Employment & Economy

The Utah economy continues to surprise on the upside, with strong gains in total employment a welcome change following three years of economic stagnation. Utah's job gains of the most recent 12-month period were the strongest in six years. More importantly, solid employment gains are expected to continue in 2005 and 2006.

The most recent Utah employment data showed a rise of 35,100 net new jobs over the most recent 12-month period. Utah employment gains should improve throughout 2005 and strengthen considerably in coming years.

"We are projecting a rise of 25,000-35,000 net new jobs in Utah during 2005," predicts Jeff Thredgold, president of Thredgold Economic Associates and economic consultant to Zions Bank. Not since 1998 has the state enjoyed job growth as strong as the current period.

The state's unemployment rate has also reflected an improving labor market. Utah's unemployment rate averaged 4.7 percent in 2004, and 5.2 percent during 2003. By comparison, the state's jobless rate averaged 6.1 percent in 2002, the highest level since 1987.

Various voices note the stronger level of job gains in both Utah and the nation of the past 12-15 months. They have suggested, however, that while the quantity of jobs has improved, the quality of new jobs is somewhat poor. The numbers, however, tell a different story.

The majority of new jobs added in Utah and the U.S. over the past year have been in professional/business services, construction, health care, energy, and financial activities. Manufacturing jobs also increased in Utah and across the nation. Job additions in retail trade and the tourism sectors, typically lower wage jobs, have actually been modest.

Manufacturing: Utah gained an estimated 4,000 manufacturing jobs over the most recent 12-month period. Nationwide the manufacturing sector gained 38,000 jobs over the latest 12-month period. There are currently about 116,000 manufacturing positions in Utah.

Construction: Utah's construction sector gained about 6,600 jobs over the past year. The state's residential and non-residential construction sector is doing well. Extremely attractive mortgage interest rates have allowed thousands of Utahns to purchase homes. About 74,000 people are employed in the construction sector.

Trade/Transportation/Utilities: This sector of the economy, which includes wholesale and retail trade, saw an increase of 7,100 jobs over the past year. Roughly 229,000 individuals work in this sector.

Information: Publishing, motion picture and sound recording, telecommunications, and Internet service providers make up the information sector. Employment levels in this sector are relatively unchanged from a year ago at about 31,000 positions.

Financial Activities: There was minimal job growth in the financial activities sector in 2004 after modest performance in 2003. Employment in this sector, currently at about 66,000 jobs, is expected to exceed 70,000 jobs by the end of the decade.

Professional and Business Services: The professional and business services sector, which includes activities such as legal services, architecture, engineering, and employment services, saw employment rise by 6,700 jobs in the most recent 12-month period to 140,500 positions. Employment services, which includes temporary employment, saw a strong gain of 9.0 percent over the past year. Gains in temporary employment are usually a precursor to gains in permanent positions across all sectors.

Education and Health Services: Growth in this sector, primarily in the area of health care, has been strong over the last 12 months. Roughly 128,000 individuals work in this sector. Growth in health care employment in coming years should outpace job growth in other sectors.

Leisure and Hospitality: Boosted by the 2002 Olympic Winter Games and plenty of freshly-fallen Utah powder, this area of the economy has grown by around 2.1 percent in the latest 12-month period. Roughly 103,000 Utah residents work to feed, entertain, and accommodate both visitors and locals alike.

Other Services: Auto repair, personal care, and non-profit organizations are some of the employment categories in this sector. Employment in other services is unchanged over the year at 33,000 positions.

Government: The three levels of government—federal, state, and local—account for a combined 18 percent of the non-farm jobs in Utah, with payrolls totaling 202,100 in the latest month.

One change to be expected is stronger home price appreciation across the state. By various measures, Utah real estate has experienced some of the weakest price appreciation in the country in recent years. However, a combination of stronger Utah job and income gains, and the fact that Utah real estate is again "bargain priced' when compared to real estate in much of the West, should lead to the strongest home price appreciation since the late 1990s.

Total construction spending in 2004 likely reached $5 billion and broke the record established the year before. In addition, 2004 entered the history books as a very solid year in the commercial real estate sector. Impressive levels of absorption and declining vacancy rates were welcome after three years of relative weakness.

A positive by-product of much stronger Utah economic performance has been a replenishment of state tax coffers. Solid economic growth has led to a considerable revenue surplus. Higher revenues will be extremely critical in meeting both the state's funding requirement for a rising school-age population and in continuing efforts to rebuild the state's transportation system.

Solid economic growth now underway is expected to continue in 2005. Utah's private sector companies are eager to expand again, following the painful performance during 2001-2003. Vibrant real estate activity should also continue with home price appreciation closer to national norms. Utah's return to economic vibrancy is a welcome change.

For up-to-date analysis of Utah's economy and other economic issues, go to www.thredgold.com.

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