The 2020 economic prediction season is underway, with the local kickoff event indicating Utah is well-positioned compared to other states.
At the Zions Bank 2020 Economic Outlook, Robert Spendlove, senior economist and public policy officer for the bank, listed several statistics showing Utah’s economic might outshines that of most other states and the nation overall.
“We are in such a good place in our state,” Spendlove told the crowd. “We continue to have one of the strongest, if not the very strongest, economy in the nation.”
Among Utah’s attributes is having the second-fastest-growing population, tied with Nevada and Arizona and trailing only Idaho, putting Utah “right in the middle of the fastest-growing area of the country,” he said. Utah’s population of 3.2 million is growing about 50,000 per year, about the size of the city of Taylorsville.
“It’s good because it’s feeding our overall economic growth, but it’s also something we need to be very serious about, looking at transportation and infrastructure needs in the state,” he said.
Likewise, Utah’s employment growth is tops in the U.S. and twice the national average. Healthcare is the strongest growth sector, followed by construction, and all sectors are growing. “At the national level, natural resources and mining was contracting, but in Utah it continues to expand,” he said.
Utah also stands apart from the nation by having strong manufacturing job growth, he noted. “Utah is anomalous. … We continue to see growth in our manufacturing sector. It’s actually one of our strong sectors. A lot of that is that manufacturing from other parts of the country is moving to Utah, so Utah is really resisting that weakness that we see at the national level,” he said.
Utah’s 2.4 percent unemployment rate is the nation’s second-lowest and tied for the state’s lowest level ever, but it’s constricting business growth. “What that is showing is we are just tapping out our labor market. Our labor market just keeps getting tighter and tighter. … It’s a double-edged sword, so we are really suffering from those labor shortages at the state level,” he said.
The only time the rate was as low as 2.4 percent was in 2007, heading into the Great Recession. But that lasted only a month or two before rising, he noted.
“I suspect that our economy is so strong that we may actually surpass or we may drop below that low unemployment rate from 2007 or we could hold steady at this very low rate, but we are in historic times in our labor market,” Spendlove said.
In addition to the low unemployment rate putting a strain on companies unable to find enough workers, Utah also seeing an “urban/rural divide” when it comes to labor, he said.
“One of the struggles that Utah is facing is bringing the benefits of the economy to the entire state, and right now the majority of that benefit is being felt in urbanized areas, along the Wasatch Front and Washington County or Cache County. … We know we’ve got a labor shortage and we’ve got available labor in other parts of the state, and now we need to make that connection and take those jobs where they can do the most good,” he said.
Another trouble spot in the Utah economy is that construction is unable to keep up with demand for new homes, resulting in higher home values. The Utah average dropped to about $200,000 after the Great Recession but now has reached nearly $350,000.
“Great if you own a home, not great if you’re trying to buy your first home,” is how Spendlove described the situation. “And that’s one of our biggest struggles in the state, is developing affordable housing for those first-time homebuyers, those low-income homebuyers. We’ve got to be doing more to bring that promise of home ownership to other groups that haven’t seen it in the past.”
Nationally, Spendlove said the economy is “looking good” but indicators are providing some mixed signals about what is ahead in 2020. The nation is in its longest economic expansion ever, but the degree of the expansion is “relatively” weak compared to previous recoveries.
The Dow has topped 29,000. Job creation is averaging about 200,000 per month but 2019 saw the third-lowest level for job creation for the decade. Construction and healthcare lead sectors in job growth, while manufacturing has seen weakness because of uncertainty tied to international relations.
“There’s no doubt that we are in the late stages of our economic cycle. Now, the question is, are we in the very late stages or just the later stages?” Spendlove asked.
While the national unemployment rate of 3.5 percent is a 50-year low, rising unemployment rates often are signs of coming recessions.
“If we see a jump from 3.5 percent to 4 percent or 4.5 percent, that could be an early indicator that a recession is on the way,” Spendlove said. “But the good thing is, we’re not seeing that right now and we’re not forecasting to see that.”
Inflation remains below the Federal Reserve’s 2 percent goal and consumer spending is up despite business investment contracting during the past two months. GDP growth slowed in the 2019 third quarter and should be between 1.5 percent and 1.8 percent in 2020.
“If we can’t get more labor, we can’t grow, and if we can’t grow the labor force, then we’re going to see it having an impact on our overall economic growth,” he said.
Overall, the nation appears to have dodged a bullet on the potential for a near-term recession. “It’s still a little early to know for sure,” Spendlove said, “but the signs are that we may have pushed that off and we’re at a much better place.”
Scott Anderson, president and CEO of Zions Bank, said the company plans to have follow-up economic outlook events every six months in order to help people “make good decisions on what we can do individually and as businesses in helping our economy continue to be robust and helping our communities move forward.”
“I think this is an interesting period of time,” Anderson said, “because I can’t remember a time when things have been going, relatively speaking, so well and yet at the same time we’ve had so many challenges.”