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Maria Kuntz: This conversation was recorded on June 12th, 2025, and may not reflect the latest economic or policy news. Today's LBIdea is that Colorado's economy is cooling, but there are reasons for cautious optimism. Today, we're joined by Richard Wobbekind and Brian Lewandowski from the Leeds School of Business.

Rich is the Associate Dean for Business and Government Relations at Leeds and Senior Economist for the Business Research Division. Brian is the Executive Director of the Business Research Division. Thank you, both, for being here today and coming to talk about the economy.

Richard Wobbekind: Our pleasure.

Brian Lewandowski: Thank you, Maria.

Kuntz: We've got some questions. We're just going to dive right in. Rich, what a year. I mean, every December, you release an economic outlook for the year ahead, but I think 2025 has probably delivered some surprises. So, we have witnessed quite a bit of volatility in the national economy in 2025. What do you make of where we are in the business cycle?

Wobbekind: Well, you're absolutely right, Maria, in terms of what a year. If you think about the major disruptions we've had since we released the forecast back in December, trade and tariffs, the immigration and border security issues that areÌý

going on, federal restructuring, the government efficiency efforts, if you will, more recently, the budget reconciliation bills, one big, beautiful bill that is labeled, and in background of all of that, the regulatory reform that is going on in terms of business regulations and changes there.

And the bottom line of all of that, of course, has been uncertainty as things have come on and gone off and so on. And that's created a lot of uncertainty for both business and household decision making. So, that's where we focus our forecast. All of that said, we've had real resiliency in terms of the job market and GDP and income. So far, and we believe, not going into a recession, a slow growth economy, getting slower in the second half of the year but still growing, job market is very slow but still positive. So, you know, bottom line of all of that is the economy has been incredibly resilient.

Kuntz: Well, that's some good news. I think folks have been worried. And that's reaffirming to hear. So, then Brian, within the national context, how does Colorado fare?

Lewandowski: Yeah. Colorado is really coming out of a long, strong growth cycle that began after the Great Recession. So, think back all the way to 2009 when we were emerging from the great financial crisis and the housing crisis. And that's really when Colorado's economy took off and really started out-competing most of the rest of the U.S.

So, when we track Colorado's economic performance over this 15-year period of time, Colorado was easily a top 10 state by almost every measure and a top five state by many of those measures. So, regardless of what we're seeing coming out of Washington right now, Colorado was already cooling. And that shows up in those same metrics where we went from being a top five or a top 10 to being in the 30s or being in the 40s nationally for some really important metrics, things like gross domestic product growth or employment growth.

And that's been somewhat concerning watching Colorado's ranking slip over the last year. At the same time, it's not all bad news. Not all of those growth rates are poor growth rates. In some instances, it's that Colorado was such a good economy for so long and other states were lagging in their growth that they're playing catch-up now.

Kuntz: Right. So, a little bit evening. We were accelerating really fast. Are we still accelerating, is it fair to say, but at a slower rate?

Lewandowski: Yeah. For most of these economic indicators, Colorado's economy continues to expand, continues to grow, but growing at a slower rate. But places like Hawaii, Hawaii was disproportionately hurt by the COVID pandemic because, really, their main component of their economy is tourism. And we saw tourism come to a standstill during COVID.

And Hawaii was a state that was, sort of, slow to reintroduce visitors to their state. And so, we saw their economic performance leg. And employment is one of those important indicators. And it's, sort of, interesting looking at their employment growth right now because they are out competing every other state in job growth, but over the long term, they're still behind Colorado. It's because they're playing catch-up. So, they are experiencing much faster rates of growth right now than pretty much every other state.

Kuntz: So, the folks in Colorado who, you know, this is their world, right, they're really focused on the state, they're seeing and hearing that things are changing in the state. What would you say to your average Coloradan?

Lewandowski: Well, when we take a look at what's happening in Colorado right now, this cooling that's happening, it's hard to sustain the type of growth that Colorado was experiencing. And one example of that is home price growth. For a 15-year period, we had about 6% compound annual growth rates for home prices.

And that ended up pricing many people out of the average housing market in Colorado, making it, sort of, uncompetitive for new entrants to Colorado's housing market. And so, seeing Colorado's home price growth cool may not be the worst thing in the world, right? So, we still have home price appreciation in many areas of the state, but growing at a slower rate might be welcomed knowing that Colorado has a housing affordability problem.

[00:06:01] Maria Kuntz: People can take some comfort maybe in the fact that, while it's different than it has been in years past, this is actually bringing maybe some relief and good news to a lot of Coloradans.

Lewandowski: Right. I think there are other things that we're keeping a close eye on. Colorado is a state that, for most of its statehood, has had positive net in migration, meaning that more people are moving to the state than moving away from the state. It's rare for Colorado to have net out migration, but for the past few years, we've had very slow migration to the state.

And that's important. And it's a concern because many of those people who are coming to Colorado from other states or even other countries are already trained. They're already educated. They bring their skills and their knowledge with them. They bring their families in tow often. And those kids end up going to our schools. So, it ended up filling the vacant jobs that we had in the state and fueling a lot of the growth that we've had in Colorado. So, we look at Colorado's slower population growth and slower net migration as a general concern.

Kuntz: A lot to think about there in the state. Rich, I want to go back to some of the federal policy changes. Can you explain why tariffs matter?

Wobbekind: Well, when we think about them from, sort of, broad macro policy, tariffs impact the supply side of the economy. They raise the cost of production in the economy. And supply-side inflationary types of issues that tariffs would fall into are very difficult to address with policy. It's very hard to control that type of inflation. When we hear that in public, when we hear people talking about tariffs and talking about inflation, people like me and Brian and others, you see that getting conveyed to households and to businesses. They express a lot of concern about inflation.

And in fact, if you look at the surveys that are out there, inflation expectations are much higher right now amongst households than they were four months ago or five months ago. All of a sudden, the trend is that they're expecting higher prices, 5%, 6% inflation, a year from now. So, just that piece is very dangerous in terms of creating inflation expectations and the psyche. All of that said, so far, we have not seen a lot of price increases related to tariffs at this point in time.

Kuntz: Rich, I want to interrupt you there real quick, just go back. You said that, like, people are preparing for inflation.

Wobbekind: Yes.

Kuntz: And so, it sounds like you think that's maybe not a positive thing. So, listening, I'm thinking, "Oh, maybe people are bracing themselves," but it sounds like that raises concern for you. Could you say a bit more about that?

Wobbekind: Sure. When we look at inflation expectations in these surveys, consumers are believing that they're going to be facing higher prices a year from now. And that builds in price increases into the economy. It's one of the things that economists dread is when they see higher inflation expectations on the part of households.

So, those people will be asking for higher wage increases because they're expecting a higher price environment that they're operating in. So, this is one of the pieces of the economic puzzle that the Federal Reserve dreads. They don't want people expecting higher prices a year from now. And they execute their policy trying to keep inflation expectations down, not going up like they are right now.

Kuntz: Okay. That's helpful. Thank you.

Wobbekind: Sure. So, that said, we haven't observed these price increases yet, but we do think they're coming. You have to go through the system. They have to work their way through the system. And they're probably still about six months out in terms of how they impact the economy. But as it sits right now, prices have stayed at a pretty stable level at this point.

Kuntz: Okay. Well, Brian, how is Colorado impacted by tariffs and trade?

Lewandowski: Yeah. I think it's interesting comparing Colorado to the U.S. overall because we're a relatively low-trade state, meaning that we're not very export-intensive. And when we take a look at why, we tend to start with Colorado's manufacturing footprint. So, we're a state that's really good at the services sectors. And services that I'm describing here are mostly high-tech services, so think about engineering, research and development, software development, and so on.

And even on the tourism side, most of that is counted in services. But on the good side, there's only a few sectors that we really focus on for goods. And it tends to be things like agriculture and manufacturing. So, focusing on that manufacturing piece, we rank really low in manufacturing intensity nationally. So, we're ranked 33rd in manufacturing GDP nationally. We're 41st in manufacturing employment as a percentage of our total employment by state.

And therefore, we're not producing a lot of goods to send around the world. And so, when we take a look at exports by state, we're really measuring goods exports by state. So, looking at our exports, we rank 33rd in total exports nationally. And when we normalize that for the size of our population, we actually ranked 49th last year. And when we averaged the last three years, we ranked 48th. So, it's not just a one-year anomaly.

And it's, sort of, true on the import side, too. So, when I say we have lower exposure, I think that's true, but we have lower direct exposure. So, we're not just directly sending as many goods abroad, and we're not directly importing a lot of those goods, but it doesn't mean that Colorado doesn't have exposure. Rich was talking about consumers and expectation of inflation. A lot of consumer goods are brought in from abroad.

And they may not land directly in Colorado. They come in through other ports and sit in other companies' warehouses, but they eventually make their way to Colorado. And that's true not only for consumer products, but it's true for those intermediate inputs that businesses use in their production. So, we, sort of, have a second-order exposure to trade. And so, it doesn't mean that we are completely buffered. It just means that we're just, sort of, less exposed directly.

Kuntz: So, some of that exposure is going to happen a little bit farther down the supply chain later in the, sort of, purchasing and business process rather than direct to Colorado companies.

Lewandowski: Yeah, perhaps. And I think what we're seeing right now is there is a lot of threat of tariffs that started earlier this year on Liberation Day when the grand tariffs were announced and then we saw the President, sort of, double down on tariffs with China. And a lot of those have been rolled back. They haven't been eliminated, but they're not as bad as first blush. I think there is a lot of concern and fear when the really large tariffs were announced, but I think that the negative impact that we expected has diminished a little bit over the last couple of months.

Kuntz: That's some good news. Let's talk with the labor market. You've talked a lot about resiliency in the labor market. And how have your expectations about job growth changed over the past year?

Lewandowski: We are still expecting slower job growth, but I think it is interesting looking at how resilient the job market has been. Coming out of COVID, remember, in 2020, we went through this period where a lot of jobs were paused or eliminated. And some of that was by policy where restaurants and some of our resorts were shut down. They couldn't do business. So, a lot of those jobs went away. And then once the economy, once our community started to open back up, those jobs came back really quickly.

And so, we saw a phenomenal job growth in 2021, where the U.S. was adding about 600,000 jobs per month on average. And we've seen that rate of growth slow as we marched through the year. So, 2022, the U.S. ended up reaching a new peak in total jobs in the economy. And we've continued to add jobs since then. So far, in 2025, this is the slowest job growth year since COVID, but we have real constraints for job growth.Ìý

You know, our population is growing slowly. The net migration that I was talking about at the state level earlier, we think about this in terms of international migration, too. And if that international migration slows either naturally or by policy, that slows a lot of our potential job growth as well. So, I think we're entering this new phase where demographics are shifting.

We have an aging population. And I think we'll see some interesting dynamics where we've got a wave of people retiring, just naturally retiring. They're reaching that retirement age. And we have a thinner population coming up behind them to fill those jobs. And so, we should, sort of, stay at full employment, you know, for the foreseeable future unless we were to hit some sort of recession, but at the same time, we also expect slower job growth, you know.

So, that's, sort of, counterintuitive, I think, to some people, but because we're already tapped out in our labor force, I think we can have both of those things happen at the same time where we stay at full employment, but we see our job growth rates come way down. And I think that will be true in Colorado as well, where Colorado is operating at the highest level of labor force we have ever had. We've never had more people working or wanting to work in the state. But we're also in a slow-job-growth environment. So, we suffer from the same things that the U.S. is suffering from right now.

Kuntz: It sounds like the economy and the job growth environment are both in a balancing act right now. It sounds like both were having really quick acceleration growth and that things are tapering. It might cause people to think there's an issue, but it sounds like your outlook is really positive that things are staying stable and actually maybe even favorable.

Lewandowski: Yeah. I think I'm cautiously optimistic. I don't think things are all rosy. I think there's many risks that we're keeping an eye on in the economy right now. And personally, I think there are more risks to the downside right now, especially when we think about Colorado. We have some unique exposures to some of the changes happening right now.

We may not be as exposed to the tariffs, but I think we are perhaps more exposed in Colorado to the federal restructuring. We have a high concentration of federal labs in Colorado. We have federal space and defense institutions in Colorado that are perhaps at risk. And then our universities receive a lot of federal funding for early-stage research that is also at risk right now. So, I think there certainly are downside risks that we need to be keenly aware of.

Wobbekind: Yeah. Certainly, with the slowing in migration to the country, keeps the markets more in balance, keeps the national unemployment rate at a reasonable level, but sectorally, it's impactful. There are certain sectors that very much rely on that labor. And we think of agriculture or maybe construction, but healthcare, particularly elder assistance, is very heavily tilted towards international or foreign-born workers. And so, we've seen quite a bit a drop off in that sector, employment numbers, in the last two months since these policies have come into effect.

Kuntz: Okay. So, definitely some things to keep our eyes on, a lot changing. So, Rich, this question's for you. After COVID, we went through a period of high inflation, but price growth has been moderating. Do you think this price moderation will last? And what can consumers and businesses expect for inflation in the near future?

Wobbekind: Well, one of the reasons it's so important to have moderate inflation is then the Federal Reserve and monetary policy might be willing to step in and cut rates should the need arise. So, the focus on inflation is very much from two sides. One, the consumer psyche, but very much also the monetary side of the economy.

For example, the President is hoping that the chair of the Federal Reserve will start to cut rates to stimulate the economy, but the Federal Reserve has been very reluctant to cut rates because they don't know what the inflationary impacts might be of the tariffs. So, there's been this piece, sort of, going on. So, that's some context. So, yes, it's been moderating and it's a very healthy thing.

And that's good news in the context of both the consumer and in terms of the Federal Reserve. The question is can it persist, or will it persist at these levels, or are we going to start to see a trend up based on the tariff impacts, say, six months out? Are we going to start to see that effect? Almost all the forecasts have inflation trending up to 3% by the end of the year, or even a little bit above 3%, which is well above the Federal Reserve's target.

So, that's why there are people constantly looking at this number and what it means. That said, it is also, at this point, causing the Fed to put these cuts on hold and until they see that, you know, it's more stable or inflation is more stable. The flip side is the Fed has put those off, but should we take a economic turn that we're not expecting, meaning a recessionary type of turn or bad impact on employment, the Fed can step in and make those cuts that they've been putting off. So, there is a silver lining, if you will, to this rather dark area of inflation.

Kuntz: Yeah. So, they're, sort of, waiting and watching, but they do have the ability and plans to make quick decisions if they need to.

Wobbekind: Very much so. They meet very regularly every six weeks, but they can make cuts or changes in between those meetings. They don't have to wait for a meeting to do that. So, monetary policy, in that sense, is very responsive.

Lewandowski: Rich, what happens in an environment where we do see some elevated inflation and we also see a deterioration in the job market?

Wobbekind: So, when we discussed the tariffs before, this higher price and lower employment growth environment is typically referred to as stagflation. And the question is how could the Fed or would the Fed respond to stagflation? And I think the truth is interest rate cuts are not great policy for cost-side or supply-side inflation.

That's really being caused by not having enough product on the marketplace, not by interest rates being too high in the economy. But if we were to see that unemployment really started to rise and the job market really started to get bad, I think the Fed would still step in and not let the boat sink. They're not going to let the economy fall apart over this inflation goal.

Lewandowski: So, we can take a look at inflation at a local level. For Colorado, it's tracked for the Denver-Aurora-Centennial region. So, we think of this as the Denver Metro region. And that's really the only official measure of inflation within the state. I started off by talking about how hot Colorado's economy was for this 15-year period. For most of that period, for 11 years of the last 15, Colorado has had higher price growth than the nation overall, so meaning that things got more expensive here faster than the nation.

And thus, we got in this environment where it felt to many residents of the state that we had a higher cost of living in Colorado. But that turned in 2024. So, 2024 was one of only a few years over the last 15 where Colorado had lower inflation than the nation. And that's continued into '25. So, we have data now through May that Denver Metro measure of inflation has trended below the national rate for almost the first half of the year.

Kuntz: That sounds like a bright spot for Coloradans. Do you see any other bright spots in the economy for Colorado and the U.S. in general?

Lewandowski: So, in addition to having some really strong key industry clusters in the state, sectors like aerospace and the biosciences and we've got a quantum hub in the state right now, we also note other little pieces of the economy that are showing really positive signs. For instance, we saw new entity filings in the state from the Secretary of State's office. We saw that these new entity filings are increasing again. So, they went through this lull where we saw fewer new filings over the last year. And now, that's turned a corner.

And we're seeing growth in new entity filings. We're seeing growth in entity renewals. We're seeing more business formation in Colorado. We're seeing positive wage growth even beyond inflation. So, we refer to that as real wage growth. So, your average earner in Colorado is a little better off this year than they were last year and so on. Those are some of the less talked about economic metrics that are certainly positive right now in the state.

Wobbekind: And we clearly remain an entrepreneurial state. And Brian's highlighting that with some of the clusters and the startup, sort of, data. I think it's really important to emphasize that we're innovative and we're highly educated, the second highest education level at the college level in the country. And that is very attractive for both startups, but also for, you know, high tech and STEM types of industries that need a well well-educated workforce. So, none of that has gone away even though the economy and the state has slowed, as was described earlier. All of those things are still in place and really good fuel, if you will, for the economy going forward.

Kuntz: So, I'd love to ask each of you as we wrap up, what are your final thoughts? What should listeners keep in mind from this discussion? What are your top takeaways for them?

Lewandowski: So, Rich talked a little bit about consumer confidence. One thing we try and do is understand some of the leading indicators in the economy. And there's, sort of, few great leading indicators. So, normally, when we're taking a look at things like gross domestic product or employment or income, a lot of those metrics are taking a look at what already happened. And there's this lag effect where we don't really know what happened until months or quarters after it actually happened.

And then there are some things that are coincident indicators that we find out about as they happen, but then there are a few leading indicators. And the leading indicators that we watch are metrics such as consumer confidence or business confidence or purchasing managers expectations or even interest rates. And a lot of attention has been paid to consumer confidence and business confidence lately. So, we went through this period in the first part of the year where consumer confidence and business confidence really came down.

We just got the newest consumer confidence report from the conference board. And it rebounded a little bit. It's still down from where it was a few months ago, but it at least ticked up. And that was true of the National Federation of Independent Business' small business confidence. We conduct a survey of Colorado business leaders called the Leeds Business Confidence Index. And we've been doing this for the last 23 years or so. And we ask these Colorado business leaders their expectations one quarter out and two quarters out.

And what we observed last quarter is Colorado's business confidence sank to very low levels. I believe it was the third lowest level on record, and it was the second fastest decline of business confidence on record in that almost quarter-century survey. So, our worry there is about what actually happens, right? So, when consumers are pulled and when businesses are pulled, they're asked a series of questions about what they think will happen.

And I think the question there is, will behavior match expectations? Because between now and the future, those business conditions and those consumer conditions can change. And so, perhaps, since we've seen some easing of the tariffs, and perhaps because we've seen some sustained job growth, people will feel a little bit better about the economy. And therefore, maybe they will feel better about spending in the economy and taking a vacation in this economy.

But that was one of those risks when we saw confidence really deteriorate earlier in the year is that consumers and businesses would make some decisions that are adverse to the macro economy, right? So, businesses could perhaps put off hiring individuals or investing in new equipment. And there's some signs of life right now that are, sort of, indicating that businesses and consumers are working through this okay so far.

Kuntz: Great. And Rich, what's on your mind?

Wobbekind: Well, starting at the top, we're not in a recession, and we don't think we're going into a recession. We do think a slow growth environment is very likely, but it's a growth environment. And the same thing is true for the state. The state's on very solid footing, unemployment rate is still at good levels, employment growth still solid as was mentioned earlier. And so, people should be not too pessimistic about the future. The political situation is clouding people's view of the economy in general. And the economy is still on decent footing.

Kuntz: Well, that's great to hear. It will be really interesting to see what the rest of the year looks like. And you, both, have given us so much to think about. Thank you for joining us today and sharing your insights and your time.

Lewandowski: Thank you.

Wobbekind: Our pleasure.

Kuntz: Thank you again for listening to Leeds Business Insights. Make sure you're one of the first to hear every episode by subscribing to the show wherever you get your podcasts. Leeds Business Insights Podcast is a production of the Leeds School of Business and is produced by University FM. We'll see you next time.