VECTRA BANK 23 RD ANNUAL ECONOMIC FORECAST BREAKFAST START SMART IN 2016! Member FDIC VectraBank.com

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1 VECTRA BANK 23 RD ANNUAL ECONOMIC FORECAST BREAKFAST START SMART IN 2016! Member FDIC VectraBank.com

2 Colorado s Economy and State Budget Office of State Planning and Budgeting April 26, 2016 Jason Schrock, Chief Economist jason.schrock@state.co.us

3 123 U.S and Colorado Jobs (2010 to 2016) Slower Growth Forecast 118 Colorado Jobs Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 The graph compares the change in the number of jobs nationally and in Colorado since January of 2010 using a three month moving average. Index: January 2010=100 Source: U.S. Bureau of Labor Statistics. OSPB March 2016 Forecast. Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Index Jobs Nationally Jan-16 Apr-16 Jul-16 Oct-16 3

4 ISM Manufacturing and Non-Manufacturing Indices * Great Recession Expansion The nonmanufacturing index continues to be in expansion territory, but has softened recently Contraction The manufacturing was in contractionary territory for several months, but has recently begun to rebound ISM Manufacturing: PMI Composite Index ISM Non-manufacturing: NMI Composite Index *Readings above 50 indicate expansion in the industry while readings below 50 indicate contraction. Source: Institute for Supply Management 4

5 Manufacturing and Mining Portion of GDP 100% 90% 80% 70% 60% 50% 40% 30% 85% 88% 20% 10% 15% 12% 0% U.S. Manufacturing and Mining All Other CO Average portion of gross domestic product from Source: U.S. Bureau of Economic Analysis 5

6 Oil and Gas Drilling Rigs in Colorado rigs, Sept rigs, April Source: Baker Hughes 6

7 Overall Job Growth and Mining Sector Jobs in Colorado (year over year % change) 5.0% 4.0% Employment growth slowed for most of 2015 at the same time the mining sector shed jobs. 20.0% 15.0% 10.0% 3.0% 2.0% 1.0% 0.0% Stabilized at end of 2015/beginning of 2016 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar % 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% Total Jobs, % Growth (left axis) Mining Jobs, % Growth (right axis) Source: U.S. Bureau of Labor Statistics 7

8 Growth in Jobs by Colorado Region, Year-over-Year Employment Growth in February, 2015 and % 8% 7% 6% Most areas of Colorado are experiencing slower job growth. 5% 4% 3% 2% 1% 0% -1% -2% Greeley Denver Fort Collins- Loveland Colorado Springs Pueblo Boulder Grand Junction February 2015 February 2016 Source: Colorado Department of Labor and Employment, OSPB Calculations 8

9 Unemployment Rates by Colorado Metro Area 7% 6% Unemployment rates fell fastest in Pueblo and Colorado Springs over the last year, and all Colorado cities now have lower unemployment rates than the national average. 5% 4% 3% 4.8% 4.1% 3.4% 3.0% 2.7% 2.5% 2.3% 3.0% 4.9% 2% 1% 0% Grand Junction Pueblo Colorado Springs Greeley Denver- Fort Collins- Aurora- Loveland Broomfield Boulder Statewide National February 2015 February 2016 Source: Bureau of Labor Statistics 9

10 Colorado s Concentration (Location Quotient) of High-Tech, Knowledge, and Services-related Industries * Professional and business services Financial activities Information High-tech Detail of High-Tech Sector Pharmaceutical and medicine manufacturing Aerospace product and parts manufacturing Semiconductor and electronic Communications equipment manufacturing Scientific research and development services Computer and peripheral equipment mfg. Electronic instrument manufacturing Computer systems design and related Data processing, hosting and related Architectural and engineering services Software publishers Other telecommunications Location quotient greater than 1 indicates the state has a greater concentration of the industry compared with the U.S * The location quotient is the ratio of an industry s employment to total employment in Colorado divided by the ratio of the industry s employment to total employment for the U.S. overall. Some of the detailed high-tech industries listed are also part of the broader professional and business services and information sectors. Source: U.S. Bureau of Labor Statistics 10

11 Working Age Population Growth 1.6% 1.4% 1.3% 1.4% 1.4% 1.4% 1.4% 1.3% 1.2% 1.0% 0.8% 0.6% 0.4% 0.5% 0.5% 0.5% 0.4% 0.3% 0.3% 0.2% 0.0% US CO Source: Colorado Demographer; U.S. Census, Federal Reserve 11

12 Migration to Colorado 50% 40% 30% 20% 10% 0% By Age Group 1 to 19 years 20 to 34 years 35 to 64 years 65 years and older % of Migrants 2010 % of Migrants 2014 By Education Attainment Top Ten Origination States California (11.2%) 2. Texas (11.2%) 3. Arizona (5.6%) 4. New York (4.4%) 5. Florida (4.3%) 6. Illinois (4.2%) 7. Washington (4.0%) 8. Virginia (3.4%) 9. New Mexico (3.2%) 10. Oklahoma (3.1%) 35% 30% 25% 20% 15% 10% 5% 0% Less than high school graduate High school graduate Some college or associate's degree Bachelor's degree % of Migrants 2010 % of Migrants 2014 Graduate or professional degree Source: American Community Survey (U.S. Census) 12

13 60% Young Firms in State and Average Annual Job Growth ρ = * % of Firms that are 5 Years Old and Younger 50% 40% Connecticut Colorado Arizona Idaho Utah Nevada 30% Rhode Island Ohio Iowa 20% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% *Excludes North Dakota because of the unique circumstance of its job growth in recent years. Source: U.S. Census Bureau, Business Dynamic Statistics and U.S. Bureau of Labor Statistics Average Annual Job Growth 13

14 Percent of Income Spent on Housing 60% 50% 40% 30% 20% 10% 13.5% Purchased Home Affordability Index for Select Metro Areas, 2012 and 2015Q2 Percent Change Shown Above Bars 9.1% 1.9% 8.0% 3.6% 3.8% 3.7% 5.4% 6.0% 3.7% 4.3% Less affordable More affordable 3.3% 3.7% 3.8% 4.5% 5.8% 2.3% 6.1% 0% Q2 Source: National Association of Realtors, American Community Survey (U.S. Census Bureau), Bureau of Economic Analysis 14

15 Percent of income Spent on Housing, 2015Q2 Affordability, 2015Q2, and Housing Starts, % 50% 40% 30% 20% 10% San Jose Denver Dallas Phoenix New York San Diego Seattle Atlanta Colorado Springs Salt Lake City Raleigh Chicago Greensboro-High Point Fort Wayne St. Louis 0% Housing Starts per 1,000 New People, Source: Source: National Association of Realtors, Federal Housing Finance Agency, American Community Survey (U.S. Census Bureau), Bureau of Economic Analysis, Federal Reserve Bank of St. Louis, OSPB calculations 15

16 2.5 U.S. and Colorado Housing Permits Issued Forecast U.S. Housing Permits (Millions) - Left Axis Colorado Housing Permits (Thousands) - Right Axis Source: Census Bureau; OSPB March 2016 Forecast 16

17 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% Colorado s Growth will Continue to Outpace Nation (Annual Change in Jobs) Forecast U.S. Total Nonagricultural Employment (Annual % Change) Colorado Total Nonagricultural Employment (Annual % Change) Source: Bureau of Labor Statistics; OSPB March 2016 Forecast 17

18 Colorado will Continue to Have Lower Unemployment 12% Forecast 10% 8% 6% 4.7% 4% 2% 3.3% 0% U.S. Unemployment Rate Colorado Unemployment Rate Source: Bureau of Labor Statistics; OSPB March 2016 Forecast 18

19 $ in billions $12 $10 $8 $6 $4 $6.5 General Fund Revenue, Actual and Forecast $5.5 $5.4 $5.7 $6.1 $6.9 Revenue Adjusted for Population Growth and Inflation $7.5 $7.7 $6.7 $6.4 $7.1 $7.7 $8.5 $9.0 Forecast $10.6 $9.8 $10.0 $2 $0 Source: OSPB March 2016 Forecast 19

20 General Fund Budget for FY Includes State Education Fund, $ in millions SB 228 Transportation Transfer 2% Capital Construction 2% Other 5% Higher Education 8% Public Safety and Courts 12% K-12 Education 40% FY Total: $11.1 billion Health & Human Services 31% Source: OSPB

21 Hospital Provider Fee, other TABOR Revenue, and Referendum C Source: OSPB March 2016 Forecast

22 A TABOR Illustration TABOR Limit Income and Sales taxes General Fund Fees Cash Funds TABOR Refund

23 General Fund Budget Comparison FY TABOR Refund 2% FY TABOR Refund 3% All other 41% K-12 Education 37% All other 36% K-12 Education 39% Medicaid 20% Medicaid 22% Source: OSPB 23

24 OEDIT Programs and Funding The Colorado Office of Economic Development and International Trade (OEDIT) offers various performancebased incentives and funding assistance. Go to: for a list of incentives, programs and resources, or contact rebecca.gillis@state.co.us 24

25 Thank You Office of State Planning and Budgeting Jason Schrock, Chief Economist

26 Thank you! Wishing you a prosperous 2016! More information available at vectrabank.com/cosprings Member FDIC VectraBank.com