Utah Economic Outlook
Autumn 2007
Written by Jeff Thredgold, President, Thredgold Economic Associates Economic Consultant to Zions Bank
Top Ranked: Job Creation
The Utah economy continues to rank as the nation’s strongest as measured by the pace of net job creation and the rise in existing home prices. The state’s leadership position is likely to continue in coming months even as both sectors experience some slowing.
The Utah economy added roughly 54,500 net new jobs during the most recent 12-month period, a powerful 4.5% growth pace. The Utah economy continues to add jobs in each of the state’s 11 major employment sectors.
The flip side of powerful employment gains is extremely tight labor availability. Utah’s unemployment rate averaged 2.5% in 2007’s first eight months, the lowest average in the state’s history, and easily one of the lowest average rates in the nation. By comparison, Utah’s jobless rate averaged 2.9% in 2006, 4.1% in 2005, and 5.5% during 2002 to 2004. High levels of net in-migration have been instrumental in keeping job creation strong.
Utah’s construction sector is evolving into one less dependent upon single-family home construction and one more balanced with new and existing commercial real estate projects. Such a development is timely as U.S. and global credit tensions related to nontraditional home finance programs remain high.
Top Ranked: Rising Home Values
The state’s new single-family home construction market has slowed, in line with weaker performance across the nation. Such slowing has occurred even as the latest national data continues to show Utah recording the nation’s strongest pace of home price appreciation.
Home price data from the National Association of Realtors measuring second quarter 2007 performance versus 12 months earlier ranked Salt Lake City as having the largest median (half cost less, half cost more) price increase in the nation, with a rise of 21.9% to $233,100.
The report noted that the median price for existing homes across the nation declined by 1.5% to $223,800. Prices rose in 97 metro areas, while declining in 50 communities.
The Office of Federal Housing Enterprise Oversight (OFHEO) ranked the average Utah existing home first in the nation in the 12-month period ending June 30, 2007, with a 15.28% price increase. Provo-Orem, Salt Lake City, and Ogden-Clearfield each ranked among the nation’s top four markets for average home price appreciation. The OFHEO data noted that the average U.S. home value rose 3.19% during the past year, with dozens of communities registering modest price declines.
The average U.S. home value rose 50.76% during the five-year period ending on June 30, 2007. Arizona, California, Florida, and Nevada, states which saw home values jump on average more than 90% during the past five years, now struggle with weak prices, overbuilt markets, rising foreclosures, and serious subprime mortgage lending challenges.
Many Sellers
Strong Utah real estate performance has now given way to a mismatch between buyers and sellers. Record inventories of Wasatch Front homes for sale, particularly of higher-end homes, suggest home price appreciation has largely run its course. Serious strains within the mortgage finance sector for higher priced homes only aggravate the current problem. Lower-priced homes face lesser challenges.
Costs Of…
One reason new companies and workers are drawn to Utah is the reasonable cost of doing business and cost of living compared to other areas across the nation. The August 2007 Utah “cost of doing business” estimate of Economy.com was 91% of the U.S. average. Similar costs for Salt Lake City and Provo-Orem were 97% and 93%, respectively.
The “cost of living” estimate of Economy.com for Salt Lake City was 95% of the U.S. average, with Provo-Orem at 89%. The most recent data from the ACCRA cost of living index registered 101.7 for Salt Lake City, with Cedar City at 94.8 and St. George at 100.8.
Winter Sports
The state’s growing winter sports industry anticipates another solid year. Each of the past four years has seen new highs in skier days. Deer Valley Resort was recently ranked as the nation’s top ski resort by Ski magazine, the third time in seven years the resort has claimed top honors. Park City Mountain Resort ranked sixth in the latest survey.
Utah Outlook
The nation’s strongest state economy is likely to slow somewhat during the next 6-12 months tied to more sluggish U.S. economic growth, housing imbalances, global credit anxiety, and extremely limited labor availability. Even so, the state will continue to rank at or near the top of the states.
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