Colorado labor market shifts amid wage hikes, automation

This article appears in the Winter 2025 issue of ColoradoBiz under the headline, Colorado labor market transformation.

Despite a drop in the state’s unemployment rate, Colorado’s job market is a study in contrasts.

While the Colorado Department of Labor and Employment (CDLE) reported a decrease in the August unemployment rate to 4.2%, Rick Hermanns, CEO of global staffing company HireQuest, warns that rising minimum wages and the rapid adoption of technology are creating significant stress and a softer unemployment landscape.

Hermanns points to soaring labor costs as a major driver of change in employer behavior. With Denver’s minimum wage set to reach $19.29 per hour in January, up from $18.81 in 2025, businesses are moving aggressively to recalculate budgets.

“Part of it is when your least costly employee is nearly $20 an hour, you start watching that number more carefully, and you invest in technology to remove those employees,” Hermanns said.

The statewide minimum wage, which is lower than Denver’s, is set to increase to $15.16 per hour on Jan. 1. Other Front Range communities also require a lower minimum wage, with Edgewater coming in at $18.29 per hour; Boulder County at $17.99; and the city of Boulder at $16.82.

Another reason for the increase in hourly wages is a recovering tech industry, said Tim Wonhof, information director for the CDLE.
After rising for a few years, wage growth slowed in 2025. At the same time, inflation has flattened or declined slightly.

“A year ago, those in the tech industry were facing layoffs,” Wonhof said. “I would say that’s probably recovering a bit, and those jobs are probably driving the increase in hourly earnings.”

High labor costs, significantly greater than the $7.25 federal minimum wage, is accelerating the adoption of automation and artificial intelligence (AI), particularly in roles involving rote administrative functions.

The result is a substantial reduction in workforce needs. For example, insurance agencies are managing the same volume of business with a third fewer employees, and warehouses that once required 150 people no longer operate with just 30, thanks to sophisticated logistics software.

The economic strain is already visible in the construction sector, which has long been a pillar of Colorado’s business-friendly image. The combination of high minimum wages and economic factors such as tariffs on metal and building products has squeezed the industry, leading to a 25% to 50% decline in construction staffing requests in late 2024.

CDLE data for August 2025 also showed a month-over-month loss of 200 jobs in the construction sector and a year-over-year loss of 800 jobs.

Employers are responding to these pressures by:

• Shifting work to lower-cost states.
• Investing heavily in automation for administrative and production tasks.
• Lengthening hiring timelines and becoming increasingly selective with candidates.

Temporary jobs, often an early indicator of a weaking economy, are among the first to be cut.

The overall decline in the employment rate to 4.2% in August was driven by a decrease of 9,000 unemployed people, alongside an increase of 4,200 who are employed.

But this drop may also be influenced by broader structural shifts, including an aging workforce and the retirement of baby boomers, which is causing the labor force to decline.

Wonhof said it’s not just retiring boomers who are contributing to the decline in employment. Lower immigration under President Donald Trump is also a factor, as is the drop in youth in the workforce.

“Unemployment rates among youth are higher than in a long time,” he said. “Maybe kids are going back to school or finding it harder to find work. Unemployment in 16- to 19-year-olds is higher than they were before the pandemic. It might reflect a structural shift in Colorado’s economy.”

While administrative roles are expected to continue to soften as technology replaces human tasks, Hermanns identifies a lucrative path for younger workers in specialized trades.

“The people who are going to do well in the next three to five years are the ones who are mechanically inclined, the ones who can keep the Roomba running,” he said.

The earning potential for certified skilled tradespeople, such as plumbers, aging carpenters and electricians, is growing because of a nationwide shortage of qualified workers and the effect of rising minimum wages, which are pushing up the entire pay scale.

So, what’s in store for 2026? Wonhof says it’s hard to predict and that the federal government shutdown prevented the department from making broad assumptions because some data is not available.

“We don’t have a crystal ball,” he said. “Previous projections assumed a rate of growth of 1.3% for 2026, but we made those expectations before a lot of those things impacted the industry, such as tariffs and inflation.”