Author: Steven L. Byers, PH.D.
Introduction
The economic performance of a state is generally measured by economic growth (GDP), unemployment, and labor force participation, among other metrics. CSI developed the Economic Performance Index to assess the overall economic performance of Colorado relative to other states. It is comprised of seven metrics: GDP per capita, labor force participation rate for people aged 18 to 64 years, net business creation, inequality as measured by the Gini Index, the percentage of people of all ages in poverty, the median household, and net interstate migration.
The index starts in 2011 and is calculated annually. Construction of the index involves ranking each of the seven-component metrics across 50 states and Washington, D.C. for each year and subtracting the rank from 100. Therefore, higher (lower) index values indicate the state is more (less) competitive. To arrive at the Economic Performance Index, each of the seven component metrics is weighted evenly. The indices for each state and D.C. are then ranked with 1 equaling the highest index value and 51 equaling the lowest index value.
CSI’s Free Enterprise Indices rely on the data available as of October of the previous year. Therefore, current data across policy areas may be different than that reported in the annual Free Enterprise Report. CSI updates and releases the report in December every year.
Key Findings
- Colorado’s relative economic performance ranks 13th
- Colorado’s economy as measured by GDP per capita has grown 78.6% since 2011 and ranks 8thnationally.
- The percentage of all people in poverty has decreased 3.9 percentage points from 13.4% in 2011 to 9.5% in 2023. Colorado’s relative performance improved from 17th in 2011 to 4th
- Median household income increased 53.4% from $58,629 in 2011 to $84,954 in 2023, higher than the 45.4% increase in inflation over the same period. Colorado ranks 9th
- Labor force participation increased 1.7 percentage points from 79.1% in 2011 to 80.8% in 2023. Colorado ranks 10th
- Inequality has decreased by 0.48 percentage points from 0.459 in 2011 to 0.457 in 2023. Colorado ranks 13th
- Net business creation per capita has increased from 18.2 per 100,000 residents in 2018 to 164.9 per 100,000 residents in 2023. However, Colorado ranks 13th
- Net interstate migration has decreased from 41,501 in 2011 to -9,324 in 2023. Colorado ranks 36th
Colorado’s Economic Performance Index
The Economic Performance Index measures Colorado’s performance relative to 49 other states and the District of Columbia and not the performance of Colorado in isolation. As shown in Figure 1, the Colorado Economic Performance Index was 85.7 in 2011 and peaked in 2017 at 90.3 before declining 4% from 2017 through 2023 to 86.7.
Colorado’s recent improvement is due to increases in four of the seven economic performance component metrics (Figure 2). As discussed later in this report, the industrial composition of Colorado’s economy differs from the rest of the country in ways that make it possible for it to be among the top state economies. For instance, Colorado’s reserves of oil and gas due to its geography constitutes a larger share of its economy than many states, and this sector tends to be among the highest for income derived from salaries and wages. Similarly, Colorado’s manufacturing sector is a smaller share of the economy than many states, and this sector tends to have a lower level of income derived from salaries and wages.
Colorado’s Economic Performance Index Component Metrics
Figure 2 shows the evolution of the CSI economic performance index component metrics between 2011 and 2023. Two of the seven metrics declined over this period. Net interstate migration decreased from 97 in 2011 to 64 in 2023. Median household income dropped from 92 in 2011 to 91 in 2023.
Increases in Colorado’s Economic Performance Index component metrics are generally due to increases in the underlying data specific to Colorado, with median household income being the exception, where the underlying data increased but worsened relative to all other states. Two Economic Performance Index component metrics declined, median household income and net interstate migration.
Figure 3 shows the percentage changes in the Economic Performance Index component metrics.
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Colorado Economic Performance Index Component Metrics
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| Net Business Creation per Capita | Net Interstate Migration | Inequality | Percentage of People of all Ages in Poverty | Median Household Income | GDP per Capita | Labor Force Participation Rate 18 to 64 (IPUMS) | Jobs & Economy Competitive Index | |
|
% Change 2011 to 2023 |
6.1% |
-34.0% |
13.0% |
15.7% |
-1.1% |
10.8% |
4.7% |
1.2% |
The Composition of Colorado’s Economy
The composition of a state’s industry has a significant impact on the performance of its economy relative to other states. The composition of Colorado’s and the U.S. GDP by industrial sector is shown in Figure 4. Additionally, a comparison of Colorado’s industrial share distribution is compared to the U.S. share distribution and is shown in the column labeled the relative share. The real estate-rental-leasing sector is the largest single contributor to GDP with 15.6% of GDP, followed by professional-scientific-technical services sector at 13.3%, and government and government enterprises at 11.2%.
Colorado’s current industrial composition differs from the U.S. overall in some key areas where GDP and wage growth is high. These include a larger share of professional, scientific, and technical services, 13.3% compared to 9.2% nationally, and mining-quarrying-oil and gas extraction is 2.8% versus 1.3% nationally.
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Colorado and U.S. Sector Share of Real GDP 2023 Q1 through Q3
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|
Industry |
Colorado Share of Real GDP |
Rank Within Colorado |
U.S. Share of Real GDP |
Rank Within U.S. |
Relative Share – Colorado to U.S. |
|
Private industries
|
88.8% |
88.5% |
|||
|
Agriculture, forestry, fishing, and hunting
|
0.3% |
20 |
0.8% |
20 |
0.42 |
|
Mining, quarrying, and oil and gas extraction
|
2.8% |
14 |
1.3% |
17 |
2.19 |
|
Utilities
|
1.2% |
18 |
1.5% |
16 |
0.81 |
|
Construction
|
5.1% |
8 |
3.7% |
10 |
1.39 |
|
Manufacturing
|
5.7% |
6 |
10.2% |
3 |
0.56 |
|
Durable goods manufacturing
|
3.7% |
5.9% |
0.63 |
||
|
Nondurable goods manufacturing
|
2.0% |
4.3% |
0.47 |
||
|
Wholesale trade
|
4.5% |
10 |
5.1% |
9 |
0.87 |
|
Retail trade
|
5.5% |
7 |
5.7% |
8 |
0.96 |
|
Transportation and warehousing
|
3.6% |
11 |
3.3% |
11 |
1.08 |
|
Information
|
8.0% |
4 |
7.1% |
6 |
1.12 |
|
Finance and insurance
|
4.8% |
9 |
6.9% |
7 |
0.69 |
|
Real estate and rental and leasing
|
15.6% |
1 |
13.4% |
1 |
1.16 |
|
Professional, scientific, and technical services
|
13.3% |
2 |
9.2% |
4 |
1.44 |
|
Management of companies and enterprises
|
2.5% |
15 |
2.4% |
14 |
1.05 |
|
Administrative and support and waste management and remediation services
|
2.9% |
13 |
3.2% |
12 |
0.91 |
|
Educational services
|
0.9% |
19 |
1.2% |
18 |
0.73 |
|
Health care and social assistance
|
6.1% |
5 |
7.8% |
5 |
0.79 |
|
Arts, entertainment, and recreation
|
1.5% |
17 |
1.2% |
19 |
1.21 |
|
Accommodation and food services
|
3.5% |
12 |
3.0% |
13 |
1.18 |
|
Other services (except government and government enterprises) |
2.0% |
16 |
1.9% |
15 |
1.05 |
|
Government & Government Enterprises
|
11.2% |
3 |
11.5% |
2 |
0.97 |
Figure 5 shows Colorado’s and the U.S. share of employment by each industrial sector. Colorado’s share of employment in mining-quarrying-oil and gas extraction is 2.1 times larger than for the U.S. Average income from salaries and wages tend to be high in this sector (Figure 6). Colorado’s employment share relative to the U.S. is also high in professional-scientific-technical services 30% higher than the U.S. share, and it is 30% higher in the information sector. Like oil and gas, these sectors tend to have high levels of income from wages and salaries.
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Colorado’s Distribution of Employment by Industry – 2022
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|
Colorado – Employment Distribution |
Colorado – % of Total Private Sector Employment |
U.S. – Employment Distribution |
U.S. – % of Total Private Sector Employment |
Relative Share – Colorado to U.S. |
|
|
Farm
|
49,226 |
1.3% |
2,567,000 |
1.4% |
1.0 |
|
Forestry, fishing, and related activities
|
13,906 |
0.4% |
966,800 |
0.5% |
0.7 |
|
Mining, quarrying, and oil and gas extraction
|
43,512 |
1.2% |
1,050,200 |
0.6% |
2.1 |
|
Utilities
|
9,613 |
0.3% |
605,600 |
0.3% |
0.8 |
|
Construction
|
279,748 |
7.6% |
11,867,800 |
6.3% |
1.2 |
|
Manufacturing
|
169,226 |
4.6% |
13,523,700 |
7.2% |
0.6 |
|
Wholesale trade
|
129,913 |
3.5% |
6,757,300 |
3.6% |
1.0 |
|
Retail trade
|
347,400 |
9.5% |
19,510,300 |
10.4% |
0.9 |
|
Transportation and warehousing
|
196,383 |
5.4% |
11,473,500 |
6.1% |
0.9 |
|
Information |
99,290 |
2.7% |
3,861,900 |
2.1% |
1.3 |
|
Finance and insurance
|
282,960 |
7.7% |
12,982,300 |
6.9% |
1.1 |
|
Real estate and rental and leasing
|
280,499 |
7.6% |
11,832,200 |
6.3% |
1.2 |
|
Professional, scientific, and technical Services
|
418,902 |
11.4% |
15,978,400 |
8.5% |
1.3 |
|
Management of companies and enterprises
|
54,843 |
1.5% |
2,953,800 |
1.6% |
1.0 |
|
Administrative and support and waste management and remediation services
|
219,213 |
6.0% |
13,058,300 |
6.9% |
0.9 |
|
Educational services
|
83,722 |
2.3% |
4,885,700 |
2.6% |
0.9 |
|
Health care and social assistance
|
367,415 |
10.0% |
23,545,500 |
12.5% |
0.8 |
|
Arts, entertainment, and recreation |
107,437 |
2.9% |
4,457,300 |
2.4% |
1.2 |
|
Accommodation and food services |
305,534 |
8.3% |
14,750,300 |
7.8% |
1.1 |
|
Other services (except government and government enterprises) |
211,741 |
5.8% |
11,616,100 |
6.2% |
0.9 |
|
Total Private |
100.0% |
100.0% |
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| Colorado’s Distribution of Income from Wages and Salary by Industry – 2022 | |||||
|
Colorado -Average Income from Wages and Salaries by Sector |
Colorado – % Share of Average Income from Wages and Salaries by Sector |
U.S. – Average Income from Wages and Salaries by Sector |
U.S. – % Share of Average Income from Wages and Salaries by Sector |
Relative Share – Colorado to U.S. |
|
|
Farm
|
$9,705 |
0.8% |
$10,169 |
0.9% |
0.9 |
|
Forestry, fishing, and related activities |
$17,953 |
1.6% |
$25,859 |
2.1% |
0.7 |
|
Mining, quarrying, and oil and gas extraction
|
$76,976 |
6.7% |
$63,214 |
5.2% |
1.2 |
|
Utilities
|
$116,650 |
10.2% |
$116,344 |
11.2% |
1.0 |
|
Construction
|
$51,446 |
4.5% |
$49,559 |
5.1% |
1.0 |
|
Manufacturing
|
$76,590 |
6.7% |
$76,518 |
7.7% |
1.0 |
|
Wholesale trade
|
$98,980 |
8.7% |
$85,653 |
8.4% |
1.1 |
|
Retail trade
|
$34,152 |
3.0% |
$33,109 |
3.0% |
1.0 |
|
Transportation and warehousing |
$36,852 |
3.2% |
$36,510 |
4.5% |
1.0 |
|
Information
|
$107,357 | 9.4% | $115,704 | 6.2% | 0.9 |
|
Finance and insurance
|
$53,379 |
4.7% |
$68,296 |
7.2% |
0.8 |
|
Real estate and rental and leasing
|
$17,124 |
1.5% |
$15,461 |
1.1% |
1.1 |
|
Professional, scientific, and technical services
|
$82,556 |
7.2% |
$78,619 |
6.1% |
1.0 |
|
Management of companies and enterprises
|
$135,345 |
11.8% |
$124,310 |
11.3% |
1.1 |
|
Administrative and support and waste management and remediation services
|
$44,456 |
3.9% |
$41,015 |
4.1% |
1.1 |
|
Educational services
|
$33,076 |
2.9% |
$40,082 |
3.2% |
0.8 |
|
Health care and social assistance
|
$54,806 |
4.8% |
$54,386 |
5.4% |
1.0 |
|
Arts, entertainment, and recreation
|
$28,085 |
2.5% |
$27,847 |
1.6% |
1.0 |
|
Accommodation and food services
|
$34,211 |
3.0% |
$29,790 |
2.6% |
1.1 |
|
Other services (except government and government enterprises)
|
$34,483 |
3.0% |
$29,249 |
3.1% |
1.2 |
| Total Private | 100.0% | 100.0% | |||
Economic Performance Index Components
To illustrate the idea that a state’s Economic Performance Index is a relative measure, each component metric index and metric value is evaluated below.
Net Business Creation per Capita
Net business creation per capita increased dramatically from 2011 to 2023. Based on the performance metric index relative to other states it increased from 82 in 2013 to 87 in 2023, in the top quintile nationally.
Figure 7
Net Interstate Migration
Net interstate migration fluctuates year to year but has been decreasing in Colorado over the past 13 years. In 2011 net interstate migration was 41,501 but fell to -9,324 in 2023. Relative to all other states and D.C. based on the economic performance metric index Colorado has dropped from 97 in 2011 to 64 in 2023.
Inequality
CSI utilizes the Gini coefficient to measure inequality. A Gini coefficient of 0 reflects perfect equality, where all income or wealth values are the same, while a Gini coefficient of 1 (or 100%) reflects maximal inequality among values, a situation where a single individual has all the income while all others have none.
Inequality in Colorado as measured by the Gini coefficient has decreased by 4.4% from 0.459 in 2011 to 0.457 in 2023. Colorado’s relative performance increased from 77 in 2011 to 87 in 2023. Colorado’s performance in terms of inequality is in the top quintile of all fifty states and Washington, D.C.
Percentage of People of Ages in Poverty
The percentage of all people in poverty in Colorado has improved since 2011, falling from 13.4% in 2011 to 9.5% in 2023. Relative to all 50 other states and D.C., it has improved from 84 in 2011 to 97 in 2023.5
Median Household Income
Median household income in Colorado has increased 44.9% from $58,629 in 2011 to $84,954 in 2023. This is slightly lower than the 45.4% increase in inflation over the same period.
Relative to 49 other states and D.C., as measured by the performance metric, Colorado has fallen from 92 in 2011 to 91 in 2023 but remains in the top quintile nationally.
GDP per Capita
Colorado’s per capita GDP increased 55% from $52,282 in 2011 to $93,371 in 2023. This resulted in an increase in the performance metric from 83 to 92.6
Labor Force Participation
Labor force participation in Colorado decreased 1.3 percentage points from 82.2% in 2011 to 80.9% in 2023. Compared to 49 other states and D.C., Colorado’s labor force participation rate is in the top quintile despite the competitiveness metric falling from 94 to 91.7