As 2024 draws to a close, we see El Paso County’s economic landscape continue to align with national trends.

Aligning with trends may sound boring, but when I moved here, our region typically underperformed the nation. And now, the US economy is doing very well. In fact, I recently revised my GDP forecasts for the rest of this year and next year due to continued resilience in consumer spending, a strong labor market and other indicators. The U.S. economy grew at an annual rate of 2.8 percent in the third quarter, the Commerce Department reported Wednesday; this is considered a healthy rate, although GDP has declined from the previous quarter’s 3% growth.

Remember, the “trend” growth was 2%, so anything above that is pretty impressive, especially when you consider other developed countries that are struggling. The international economic scoreboard we do keeps me up to date on the Eurozone (EA), and that region is struggling. Germany, usually strong which accounts for almost 30% of EA’s economy, has had negative GDP rates for a year. The US has some serious structural problems (for example, spending $1 trillion a year on debt interest payments – more than total annual military spending), but we have some key comparative advantages that put us ahead of many other economies. I have therefore revised my estimates for the GDP growth rate to 2.8% for the full year 2024 and 2.2% for 2025.

My optimism about US economic growth is despite shaky consumer sentiment, which is a good leading indicator for the economy as two-thirds of GDP comes from personal spending. The University of Michigan consumer sentiment index for October rose to 70.5 from 70.1 in September. Although it has improved, sentiment is still low compared to historical levels, mainly due to today’s (much higher) prices relative to the benchmark (eg January 2020) as well as uncertainty surrounding the upcoming presidential election.

No doubt the presidential candidates have quite different political agendas, but since the polls show a very close race, I think about half of consumers and businesses will be happy with the result, and the other half won’t. Therefore, consumer spending and business investment will generally not change significantly in the first year or two after the election.

Also, policy changes take time to take effect. There is an additional reality of whether Congress will pass the proposed legislation. We would need to have a majority party in Congress that aligns with the new president’s party to have any major changes in legislation.

On a positive note, inflationary concerns have largely subsided. The consumer price index (CPI) for all items came in at 2.4% in September year-on-year, down from 2.5% in August. When you break down the CPI, we see that gas prices are down 15.3% from a year ago (gas is currently under $3 in Colorado Springs after the high prices seen over the summer).

Headline inflation wouldn’t have fallen as much if gas prices hadn’t retreated — and we know that can change.

A more permanent component of inflation is auto insurance, which has risen 25% on average in the US, while home prices are 45% higher than before the pandemic (and up 4.9% year-over-year). I recently did a segment on the rising cost of homeowners insurance with hail storms and fire threats. But Coloradoans are also experiencing the pain of increased health insurance premiums.

The Peterson-KFF Health System Tracker reported, “Since 2000, the price of health care, including services provided as well as insurance, drugs, and medical equipment, has increased 121.3 percent. In contrast, prices for all consumer goods and services rose. by 86.1% in the same period.” And despite being one of the healthiest states, Colorado ranked 10th among states for the largest health insurance increases in the nation in 2024.

I now include health care cost statistics in my presentations showing that in 2022, per capita health care spending in the US was $12,742, compared to $5,312 for the OECD (other developed nations). Life expectancy that year in the US was 76.1 and 80.6 for the 38 OECD countries. All of this is remarkable from a growth perspective because health insurance is part of “services” inflation (as is all insurance) and because health care spending comprises a large portion of government spending (and the $36 trillion debt dollars).

Yes, prices are much higher than early 2020 levels (and I think that could have a substantial impact on how people vote), but the rate of growth is now slower, which is why interest rates are coming down . We had a 50 basis point cut in September and are expected to have two more cuts of 25 basis points in 2024, a total of 100 basis points in 2025 and 50 basis point cuts in 2026, which would bring us to a terminal rate of 3%.

While mortgage rates have fluctuated little in response, many expect the 30-year mortgage rate to fall below 6% in 2025.

Nationally, the labor market continues to show signs of resilience. US job openings rose to 8.04 million in August 2024, a 4.3% month-over-month increase. Additionally, job attrition rates and layoffs are steady, indicating that workers are keeping their jobs and companies are keeping their employees. In Colorado Springs, job openings fell marginally from 19,449 in August to 18,928 in September. However, the number of unemployed fell more sharply, reducing the ratio of workers to available jobs from 0.89 to 0.87. The number of people in the labor force increased by 1,425 between August and September, while the number of employed people increased more (+2,390). However, this brought our regional unemployment rate down from 4.5% in August to 4.2% in September.

Similarly, Colorado’s unemployment rate fell slightly from 4.3% in August to 4.1% in September, while the national unemployment rate fell from 4.4% in August to 3.9% in September , a notable improvement.

In other exciting jobs news, the Colorado Economic Development Commission recently approved tax credits to stimulate performance-based job growth for WMD Squared Engineering (which is setting up at The Catalyst Campus for Technology & Innovation) and hopes to same for other undisclosed data. management company.

These new companies are expected to bring several new competitive wage jobs in engineering, sales and software development to the El Paso County area. Other new development includes a new business district in north Colorado Springs (which used to be zoned agricultural). It’s close to my house and I can’t believe the development in this part of town.

The housing market in the Pikes Peak region continued to cool in September. Home sales fell from 1,064 in August to 933 in September. This was reflected by a decline in single-family building permits, which fell from 199 in August to 179 in September. No multifamily permits were withdrawn in September, up from 16 housing units in August. Clearly, the multifamily building frenzy is largely behind us.

It is worth noting that the apartment vacancy rate according to HUD was 12.2% in the second quarter of this year. This gives the appearance of “too many apartments and no shortage of housing,” but what we’ve mostly built in the last few years are luxury rentals — not in the more affordable range that younger and older renters especially need.

Commercial real estate in the region appears to be on a downward trajectory, with vacancy rates increasing for office space (from 10.1% in Q2 to 10.4% in Q3), medical office space (8.6% to 9.1%) and commercial premises (4.7%). to 5%). Rental rates declined for office and retail space, while they remained about the same for medical office space. Vacancy and rental rates for industrial space have remained steady, which follows national trends.

I would like to conclude by revisiting my earlier comment about the US having a comparative advantage over other developed nations. The US has abundant natural resources and is therefore more self-sufficient, which insulates us from resource shocks like the Ukrainian crisis (27% of our GDP comes from trade vs. the Eurozone at 90%).

The US dollar is the world’s reserve currency, so other countries/investors buy our bonds. This funds our debt, which is a bittersweet thing. We have a high level of innovation and entrepreneurship when you look at patents and business start-up rates. We are indeed aging, but not as fast as our European counterparts (our average age is 39, and Germany’s is 47). And while immigration is a contentious issue, we have more immigrants per million people than EA, and immigrants fuel innovation and entrepreneurship. It also fills a lot of jobs in healthcare and hospitality.

I like to end on a positive note.