Utah economy sputters to life, but pain remains
Recession » Though pace of decline has eased, recovery will take time to take hold.By Paul Beebe
The Salt Lake Tribune
Updated:03/13/2010 05:08:21 PM MST
Maybe the best that can be said about Utah's economy is that it is neither in deep recession nor in full-on recovery mode.
Instead, the $110 billion amalgam of goods and services is in limbo, straddling an amorphous line between shadow and light, no longer shrinking rapidly but growing too slowly to help 91,000 of out-of-work Utahns any time soon or erase the upheavals endured by the unemployed since the U.S. slump began 27 months ago.
In fact, some labor experts say, a jobs recovery that gets us back to numbers close to those in early 2008 may not happen until 2013 at the earliest -- five years after the slide began.
Still, a consensus is building that the worst of the recession is over.
"We have Utah in a moderating recovery, which means that it is still contracting but at a slower pace than last year, and I do think the Utah economy will be entering recovery in the next couple of months," said Augustine Faucher, an economist with Moody's Economy.com.
Enough evidence exists for Gov. Gary Herbert to assert Utah has crossed into this twilight. In his State of the State address in January, Herbert insisted "the economic tide is turning," even though a $750 million deficit hung over lawmakers' heads as they began their session.
Although there is agreement among politicians and some economists, the view among many jobless Utahns isn't as optimistic.
"It might be getting better for the president and the governor because they have all the money. But for people like me, we don't have the money to pay for rent or groceries," said Jesse Espitta, 31.
Espitta is afraid. Unless he finds a job immediately, he will be homeless at the end of this month. A string of unskilled jobs ended in November 2008, and he has been struggling ever since to find work.
"I'm so scared right now," Espitta said. "There are so many other candidates that have more experience than me."
Yet in the realm of economic prognostication, agreement is forming around the governor's message, and the harmony is coming from several directions.
"We can agree with that. The worst part is definitely over," said Jeannine Catalzi, an economist with IHS Global Insight, an economic think tank in Lexington, Mass.
Said Jim Judd, president of the Utah AFL-CIO federation of about 50 union groups: "We are turning the corner on the economic downturn in the state of Utah."
To assert better times are coming means forecasters must conclude that ongoing drags on the economy are outweighed at least slightly by a string of positive signs.
On the one hand, nonresidential and commercial construction activity is still sluggish and almost 13,000 construction workers are out of work, according to the Associated General Contractors of America.
On top of that, mortgage foreclosures are still piling up, real estate values remain weak and federal tax credits for home buyers will dry up in April.
Yet, the pace of job losses is moderating. Job postings at Workforce Services offices have doubled in the past year, and initial claims for unemployment benefits are declining.
Sales of existing and new single-family homes have turned up, although numbers are still low. Deals in the months between June and January exceeded those in the same months a year earlier, said Jim Wood, director of the University of Utah's Bureau of Economic and Business Research.
"There are signs that retail sales have bottomed out. Declines were running at 10 percent in the first two quarters of 2009. They've dropped to about 2 percent by the end of the year," Wood said. "All of this plays into the (state) revenue numbers. They aren't as bad as first thought."
But whether Utah is poised to exit the recession at the same pace as the nation as whole is not as clear. Global Insight's Catalzi says it will, but others are more cautious.
With a diverse economy, young population, comparatively stable work force and reasonably priced homes, the state will be a leader among western states and emerge "probably along with the economy as a whole," she said.
But Moody's Faucher doubts that Utah's unemployment rate will ease before at least September. And because the housing market collapsed later in Utah, the recovery will lag other states, he said.
Paradoxically, as the economy gathers steam, the unemployment rate probably will rise even more.
The rate stood at 6.8 percent in January, highest since March 1997. But with rising numbers of job postings, idled workers are trickling back into the job market. Until they find work, they will push the rate up, said John Mathews, northern region economist at the Department of Workforce Services.
The rate will stay high until employers see enough demand for their products and services to warrant recalling or adding new workers, Mathews said.
Using unemployment numbers that have been adjusted to remove seasonal fluctuations, the Governor's Office of Planning and Budget believes the dreary drumbeat of month-over-month job losses ended in August.
But, economist Juliette Tennert added, "that doesn't mean we are in a phase of month-over-month growth. Basically we are getting to the point where we are bouncing around the bottom."
The number of jobs lost to Utah's economy during the recession is unmatched by any downturn in almost 60 years. Employment numbers peaked in January 2008 at 1.26 million. If the bottom was reached in August, the economy shed 61,300 jobs, a decline of 4.9 percent.
"It certainly stands alone. We haven't seen that since the 1950s, and that was when we were shutting down the Korean War," said Mark Knold, chief economist at the Utah Department of Workforce Services.
Jobs were lost across virtually the entire nonfarm employment spectrum. Heaviest hit, however, were construction, manufacturing, retail and wholesale trade. About the only sectors that didn't suffer heavy losses were health care, education and government.
Knold thinks the soonest Utah will get back to 1.26 million jobs is 2013 -- five years after the economy began to shed jobs -- for a net gain of zero.
"And that's just getting back to where we were in 2008," he said. "That's not creating jobs to absorb the people who are (graduating from high school or college and) ageing into the work force."
Philip Nguyen can't wait another three years for the job market to loosen. The 45-year-old cook has been out of work since his employer's Chinese restaurant closed four months ago. His prospects for another job aren't promising.
Nguyen has been living at the Road Home shelter in Salt Lake City for two months. He is skeptical of the governor's claim of an economic recovery any time soon.
"It's really hard. I (have been) looking for five, six days a week. I apply everything, but nothing coming up," Nguyen said.
If there's a silver lining, it is that high unemployment rates drive lots of people back into the education system. Those who might have quit high school when the economy was expanding return to receive their diplomas and perhaps go on to college. Same for college and university graduates. They might go on to earn advanced degrees.
"So what you end up with down the road is an even better-educated work force than when the downturn started," Knold said.
In time, historians may come think of this decade's two recessions as really just one economic decline interrupted by six years of growth. The seeds of the dot-com recession of 2000-2001 and the downturn triggered in late 2007 by the subprime crisis and the ensuing credit crunch had their beginnings in the 1990s, Knold said.
"Yes, you have two separate downturns. But both are correcting the excesses of the 1990s -- the easy credit and the disrespect of risk that is inherent in a capitalistic economy."
pbeebe@sltrib.com
Labels: Utah economic development, Utah economy
