Colorado’s Economic & Policy Bullwhip

If you’ve ever had the distinct displeasure of taking a class on logistics and inventory management, you learn about “the bullwhip effect.” Succinctly, it’s the problem caused by lagging inventory demand. For example, you have 10,000 widgets to sell this month, but demand is for 12,000. So next month, you order 14,000 because you want to fulfill the original 10,000 you’d expected, the 2,000 you missed out on last month, and then order another 2,000 in anticipation that demand will be the same. But because demand can be more or less elastic over time, you find that orders for the next month are suddenly only 9,000 units. Not only did you miss out on 2,000 in sales last month, but you’re now over-stocked by 5,000 units. So next month you order only 4,000 units, anticipating the same demand as the prior month, only to receive 11,000 orders. On and on the effect goes, magnifying both the costs of missed sales due to lack of inventory and the costs of inventory storage when you over-order and have supply exceeding demand.

What’s the relevance of this particular business principle in the context of Colorado’s economy and policymaking? A popular idiom is useful here: “Hard times make for strong people, strong people make easy times, easy times make weak people, weak people make hard times.”

This week, our team had the pleasure of enjoying the Vectra Bank Economic Summit down in Denver, where we enjoyed presentations by Economists Tara Bayke and Dr. Richard Wobbekind, on the state of both the national and Colorado economy. While they covered quite a great width and breadth of subject matter, a couple of salient economic points highlight that Colorado may be undergoing a rippling effect of economic and policy changes that resemble our titular bullwhip effect. So this week, we discuss those particular metrics and measures, and go on to cover what issues may arise as a result.

The First Problem: Colorado’s Economic Performance

If you look back about twenty years, Colorado was a top-tier state in almost every regard. From 2008-2023, Colorado ranked in the top five states for real GDP growth, employment growth, population growth, personal income growth, per capita personal income growth, labor force percentage growth, and FHFA home price index growth. Effectively, the economy boomed since the Great Recession and well past the main effects of COVID on the Colorado economy.

Measuring 2009-2024, some of these metrics began to slip. Employment growth fell down to 7^th in the nation, and population growth, labor force percentage growth, and FHFA home price index growth fell to 6^th. Measuring the year 2025? Things get far worse.

Dr. Wobbekind reported the following for 2025:

• Real GDP Growth: 18^th
• Employment Growth: 18^th
• Population Growth: 29^th
• Personal Income Growth: 29^th
• Per Capita Personal Income Growth: 33^rd
• Per Capita Personal income: 9^th
• Average Hourly Wage % Growth: 48^th
• Average Annual Pay % Growth: 23^rd
• Average Annual Pay: 7^th
• Unemployment Rate: 21^st
• Labor Force % Growth: 43^rd
• Labor Force Participation Rate: 8^th
• FHFA Home Price Index Growth: 48^th
• Job Openings Rate: 44^th
• Worker Shortage Ratio: 40^th

Essentially, while year-over-year figures are always more volatile than longer-term trend figures, Colorado’s economic performance indicators fell off a cliff. Net migration fell to almost 1/3^rd of the prior year, with 2025 representing the first year since 2004 that Colorado’s population declined on an intrastate basis (e.g., more people leaving the state for other states than coming to Colorado from other states).

The Second Problem: The Colorado Job Market

By all indications, you’d think it was a great time to be a job seeker. As recently as five years ago, there were 2 unemployed people for every job opening, but today, the ratio has shrunk to 0.9-1.16 people per job opening (comparing figures from both Bayke and Wobbekind). Yet, this news is accompanied by the well-known observation that layoffs in the tech sector are ubiquitous at the moment, and endless anecdotes of people submitting hundreds of applications before finding an opportunity somewhere. Yet with a ratio essentially at 1:1 parity of job seekers for jobs, and adding on the Colorado unemployment rate of 3.9%, what’s the problem?

While we can’t disregard that the labor market is more complicated than a mathematical ratio, we have to also remember the old expression: “There are lies, damn lies, and statistics.” Recall that job-seeking and unemployment figures are typically measured based on the number of people claiming unemployment benefits from the states and reporting their job-seeking behavior. The problem? In Colorado, the maximum duration you can claim unemployment benefits, if you’re eligible, is 26 weeks. Meaning that those who haven’t found a job within 6 months of losing their prior job fall off the metrics. Thus, while the ratio of job-seeking individuals to positions is not so clearly measured by the proportion of job postings to those on unemployment benefits, despite our best efforts to the contrary.

This has been further exacerbated by impacts on select industries. While Colorado’s largest job sector by growth is Education and Health Services (don’t ask me why they smash these together, I’m just reporting the figures), the second fastest declining industry is the leisure and hospitality field, which is anticipated to shrink by several thousand jobs across the state this year. We already see evidence of this in practice. A local major regional distributor of beverages to both restaurants and retail establishments has just laid off almost 600 employees around the state. We’ve seen local breweries merge in an effort to leverage economies of scale to stay afloat. And while flights into and out of DIA have increased year over year like clockwork, more and more of those in transit are actually just having a layover at DIA rather than disembarking and heading out of the airport and into the state’s local economy.

The Third Issue: Easy Times > Weak People > Hard Times?

Recall the backdrop to this discussion: the bullwhip effect. Fifteen years of unbridled economic prosperity have made Colorado a singularly excellent destination in the United States. We’re welcoming the Sundance Festival, the Front Range is in contention for a major multi-billion-dollar Quantum program funded by the Federal Government, and we’ve brought plenty of innovation and improvements to quality of life for years. But this largesse and privilege have led to a shifting in policy at the state level. Bear in mind, as I talk about this, that I’m not here to opine on Democrats or Republicans or otherwise to say whether any policy I’m about to describe is a good one or a bad one in isolation; I’m talking about the “macro-policy” rather than the “micro-policy” if that makes any sort of sense.

Today, in the 2026 Colorado Legislature, as I write this, there are 154 bills proposed that could have an impact on businesses and the labor market. I think all of the sponsors of each of the 154 bills would go so far as to say: “These are all intended to have a positive effect.” I don’t disagree with the motivations or intentions of any of the bills as far as I’ve been able to peruse them. They aim to do everything from improving Union laws in the state, to simplifying local zoning and ordinance regulations, to reducing the possibility that you could accrue a lifetime’s worth of debt in a single hospital stay. Some are even unequivocally good, such as an extension of the Colorado Child Care Contribution Tax Credit, which gives you an additional charitable deduction when you donate to eligible 501(c)3 organizations that provide childcare.

Yet many of the proposals come with burdens. Whether they be purely administrative in nature or financial, there is no free lunch. Each and every policy with any shot at making it through the legislature comes with a price tag; not solely in terms of tax revenue required, but also with a necessary compliance burden, whether that be in the form of additional HR hires, safety inspectors, or legal fees to ensure good faith compliance with the labor laws of the state. And why are these matters coming to the forefront? Simple: Because we’ve had good times, and good times are the primary diet of the notional “good idea” fairy. If necessity is the mother of invention, abundance is the father of foolishness.

The Bullwhip Effect: What Happens Next?

If the bullwhip effect is to be believed, our current economic conditions and policy-making apparatus are on the notional “downslope” of the economic and policy cycle. In fact, that’s actually already evidenced by the slowdown in 2024 and the steep drop in 2025, suggesting that the flood of “good ideas” has already started to weigh on economic conditions in the state.

Growth will slow, and then recession will kick in; not necessarily a literal economic and market recession where stocks collapse 20%, and unemployment shoots up to double digits. But the kind of recession where growth stunts for a protracted period of time and opportunity becomes scarce; where eventually things get bad enough that necessity kicks in and some of the “good ideas” we had a few years ago suddenly find themselves on the chopping block. A good example of this was the “builder’s defects law” passed over a decade ago that was based on the good idea of making it easier to sue negligent developers for defects in building housing; only to cause the market for condos and townhomes to dry up almost overnight, as no developers wanted to accept the potential liability. Fast forward to the present, and we have an affordable and accessible housing crisis in Colorado, if only in part due to that well-intended law.

So what will the current environment produce that causes such dire ramifications? Who’s to say? I’m far from a positive prognosticator, and Nostradamus has been dead for 450 years. But as the old adage goes: “History doesn’t repeat itself, but it rhymes.” The last time Colorado faced a confluence of economic slowdown and “good idea” policymaking, the Great Recession kicked in. I’m not here to claim that Colorado was causal in that, mind you, but it was still a rather painful time for all parties involved; and while we can see the benefits in the decade and a half that followed, the economy operates in a cycle, and we in society both thrive and wilt within that cycle as well.