Colorado’s Secret to Crushing Unemployment

By | December 15, 2014 at 10:56 PM |

Colorado’s unemployment rate is down to an impressive 4.3 percent. That is the lowest level since March of 2008 and down from 4.7 percent in September of this year. A mere 13,000 Coloradans report that they are unemployed, the Colorado Department of Labor announced recently, and all but 7 of the state’s 64 counties are reporting unemployment rates under 5 percent.

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The Colorado unemployment rate has consistently been lower than the national average. Colorado’s unemployment rate peaked 9.1 percent in October of 2010, while the rest of the nation was poised to break 10 percent unemployment.

Today, the state’s unemployment rate is more than a percentage point below the national average of 5.8 percent — a substantial difference. All in all, the state has logged an impressive 36 consecutive months of job gains and ranks 9th in the nation for the lowest unemployment rate, making it one of the best examples of economic recovery in the nation. So, what’s Colorado’s secret to success?

The Secret to Success

In the wake of the now infamous Great Recession, legislatures made dramatic cuts to state and local governments across the country. Colorado, however, like Idaho and Utah, resisted the urge to take an ax to government expenditure and instead chose to support public sector workforces, something that proved incredibly advantageous in the long haul.

In states where state and local governments did put the hatchet to expenditures, (including Michigan, Louisiana, Rhode Island, and Connecticut, where public sector budgets were cut by over 5 percent over the course of the past 7 years) unemployment rates currently remain significantly higher than the national average.

Secondly, Colorado also reaps the benefit of being situated incredibly close to the Dakotas’ energy boom, which has helped to create jobs in the state. Lastly, Colorado also boasts a substantial population growth, which has helped to invigorate the economy, generating increased demand for public-sector services, like health care and education.

The state has seen population growth of close to 11 percent over the course of the past seven years, a rate that is nearly double the national average. This, in conjunction with an aging U.S. population, the introduction of Obamacare, and a growing focus on labor-market skills and childhood education, has all resulted in huge growth in the public sector, meaning more employment opportunities.

How Low Is Too Low?

Still, it should be noted here that an unemployment rate that is too low can actually cause the economy to operate inefficiently. A 0 percent unemployment rate might sound terrific, but in reality it can cause problems.

Economist Gary Horvath said that from an academic standpoint, the economy will begin to function inefficiently if the unemployment rate drops below 4.5 percent. This is because an unemployment rate below this threshold generates labor shortages and exacerbates competition between sectors for skilled workers.

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