Pub.1 2019-2020 Issue 2

Economic Forecast for 2020 T wo prominent economists generally expect Utah’s 2020 economy to continue to be strong. Natalie Gochnour, senior advisor for the Salt Lake Chamber and an associate dean for the David Eccles School of Business, University of Utah and Ken Simonson, Associ- ated General Contractors of America weigh in. Natalie Gochnour recently wrote an analysis that focused specifically on Utah. The main reason for Utah’s strong economy is the construction industry, but she also saw factors that could change the situation. Despite the strength of Utah’s economy, the U.S. economy as a whole seems to be slowing down and might be headed toward a recession. • The upcoming election for governor could go in unexpected directions because no one has the advantage of being an incumbent. • Ken Simonson focused his analysis on the U.S. as a whole. Simonson pointed out that although the U.S. economy is expanding, the expansion is slower than it was. • He sees volatility in consumer behavior, business confidence, and the stock market. • Manufacturing data shows weakness, and the data for single-family housing and apartments is mixed. • Economists are concerned about trade and the effect of slowing global growth, which increases the risk of recession. A national recession would not surprise economists. Drawing on information from Moody’s Analytics and the Bureau of Labor Statistics, Natalie Gochnour considered the following in her analysis of Utah’s economy: • The U.S. is currently going through the longest expansion in its history. There have been a dozen recessions since World War II. The first one started in 1945 and the last one was the Great Recession. The expansion since the Great Recession has already lasted 10 years, which is double the post-World War II average, but it could also continue into 2020 and 2021. • Although the majority of the U.S. is expanding economically, Louisiana is at risk of recession and other states are currently recovering from reces- sion: Connecticut, North Dakota, West Virginia, and Wyoming. • It is important to realize that even in Utah, which is generally expanding, four counties have experienced a silent recession between July 2009 and July 2019: Beaver, Carbon, Emery and Piute. Sometimes you have to look at the individual counties as well as the state as a whole. Statewide, growth has been +36.3%, but that number hides the economic situation of these specific counties, which lost jobs instead of gaining them. • Measured between October 2018 and October 2019, Utah had a 3.3% job-growth rate. That outperforms the U.S. job-growth rate, which is 1.4% for the same period. • The unemployment rate in Utah is currently 2.7%. The national unemploy- ment rate is 3.5%. In general, Ken Simonson says that contractors are confident and busy. Most states are still hiring for construction jobs, although more slowly than they were. People are spending in most categories, but the numbers haven’t been adjusted for inflation. He sees three main concerns: • Labor shortages that are being made worse by the current hostile U.S. immigration policy. • Trade policies that increase the cost of materials and, as a consequence of that increased cost, reduce the demand for construction. • The possibility of rising interest rates. Again, higher rates translate to decreased demand for projects that produce income for the construction industry. People don’t build new homes they can’t afford. The Bureau of Labor Statistics listed the following Utah industries according to their individual job growth rates and the number of jobs created in the state between October 2018 and October 2019. • Construction: 6.4% (6,900 jobs) • Educational/health services: 4.6% (9,600 jobs) • Financial activities: 2.9% (2,600 jobs) • Government: 1.5% (3,800 jobs) • Information: 5.1% (2,000 jobs) • Leisure/hospitality service: 3.3% (5,000 jobs) • Manufacturing: 2.4% (3,200 jobs) • Natural Resources: 3.1% (300 jobs) • Other services: 3.1% (1,300 jobs) • Professional and business services: 5.1% (11,000) • Trade/transportation/utilities: 1.9% (5,500 jobs) As you can see, the percentage increase doesn’t necessarily match the number of jobs generated. For example, the construction industry had the highest percentage growth at 6.4%, while professional and business services grew 5.1%, but there were 6,900 new jobs in construction versus 11,000 jobs in professional services. The discrepancy occurs because comparing percentage growth to the actual number of jobs created isn’t an apples-to-apples comparison. The percentage increase is for just that industry alone. As a result, construction grew 6.4%, outpacing every other industry in terms of its growth, but it did not have as many jobs to start with as some other industries, so the number of actual jobs created is lower than the number of jobs created in those other industries during the same period. Clearly, however, there are plenty of construction jobs in Utah right now. What’s the breakdown of the 6.4% increase in Utah construction jobs? Accord- ing to the Bureau of Labor Statistics in October 2018 and October 2019: • Jobs constructing buildings went from 22 thousand to 24.5 thousand, an increase of 11.4%. • Heavy and civil engineering jobs went from 10.7 thousand to 11.4 thousand, which is up 6.5%. • Jobs for specialty trade contractors went from 74.5 thousand to 78.2 thousand, or an increase of 5.0%. 18 UP DATE