No surprise here. Global unrest with the Russian invasion of Ukraine plus ongoing and rising inflation have Colorado business leaders less optimistic about the economy this year than last, according to a new survey.
But has that changed how they’re going about their business?
According to a new analysis by Leeds Business Confidence Index, 55% of the 195 local business leaders surveyed said they expect to raise wages while just 8% plan to reduce staff and 1% plan to cut hours. Nearly half, or 46%, will increase prices or pass costs to consumers because of inflation.
“They’re pessimistic about the (economic) backdrop,” said Rich Wobbekind, senior economist and faculty director of the Leeds Business Research Division at the University of Colorado. “But in their own responses, they’re saying in the next three and six months, we’re going to hire more people, we’re going to invest in more capital. So, they’re still in expansion mode even though they’re concerned about the broader economy.”
Inflation in Colorado, by the way, is projected to increase 7.3% this year and slow to 2.8% next year.
The index measures business leaders’ optimism and above 50 is considered positive. And while most categories are still above 50, including how leaders feel about Colorado’s economy, concerns with global events and inflation caused the Leeds index to fall to 40.4 for the national economy for second quarter 2022.
Brian Lewandowski, the division’s executive director, said that business leaders tend to be more optimistic about the state’s economy than the nation’s. It’s because they live here and work here, so what’s happening outside the state isn’t as tangible.
“The one thing I would add,” he said, is “the expectation of inflation is almost as bad as actual inflation. And I sort of wonder if the same is true when looking at business confidence. So, it’s still positive right now, which is a good signal. But if business leaders signal pessimism about the future, if they expect the future to be worse than it is today, then that could have impacts on how they invest and how they hire and how they try and expand their business. So that’s a concern when it drops below 50.”
Colorado hotel workers had highest rate of job quitters
Colorado workers may finally be finding the jobs they want — or at least employers are doing their best to retain them — as the national rate of job quitters fell in March and leveled off in Colorado, according to new data from Gusto, a payroll and benefits services company with co-headquarters in Denver.
Colorado’s quit rate in March was at 3.01%, down from 3.03% in February, and nearly half the August high of 5.04%. The national average was 2.85% in March, down from 3.09% in February and 4.94% in August.
But something else is going on in accommodations, which is essentially the hotel industry. That part of the economy had a 10% quit rate in March, according to Gusto, which can analyze its own customer data to see trends before the national report comes out. Other service industries — including retail and food and beverage — also saw rates higher than Colorado’s overall quit rate of 3.01%, and the U.S. rate of 2.85%.
Gusto’s lead economist Luke Pardue theorizes this type of worker can find another job pretty easily these days. Companies from Amazon to United Airlines are all looking for workers who, at minimum, are pleasant to customers and show up on time.
“These industries where we’re seeing the highest quit rates, we’re also seeing the highest hiring rates,” Pardue said. “This is a sign that workers are really switching jobs within industries for higher pay, for better conditions or better benefits.”
However, he added, “A 10% quit rate in accommodations is not something we have seen (since) quit rates hit 10% in August of 2021, as many workers left seasonal positions as the summer ended. Also, a 10% quit rate is not something we have seen in other sub sectors recently.”
As hotels prepare for warmer weather and more visitors, they are again competing with one another as well as the rest of the hospitality, travel and restaurant industries that are also ramping up for what they’re hoping to be a more fortuitous season.
The cost of benefits
Scanning the help-wanted ads, it’s difficult to find hotel work without some sort of incentive beyond a paycheck.
The Sheraton Denver Downtown Hotel offers a $1,000 sign-on bonus to experienced cooks (the gig pays $22 an hour and includes health and retirement plans). Springhill Suites in Denver offered medical and retirement benefits, an RTD pass and a $750 hiring bonus for a room attendant (though that job appears to be filled).
The key here may be to offer benefits in the first place. And they might not be as much as an employer assumes. According to Gallup polling data, replacing a worker costs one half to twice the ex-worker’s salary.
Pardue calculated the cost of replacing versus offering retirement benefits, based on Gusto and Bureau of Labor Statistics data:
1. Retirement benefits reduced quit rates by 1.3 percentage points, or 15.6% for 12 months.
2. A company with 25 workers and 15.6% lower quit rate loses 3.9 fewer workers per year.
3. At an annual salary of $30,000, those 3.9 jobs cost, conservatively, $58,500 to replace.
4. BLS estimates that retirement benefits cost an employer 3.5% of a worker’s salary. For 25 employees, that’s $26,250 a year.
So, that’s paying out $26,250 a year versus $58,500.
“On our back-of-the-envelope calculation, the return is more than double the cost of a retirement plan. So, one thing that they actually can do is offer these low-cost or no-cost benefits that aren’t necessarily as expensive as, say, health insurance but have the benefits of retaining and attracting talent,” he said. “Offering, say, retirement benefits might seem like an upfront cost but it has these returns that more than pay for themselves.” After writing about unemployment, jobs and Colorado’s pandemic economy for two years, I finally got a chance to stop by a real, live job fair. Those in-person career events are not completely back, but at the invitation of United Airlines, I stopped by its event at the United Club at Empower Field at Mile High stadium on Tuesday.
The airline has been desperate for workers, and I’ve mentioned how they’ve tweaked their benefits in past columns, including bonuses of up to $10,000 and rolling out new starting wages of $19.64 an hour for baggage handlers and customer service representatives.
By the end of the day, 970 people stopped by for the event and 350 left with a job offer, United spokesman Russell Carlton told me. Of those offers, he said, “more than 200 were for customer service, a little more than 100 were for ramp agents and more than 20 for roles within our technical operations division.”
United plans to hire another 3,000 workers by 2026, but it’s not just to get back to its pre-pandemic levels. It’s about major expansion going on in Denver. The company is committed to adding another 200 daily flights and 20 more gates at Denver International Airport. Read more about the investment and jobs in my earlier story: “United Airlines needs more workers as it undergoes one of its largest Denver expansions in years”
This story is from The Colorado Sun, a journalist-owned news outlet based in Denver and covering the state. For more, and to support The Colorado Sun, visit coloradosun.com. The Colorado Sun is a partner in the Colorado News Conservancy, owner of Colorado Community Media.