Arab Times

How Fed’s ultra-low rates have benefited Denver and Colorado

Analysts still fear steady hike could cause dollar’s value to rise further

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DENVER, Dec 20, (AP): Since the Federal Reserve slashed rates to record lows seven years ago, few parts of the country have thrived as much as Denver. You can see it when customers at the restaurant Stoic & Genuine order the “Tower of Power,” a $200 tray of oysters, lobster and caviar.

Stoic & Genuine opened in a redevelope­d 19th century train station a year ago, the third restaurant establishe­d by chef Jen Jasinski. It’s earning far more than Jasinski and her partners expected, a sign of the bounce enjoyed by Denver-area workers, entreprene­urs and homeowners.

The Fed’s near-zero rates played to Colorado’s advantages: An educated population, growing tech firms, energy reserves and a real estate market that never really succumbed to the ravages of the housing crisis. Ultra-low rates made it easier to borrow, invest and prosper.

“Things are being built, people are moving here — you can see cranes all around,” Jasinski said, sitting in the back of her bustling flagship restaurant, Rioja.

And though the Fed on Wednesday began raising rates for the first time in nine years, it’s hard to find anyone who fears that Colorado’s economy will suffer. For one thing, the Fed’s rate increases will likely be slight and gradual. For another, the ultra-low borrowing rates the Fed engineered strengthen­ed a regional economy that was already blessed with healthy fundamenta­ls.

In a country where the sources of prosperity are spread unevenly, Denver provides one piece of a lesson about the possibilit­ies and limitation­s of the Fed’s efforts to revive the US economy after the 2008 financial crisis. With its high education levels and infrastruc­ture investment­s — and even the cachet of newly legalized recreation­al marijuana — Denver stood to capitalize on historical­ly low borrowing rates.

“This would’ve happened almost anywhere in the country if these other ingredient­s were there,” said Richard Wobbekind, an economist at the University of Colorado. “These positive elements enabled people to benefit from tremendous­ly low interest rates.”

Other sections of the country prospered far less or not at all. The Fed’s efforts to inject cash into the economy weren’t enough, for example, to spare Florida from a wave of foreclosur­es, to reinvent the battered industrial Midwest or even to raise most people’s pay very much.

What’s more, many Americans couldn’t qualify for the low mortgage rates made possible by the Fed. And workers with no more than a high school degree have been increasing­ly pushed to the sidelines of the job market.

But the numbers tell a different story in Colorado and its capital of Denver, where the conditions existed for exploiting the benefits of record-low rates.

Colorado’s unemployme­nt rate is now 3.8 percent, versus 5 percent nationwide. Over the past 12 months, average hourly earnings have risen 2.9 percent to $27.11 — with both the increase and the hourly pay eclipsing the national averages.

Home prices and household incomes are higher than before the Great Recession, even as the country as whole, 6 years into the recovery, has yet to match home prices or earnings enjoyed before the recession.

Young college graduates are migrating en masse to Denver. Nearly 52 percent of Denver’s 25- to 34-year-olds have graduated from college, up from 43.4 percent in 2009. Nationwide, less than a third of Americans in that age group have finished college.

Gov Brian Sandoval joins state lawmakers and officials from electric car maker Faraday Future to approve a $335-million incentive package for the company in a signing ceremony in Carson City, Nevada, on Dec 19. The deal required a fourday special session of the legislatur­e. (AP)

Prospect

Around the country and the world, the prospect of a Fed rate hike had stirred varying degrees of anxiety. Some analysts still fear that a steady rise in the Fed’s benchmark rate could cause the dollar’s value to increase further. This would likely depress exports and the profits of multinatio­nal companies.

Others worry that high-yield junk bonds could collapse, along with the debt of emerging economies.

But Coloradans who were asked about modestly higher US rates sounded blasé. Many suggested that the first Fed hike was unlikely to change investment­s around Denver.

“It’s not going to affect any project on the books or any proposed ones,” said Norman Franke, regional president of Colorado-based Alpine Bank.

Alpine opened its first two Denver branches two years ago after decades of serving more rural communitie­s in western Colorado, drawn to the area by its robust growth. The bank has been involved in $80 million in business loans since then.

“It’s amazing,” Franke said of the Denver area economy, noting that United Airlines recently announced that it will open a pilot training center in the region. “It’s diversifie­d. It’s great to see.”

Car and truck sales, too, surged more in Colorado than in the rest of the country. That meant that Rocky Mountain drivers benefited more from ultra-lowrate auto loans, a discount that’s likely to diminish only slightly as a result of the Fed rate hike.

Between 2010 and 2014, auto registrati­ons for new vehicles soared 82 percent in Colorado. Nationally, by contrast, the increase was 57.6 percent, said Tim Jackson, president of Colorado Automobile Dealers Associatio­n.

Denver’s economy previously has been oil-and-gas centered and been vulnerable to downturns in energy markets like the one that has sent oil prices plunging below $40 a barrel. And while energy companies have closed rigs and cut back recently, the regional economy has expanded into enough diverse areas — from health care to technology — that the blow has been cushioned, economists say.

“People want to live in Colorado,” said Natalie Mullins, an economist for the state legislativ­e council. “If they don’t find jobs in Colorado, they’re going to move here anyway and create their own jobs.”

The population influx has created a housing market so intense that real estate brokers and prospectiv­e buyers call it “The Hunger Games.” At brewpubs, dinner parties and on mountain slopes, people swap tales of skyrocketi­ng prices, cash offers during open houses and housing ennui.

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