wobbekind said the state ranks in the middle of the pack in key economic sectors where it used to rank in the top 10.
In 2023, the state ranked 43rd in personal income growth, 19th in gross domestic products and 21st in unemployment rates.
However, Wobbekind believes Colorado’s No. 37 ranking in employment growth will increase in 2024. On another note, the state ranked the highest in labor force participation rates and year-over-year housing appreciation had gone down in the state. He said there are 1.7 jobs open for every unemployed person.
In addition, net migration is still fairly low. Total net migration was only about 40,000 people this year, according to the data presented on Tuesday.
“They’re forecasting a bounce back going forward,” he said. “We’ll see where that goes from here.”
Wobbekind said state demographers expect the overall state population to go up through 2050, but it seems the youth population is stalling.
“There’s a small percentage in that 0 to 17 (age) category, and that will have implications for the school districts,” he said.
Among Wobbekind’s other concerns was that statewide personal savings were down in 2023.
“We thought you were consumers before COVID,” he said. “But now we’re really consumers, we’re (on) a whole different trajectory of how much of our income we’re spending on products.”
tbrown@durangoherald.com
