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DENVER (KDVR) — Colorado businesses are bouncing back from the pandemic depths, but inflation is eroding wage gains.

Economic indicators are looking up for the Centennial State, according to a University of Colorado Boulder Leeds School of Business report published in collaboration with the Colorado Secretary of State. The state’s gross domestic product is climbing back up, unemployment is dropping and small businesses are hiring at a quicker clip.

Still, the specter of national inflation hangs over the bright spots. Inflation is overshadowing wage growth even though Colorado’s wages are outpacing the U.S.

“I think it’s really important that state lawmakers and every elected official do everything they can to support working Coloradans,” Colorado Secretary of State Jena Griswold said. “You know, the economy is optimistic right now. Coloradans’ average pay reached $33.28 an hour in December, which is up 8.2% in two years. But there are a number of cost increases, including housing and childcare.”

This puts Colorado ahead of national wage estimates by $2 an hour. The U.S. had an average wage of $31.31 per hour in December 2021, according to U.S. Bureau of Labor Statistics data.

The issue of living costs, however, is less about wages than purchasing power – how much your dollar buys.

Workers actually have less purchasing power now than they had before wages grew rapidly, according to Tyler Goodspeed, a former economic adviser for the White House during the Trump administration and now a fellow at Stanford University’s Hoover Institution.

“The interesting thing about 2021 was that we observed really big nominal wage growth nationwide, but that nominal wage growth was not enough to keep pace with overall inflation,” Goodspeed said. “So in real inflation-adjusted terms, nationally worker compensation actually declined by a little under 3% last year.”

Goodspeed echoed Griswold in his concern about housing prices. Early in the pandemic, supply chains restricted harder-to-secure items such as microchips. Later, the effects spread to utilities and groceries. In 2022, he predicts housing prices will inflate in price more than other spending categories.