Jared Polis will face a number of challenges as governor of Colorado, however one of many greatest might be an economic downturn in the second half of the yr, if a forecast from economist Alan Beaulieu lastly proves out.
Beaulieu is president of ITR Economics and a specialist in predicting economic cycles. This yr, as he has performed for a lot of the last decade, Beaulieu made his first public forecast of the yr in entrance of the Denver Chapter of the Association for Corporate Growth.
“The U.S. economy and your economy in Colorado will slow down in 2019,” he informed the greater than 275 individuals attending a lunch Tuesday on the Embassy Suites in downtown Denver.
The downturn will hit industrial corporations, exporters and commodity producers more durable than it is going to customers and the companies that provide them. And it gained’t be significantly extreme, however it is going to sting after a protracted stretch of progress.
“Expect a slow down, but don’t expect a break down,” he mentioned.
Given what a number of the economic numbers are beginning to present and the inventory market’s brutal slide in the fourth quarter, that won’t seem to be a very daring name. But Beaulieu has persistently predicted this decelerate in his Denver visits since 2014 and even earlier.
Last yr, he thought the decelerate would manifest in the primary half of 2019, however this yr he pushed it again two quarters, due to the stimulus from the tax cuts in late 2017. But he mentioned it’s coming.
A bunch of economic indicators at the moment are pointing to slower progress, and the belief lastly hit inventory buyers, jolting a market working on a sugar excessive, he mentioned. Higher tariffs and commerce disputes have introduced ache to China, which is contributing to a bigger international decelerate that can weigh on the U.S. financial system. And because the U.S. financial system slows, Colorado will gradual with it.
Still, many economists don’t see a recession in the playing cards given the robust hiring nonetheless going down. Economist Elliott Eisenburg, additionally a frequent customer to Denver, factors to the 312,000 internet new jobs employers added in November, the most important enhance since February of final yr.
Wages are rising at a 3.2-percent clip, the most effective displaying in a decade. More employees are coming again into the labor drive.
“With data like this, household consumption will remain strong and there will be no recession,” Eisenberg predicts.
Beaulieu affords a special set of numbers. Exports are slowing, housing is slowing, enterprise confidence is falling and in an ominous improvement, retail spending is beginning to rise at a slower fee. He predicts the financial system will peak in the second quarter earlier than sliding decrease in a downturn that lasts a couple of yr.
But he isn’t calling for a extreme downturn. Business-to-business suppliers will really feel it greater than customers. Capital funding will drop, and uncooked materials costs will weaken. Home worth positive factors will average, with exercise in nonresidential actual property turning down a couple of yr after the bigger financial system.
The downturn will usher in what Beaulieu describes because the roaring ’20s, an prolonged stretch of robust economic progress interrupted by just a few average downturns. A scarcity of employees will drive up wages, and immigration will likely be an essential subject to watch.
Wage hikes will push inflation to ranges not seen because the 1970s and early 80s with average positive factors in the fist half adopted a lot steeper worth will increase in the second half.
It will likely be a interval of nice cultural change as millennials assert their economic and political energy. The subsequent decade will likely be a interval of elevated prosperity and powerful inventory positive factors, nevertheless it won’t finish effectively, he mentioned.
An growing older inhabitants, rising well being care prices, rising authorities entitlements, larger inflation, and unsustainable borrowing will all mix to crash the U.S. financial system and usher in one other Great Depression, Beaulieu mentioned.
The 2030s will likely be a misplaced and painful decade for individuals who haven’t ready, he warns.
Perhaps a Cassandra — a maker of dire predictions — but when Beaulieu is correct in his name for a 2019 recession, it is perhaps price taking heed.