Major Trends Impacting Colorado’s Future Today and Tomorrow

1. Major Trends Impacting Colorado’s Future Today and Tomorrow

2. Colorado Economy Today • Colorado’s recession ended in 2009. • 2012 and 2013, job growth beat projections by every economist. 2014 continues the trend. • Colorado’s highly diversified economy (4th best in the U.S.) cushioned the recession’s blow – especially in housing values. • Growth is progressing at all levels across the State’s economic base, but growth in geographic areas is not equal. • Lay-offs are half of lay-offs in 2008

3. The Depth of the Great Recession • 2001 – 2010 “establishments” created “net zero” jobs. But job growth increased by 130,000 jobs. More about this later. • Number Employed Metro (2005): 1.440 million • Total Number Employed (2013): 1.463 million • This was truly The Great Recession

4. Growth Up, Up, Up… • State jobs up 2.6% Metro up 2.7%. Led by construction and natural resources. Expect 3% growth rate by year end. Haven’t seen numbers like this since the late 1990s. • Exports up 6%. Could reach record of $8.6 billion by year end. • Leeds Business Confidence Index is 60.5 up from 58.1

5. Colorado Per Capita Personal Income Colorado has 13th Highest Per Capita Personal Income Level Source: U.S. Bureau of Economic Analysis.

6. Nonfarm Job Growth Rates Metro Denver 2013 Employment = 1.5 million 68K jobs lost 2009-2010; 64K jobs added 2011-2012; 49K jobs added 2013 Source: U.S. Bureau of Labor Statistics.

7. International Trends Uncertainty in Every Corner • Putin holding Western Europe hostage with natural gas. • Crimea, Syria, Libya and Iraq all caught up in civil war. Libya and Iraq had been significant oil suppliers to U.S. in recent years. • China and Japan conflict over northern Japanese Islands. • International refugee crisis

8. International Trends • Colorado now a global competitor – direct flights to Europe, Asia and Panama (December, 2014) now connect Colorado to 65% of Gross World Product in the “Global Triangle”. • Huge global consumer market will seem to “explode” in tourism and trade, as China alone adds 300 million to the middle class in next 10 years. • Japan will begin to off-shore its manufacturing over the next five years as it emerging from twelve year recession. U.S. and Brazil will benefit.

9. The Prospect of American Energy Independence • Colorado ranks 5th in U.S. for natural gas production and 10th in oil production • U.S. is preparing to launch a major infrastructure initiative that would permit the export of liquefied natural gas (LNG). • “Re-shoring” of manufacturing will result as low cost gas will increase our competitiveness

10. U.S. will be world’s largest oil producer by 2020 • Reliable oil prices – over 80% of U.S. oil demand will come from domestic sources or trusted allies – Canada and Mexico. • Balance of payments will improve, strengthening dollar, increasing domestic investments. • Western Europe and Asia (Japan and China) will increase direct investments in U.S. as Russia’s grip on oil and gas costs throughout Europe will discourage expansions due to higher production costs.

11. 1.0 Trillion Barrels of Oil Fig. 14

12. Fig. 16

13. Fig. 10

14. Fig. 6

15. Fig. 33

16. Partnership between Natural Gas and Renewable Energies • Natural gas produces 40% less carbon dioxide than other fossil sources. • “Ramp up” time for natural gas electrical generation is generally faster than older coal plants. This “quick on” advantage allows gas to supplement drops in wind speeds for turbines or weather changes for solar fields.

17. Fig. 41

18. The Changing Workforce

19. Migration of people U.S. migration vector from East to West remains unchanged. Colorado now “first choice” of 25-34 year old migrants New vector from Latin America

20. Millennials Largest Population Group - 2014 Next Gen 599,900

21. Baby Boomers Slow to Retire • Replacing 401k losses during the Great Recession • Increased longevity and fears of having enough for lives into age 90 keeps Boomers working. • Example: Projected aerospace retirees in 2012 was 8% - actual percentage who retired - 1%.

22. Millennials Largest Population Group - 2024 Next Gen 880,400

23. Changing Workspaces • Millennials are most educated generation in history. Most bachelor’s degrees conferred in business, the social sciences and history, health sciences, and education. • One-half to two-thirds of Millennials are interested in entrepreneurship, and 27% already self-employed. • 29% of entrepreneurs were 20 to 34 years old in 2011. • Three out of four Millennials say that work-life balance drives their career choices. This balance will place greater emphasis on transportation and access to the mountains.

24. Metro Denver Industry Clusters 2007 - 2012

25. Metro Denver Industry Clusters

26. Possible Ballot Initiatives in 2014 • Deferred maintenance on State’s roads – sales tax increase – DEAD • State-wide fracking ban – deferred to Commission

27. Real Gross Domestic Product Annual Average Growth Rates Source: U.S. Bureau of Economic Analysis.

28. Metro Denver Annual Change in Population 2014 Population = 2.99 million Source: Colorado Division of Local Government, State Demography Office.

29. Colorado Becoming More Diverse Percent of minority population increases from 31% to 37%

30. Colorado 3rd fastest growing state Nonfarm Job Growth Rates #3 Source: U.S. Bureau of Labor Statistics, QCEW.

31. Employment growth inconsistent across the state Nonfarm Job Growth Rates by Metro Area, YTD July 2014 Source: U.S. Bureau of Labor Statistics.

32. Proprietors are another significant component of employment Proprietors Employment 25.5% of Colorado’s Total Employment (US avg = 22.4%) Source: U.S. Bureau of Economic Analysis.

33. Milliennials and Housing • Student loan debt more than tripled in past decade, to more than $1.1 trillion. While Fannie- and Freddie-backed borrowers have an average score of 740, most Millennials have credit scores below 700. (Source: FICO) • In 2012, 36% of the nation’s Millennials were living in their parents’ home. This is the highest share in at least four decades. (Source: Pew Research Center) • Younger buyers tend to buy older homes, and are more likely to buy previously owned homes. Most often they do so because the home is a better price and better overall value. (Source: National Association of Realtors)

34. “Always end a speech on a high note.” Is legalized marijuana hurting our economic future?

35. 2015 • Growth will continue, but at slower rate as U.S. returns to more “normal” five-year business cycle. Expect 2.0% growth rate. • High housing prices will slow job growth, as Phoenix, Las Vegas and Dallas costs will compete strongly against Colorado. “Most expensive housing market without a coast.” • If you own a house, your net worth will continue to grow, but not at the 15% rate of 2012-13.

36. Enjoy another great year!