Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank

Getting Better
During 2010, the Utah economy is expected to continue a transition from its most painful recession since the Great Depression to modest economic growth. Such expected improvement will be in line with slow but steady improvement in a majority of the nation’s states, including most of Utah’s neighbors.

All 50 states have recorded employment declines during the most recent 12-month period. Note: Washington DC has added a modest number of new jobs as the expansion of government continues. Such declines have ranged from 1.5% or lesser declines in North Dakota, Alaska, and Montana to declines exceeding 6.0% in Nevada, Michigan, and Arizona.

Utah’s job decline during the most recent 12-month period is estimated at 3.3%, placing the state in the “middle third” of the states. Utah’s year-over-year decline two months prior was 4.5%.

The state’s net loss of roughly 41,000 jobs during the past 12 months, while enormously painful, compares favorably to a loss of 57,000 jobs just two months ago. Such comparisons will continue to “improve” in coming months, with the state likely to see monthly employment gains by the summer.

Lost Jobs
Utah job losses have been concentrated in construction and manufacturing, with five of every eight jobs lost from these sectors. Additional losses have primarily occurred in trade, transportation & utilities and leisure & hospitality. A net gain of 10,000 jobs was recorded in education & health care, government, and information sectors during the past year.

The Beehive State unemployment rate remains relatively low when compared to other states, although revised data during 2010 is likely to reduce the difference. The Utah Department of Workforce Services estimated a 6.5% jobless rate in the most recent month, as compared to the nation’s 10.0% jobless rate in November. By comparison, the Utah jobless rate one year earlier was 3.5%.

Two Preconditions
As noted previously, two events must take place before the Utah economy can begin to grow again. The first of these is a return of U.S. economic growth, which has been underway since last summer. The second event is a return of global economic growth, a development now seemingly underway.

Economic Development
More concrete signs of renewed economic growth during 2010 will heighten competition between states to attract jobs. Too much of the focus will be on enticing employers from higher-cost states to lower-cost states, with costly incentives a key part of the equation.

Rocky Mountain states will focus on California companies. Smaller states in the Northeast and the Midwest will focus on employers in New York, Massachusetts, Illinois, and Michigan. While any successes in enticing out-of-state employers make for good “front page” news, two other components of economic development too often get the short ends of the stick.

Economic development is a three-part process…attraction of outside existing or new employers, retention of existing employers, and expansion by existing employers. What can Utah’s political and business leaders do to entice outside employers at reasonable costs? What can such leaders do to keep Utah employers in place, even as other states are focusing on Utah’s best companies? And what can such leaders do to entice existing employers to expand their operations in Utah?

Mortgage Rates
Thousands of Utah’s struggling homeowners, like those in all states, can benefit from the most attractive 30-year fixed rate conventional mortgages in 40 years. National rates have averaged below 5.00% in recent weeks, in part tied to aggressive buying of mortgage-backed securities by the Federal Reserve.

Such mortgage rates may not be available later in the year as the Fed concludes its purchase program and, at some point, begins to sell such securities. Painful job losses and home price weakness in Utah and around the nation have reduced the number of people who can refinance a mortgage or finance a new home. Still, timing is critical to “lock in” such enormously attractive mortgage interest rates.

Utah in 2010
Better days are ahead! More signs of Utah and regional economic rebound from the painful recession will be seen as 2010 matures.

A return of U.S. and global economic growth provides the framework for renewed Utah economic growth later in 2010 and especially during 2011. The state’s longer-term economic potential, tied to the nation’s youngest workforce, solid population gains, moderate cost of doing business, business-friendly public sector and outstanding recreational opportunities ranks with any in the country.

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