- Colorado is forecast to avoid a recession in 2026, with real GDP growth near 2.9% despite broad headwinds.
- Job growth is expected to stay unusually weak at about 0.6% (~17,500 jobs) as slower population growth and reduced migration constrain labor supply.
- Education and health services, government, and trade/transportation/utilities are projected to add jobs, while information, professional and business services, and leisure and hospitality may contract.
- Unemployment is projected to edge down even as inflation ticks higher, and economists warn the outlook could slip toward contraction by 2027 if conditions worsen.
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Colorado’s 2026 economic outlook presents a picture of steady but subdued growth. According to the latest forecast from CU Boulder’s Leeds School of Business and its Business Research Division, the state’s real GDP is expected to increase ~2.9% in 2026, up from ~2.1% in 2025, outpacing national growth estimates. However, despite this output expansion, employment growth is weak: 0.6%, or about 17,500 new jobs, a slight improvement over 2025 (estimated at 0.4%), but still unusually low by historic Colorado standards.
One of the central constraints driving this subdued job growth is labor supply, which is being squeezed by multiple demographic forces: slower population growth (estimated at 0.6% in both 2025 and 2026), reduced net migration (domestic and international), and retirements among older cohorts. While unemployment is expected to decline from ~4.5% in 2025 to ~4.1% in 2026, this reflects labor shortages rather than slack in demand.
The sectoral outlook is mixed. Gains are expected in education & health services, trade, transportation & utilities, and government. Meanwhile, sectors such as professional & business services, information, and leisure & hospitality are forecast to shrink modestly in 2026—all facing unique headwinds, including slower consumer demand, regulatory changes, and shifting migration patterns. Despite the constrained labor market, consumer spending remains resilient; retail sales and consumption continue to grow, even as investment and government spending expand more slowly, helping support overall GDP growth.
Strategic implications from this outlook include potential risks and opportunities. On the risk side, external risks—tariffs, inflation, high interest rates, climate and policy uncertainty (especially immigration and health care)—could exacerbate downside. If job losses spread or consumption falters, recession risk could creep in by 2027. On the opportunity side, limited population growth may ease housing demand and affordability pressures; productivity gains will be essential, particularly in sectors adversely affected by staffing shortages.
Open questions to monitor: Will policy interventions (immigration reform, labor force participation incentives) reverse labor supply constraints? How sensitive will Colorado’s leading sectors be to national monetary policy shifts, especially if rate cuts stall? And to what extent could rising costs (inflation, housing, health care) dampen consumer resilience?
Supporting Notes
- Real GDP projected at ~2.9% growth in Colorado for 2026, up from ~2.1% in 2025; state GDP outpaces national rate.
- Job growth forecast at 0.6% in 2026 (~17,500 jobs), modestly above 2025’s ~0.4% growth; similar low population growth (≈0.6%) for both years.
- Unemployment rate expected to decline from ~4.5% in 2025 to ~4.1% in 2026, driven by labor supply tightening.
- Industries expected to gain jobs: education & health services; trade, transportation & utilities; government. Industries expected to lose: professional & business services; information; leisure & hospitality.
- Consumer spending and retail sales remain resilient despite falling consumer confidence, helping support growth in output.
- Main risks: tariffs; inflation & interest rates; labor & immigration constraints; elevated housing costs; effects of demographic shifts.
- Population growth causes: natural increase (~19,500 people) and net migration (~15,700), totaling ~35,100 in 2026, but rates remain modest.