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D.C. deadlock dampens Utahns' faith in 2013

Published January 19, 2013 11:23 pm

'13 economy • The memories of the Great Recession, partisan noise in D.C. drown out a chorus of strong economic signals from the state.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

As Utah settles into 2013, signs are plentiful that this should be a good year for the state's economy and the million-plus workers whose livelihoods depend on it.

Job numbers are growing at rates commensurate with normal times. Unemployment is at a four-year low. Homebuilding is picking up again and home prices are showing a modest recovery. Lots of companies are trooping to Utah, bringing jobs that pay more than prevailing wages.

"I feel very comfortable saying the Utah economy is back," said Natalie Gochnour, chief economist at the Salt Lake Chamber, which has 7,400 members across the state.

"We are back to our historic rate of growth. We are a leading state for job growth. Our unemployment rate has been heading in the right direction and is the sixth-lowest in the nation."

And yet.

In spite of the favorable signals, many everyday Utahns are doubtful. Instead of welcoming the evidence, they seem to take Utah's recovery with a huge grain of salt. According to Zions Bank, which tracks consumer attitudes, they are less bullish today than they were a year ago. In December, their views of the economy and on their own state of affairs were just slightly more sanguine than in November, when consumer attitudes had descended to a 2012 low.

Damping their mood was (and is) the incessant deadlock between Congress and the White House over how to put tax revenue and spending on a path that sets the budget deficit on a downward path, allows the U.S. economy to grow, and doesn't hurt lower-income Americans. Although Congress and the White House agreed earlier this month to raise income taxes on individuals making more than $400,000 and couples with incomes above $450,000, the battle isn't over. Congress must agree to raise the debt ceiling by March 1 or face the prospect of defaulting on its obligations.

"We are seeing a close correlation to consumer confidence and the polarized bickering within our federal government, meaning the inability of our federal government to wisely tackle our fiscal crisis is causing real anxiety and confusion," said Randy Shumway, CEO of The Cicero Group, the Salt Lake City-based market research company that prepares a consumer attitudes index for Zions each month.

"And yet, businesses are really growing and employment is improving," Shumway said. "So I expect in 2013 that we will continue to see systemic business and labor growth. But it will be coupled with consumer anxiety that is caused by the confusion created by the leadership vacuum that we are seeing in Washington, D.C."

Anxiety • Consumer confidence is a proxy for spending, and spending drives roughly 70 percent of economic growth. The Zions survey showed consumers were slightly more optimistic in December about current business conditions and hiring. But their outlook for the next six months deteriorated to its lowest level in at least a year.

"People are feeling OK about their current economic circumstances, but they are feeling genuine anxiety about their future," Shumway said.

And that, said the Chamber's Gochnour, could temper further growth in Utah in the coming year. If Congress and the White House do not resolve their differences over the budget, the U.S. economy will have a hard time accelerating. If it remains stuck in low gear, Utah is bound to suffer.

"I do not see a scenario where we can continue to have strong growth [in Utah] and a U.S. economy that doesn't perform better," Gochnour said. "We are not an island."

By most measures of vigor, Utah has performed far better than the wider U.S. economy since the recession ended in mid-2009. Consumer confidence is far higher in the state than elsewhere. Job growth is twice as rapid here, and the unemployment rate is almost 3 percentage points percent lower than the U.S. rate of 7.8 percent.

The Governor's Office of Economic Development had its best year ever in fiscal 2012. It offered post-performance tax incentives to companies that agreed to create 9,065 jobs paying at least 25 percent more than the average compensation of the counties in which they will operate. Midway through this fiscal year, GOED has offered tax breaks to companies that have pledged another 4,353 jobs.

Vibrant Utah • Utah's economy stands head and shoulders above most states, says Eric Temple, who moved his video production company to South Ogden from Bethesda, Md., 18 months ago. The Washington, D.C., region, where he lived for two decades, was largely insulated from the worst effects of the recession because of government spending, he said. But on returning to Utah, where he met and married his wife in the 1980s, Temple was struck by how much more spirited the state seemed.

"Utah sank lower than Washington did and has further to come back. But it seems more vibrant. It seems like people are taking more entrepreneurial risks than in the D.C. area," Temple said.

Highway 89 Productions did well last year, Temple said. His clients, a mix of government, nonprofit and corporate customers, began to spend more freely in 2012. Their budgets are still tight, he said, but 2013 should be another good year.

In Maryland, Temple came to learn that watching Congress and the White House fight "is sort of like the local team sport. So I've already factored the congressional dysfunction into my own planning."

"I have had a better couple of years in the past two years than in the previous two. So in spite of the dysfunction, I'm still optimistic that at some point businesses have to realize they have to get on with their [work]. They can't hold their breath forever," he said.

A housing rebound • Despite the political uncertainty, consumers generally are feeling better, said Rene Oeh­lerking, marketing director of Garbett Homes, a Salt Lake City-based homebuilder. Last year, Garbett sold all of its housing inventory that had been built during previous years without lining up buyers. Today, the company has sales contracts on all the homes it builds, and Oeh­lerking says undeveloped land values in Salt Lake, Davis, Utah and Summit counties have jumped as much as 40 percent as developers jockey among themselves.

"Most of the production builders, who build more than 50 homes a year, are completely convinced that the market has turned around," he said, citing reasons why Garbett believes 2013 will be a good year for his company. Consumers who put off buying a new home until prices stopped falling now see values rising again, if only slowly. People who lost their homes to foreclosures or short sales are getting into the market again. And workers who feared for their jobs during the recession now feel more hopeful they will stay employed.

"We are feeling very bullish for 2013," Oehlerking said.

Lingering effects • Yet there still isn't across-the-board acceptance of Utah's recovery. Many unemployed Utahns remain reluctant to re-enter the labor market, apparently skeptical that they will find work. Although the labor force participation rate moved up in 2012, it is still more than 5 percentage points below 72 percent, where it stood before the recession started in 2007, said Mark Knold, chief economist at the state Department of Workforce Services.

"Obviously, there are a good [number] of people who were previously looking who decided not to do that anymore," Knold said.

And although employment has started to expand by at least 3 percent a year — the long-term annual rate is 3.1 percent, going back to the 1950s — it might take two years of strong job growth before participation in the labor market returns even to 70 percent, Knold said.

"Having said that, this is the best environment we've been in since the recession started. But the recession's consequences aren't completely gone, and the strongest effect has been on labor and its idleness," he said.

Last September, Utah finally regained all of 80,000 or so jobs that were lost to the recession. Although that appears to suggest the recovery is complete, it doesn't account for close to 100,000 people who became old enough to join the workforce. Knold said Utah will need to create 20,000 jobs a year just to absorb the newcomers. Only when the number rises above 20,000 for several more years will the economy absorb everyone who was laid off during the downturn and is still sitting outside the labor market.

At least for 2013, that looks likely. Knold believes employment will expand by 3.5 percent, and could go even higher if the housing market's recovery is real.

"It looked like the housing market turned the corner in 2012 and is poised for a good 2013, just because of the pent-up demand for housing that developed during the recession years," he said.

If construction does take off this spring, employment growth could go even higher — perhaps above 4 percent, Knold said.


Twitter: @sltribpaul —

Jobs gained, jobs lost

In September, Utah finally regained the last of 80,000 jobs lost during the recession. The gains weren't spread equally across all sectors of the economy, however. A look at which have recovered and which haven't (September 2007 vs. September 2012).

Mining • 11,028; 12,817

Construction • 107,921; 72,762

Manufacturing • 128,364; 117,720

Wholesale • 47,633; 48,445

Retail • 148,417; 144,516

Financial activities • 74,390; 70,154

Professional and business services • 162,660; 170,482

Education and health services • 142,438; 160,436

Leisure and hospitality • 113,112; 122,513

Federal government • 35,977; 35,399

State • 60,441; 69,327

Local • 108,999; 120,121

Transportation • 46,601; 46,933

Utilities • 4,134; 3,993

Information • 32,337; 31,141

Other services • 35,772; 35,438






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