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I
magine a hopped up hot rod firing on all cylinders. Now imagine the turbocharger just kicked in and you have an idea of what Utah’s economy is like.
Since the first quarter 2004 Utah’s economy has been racing. Job growth in the first quarter of 2007 was 4.5 percent high than for the first quarter of 2006, more than triple the rate of the U.S. overall. In the last year alone the state’s robust economy added more 54,000 jobs.
More than 14,000 of those new jobs came in the construction industry, proof that Utah’s building boom is bucking the national trend. Likewise, Utah added more than 5,000 new manufacturing jobs, a growth rate better than 4 percent.
Real total personal income, the number economists consider to be the clearest measure of current economic activity reached $74.4 billion in the third quarter of 2006, an increase of the year prior of 4.9 percent, and 1.3 points better than the national rate.
Utah’s average payroll wage reached $34,000 in 2006, making it 38th in the nation. It grew 1.3 percent over the year prior. Utah’s pay averages 83 percent of the national average.
All these factors have combined to make for a housing market that makes locals swoon.
In the first quarter of 2007, the average home price in Utah grew 17 percent, making the state tops in the nation for real estate growth. This after Utah trailed the nation in real estate appreciation in the calendar year 2003. That’s from 50 to 1 in four years.
To what to attribute this boomtime?
Part of the answer in systemic.
Utahns enjoy a high quality of life. The fertility rate is the highest in the United States, and long has been. Utah’s total population growth in 2006 was 2.4 percent, ranking it sixth in the nation. And the inhabitants enjoy good health and long lives. The life expectancy in the state is the nation’s third highest. At 28.5 years, the median age is the nation’s lowest. Its household size is the nation’s largest. And the populace is well educated. Fully 91 percent of the state has a high school diploma and 27 percent hold a bachelor’s degree.
The economy has also grown thanks to a sharp rise in energy prices and natural resources, which the state enjoys in abundance.
There is also an x-factor at work in the state’s current boom. It may be an optimism that starts at the top.
Site selectors… the elite who recommend where to place new business operations… say that Utah Governor Jon Huntsman, Jr. is the state’s biggest advantage.
Certainly Governor Huntsman is uniquely placed among those holding the statehouse. Fluent in Mandarin Chinese, Governor Huntsman is also Ambassador Huntsman having served as ambassador to Singapore. He was a trade minister to East Asia during President George W. Bush’s administration. Huntsman relied on his chops as an ambassador and negotiator when he received a state visit from the (former) President of Mexico Vincente Fox in May 2006. No matter who visits or where he goes, the governor talks up the State.
The governor’s optimism has proven contagious. In first quarter a survey by public opinion pollster Dan Jones & Associates business people in Utah are upbeat about the future. Some 50 percent of those polled rated their optimism about the financial futures of their companies as a seven or eight on a 10 point scale. Another 33 percent rate their company’s future at a nine or 10! In terms of capital spending, 71 percent said that they anticipated spending about the same or somewhat more in the first quarter. When it comes to adding employees, 47 percent said they expected to increase somewhat their headcount in the coming quarter.
“One of the nation’s tightest labor markets is forcing wages higher, good news for Utah workers,” says Jeff Thredgold, president of Thredgold Economic Associates. “The Utah real estate sector is healthy, with more moderate price appreciation expected over the next 12-18 months.”
Employment
2007 remodel of the Wells Fargo Building
Utah’s rise in employment occurred in 10 of 11 major sectors, with only information jobs showing a small decline. The job growth was lead by construction jobs, with more than 14,500 jobs added, a 15-point percentage gain. Job growth was also strong in the professional and business services sector, which added 9,200 net new jobs, a growth rate of 6 percent. But the biggest gain came in the high-paying natural resources and mining sector, which grew by 15.7 percent and added 1,500 new jobs, mostly in rural Utah.
In 2006 funds earmarked by the State legislature for the USTAR (Utah Science, Technology and Research) initiative began flowing. “USTAR is a far-reaching effort to bolster Utah’s economy with high-paying jobs and keep the state vibrant by recruiting world-class research teams in carefully targeted disciplines that have the potential to grow the economy through innovation and incubation,” says Jeff Edwards President and CEO of the Economic Development Corporation of Utah.
$50 million went to initiate the planning and design of a Bio Innovations Research Institute at Utah State University and a Neuroscience and Biomedical Technology Research building at the University of Utah.
$15 million was allocated for the hiring of “all-star” research teams to complement existing strengths at the respective research universities.
$4 million funded development of a state-wide technology outreach program.
Sector Performance
Construction: Utah’s construction sector is booming and netted more jobs than any other. Roughly 14,500 construction jobs were added in 2006. This translates into a vigorous growth rate of nearly 15.3 percent. About 100,000 people are employed in construction.
Trade/Transportation/Utilities: This sector of the economy saw an increase of 8,800 jobs over the past year, a growth rate of 3.8 percent. Roughly 240,000 Utahns work in this sector.
Manufacturing: Utah gained an estimated 6,100 manufacturing jobs in 2006, a growth rate of 2.6 percent. There are currently about 125,000 manufacturing positions in Utah.
Information: Publishing, motion picture and sound recording, telecommunications, and Internet service providers make up this information sector. Current employment in this sector is about 32,800 positions, a net decline of 200 jobs from the year prior.
Financial Activities: Growth in financial activities was strong in the past year, with 3,400 new positions added. Nearly 74,000 people in the state are employed in financial activities, an increase of 4.8 percent over 2005.
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 a sizeable 9,200 jobs in the most recent 12-month period to 164,000 positions. This represents a growth rate of 6.0 percent.
Education and Health Services: Growth in this sector at 4 percent trailed slightly the overall 4.5 percent job growth rate in the State, with an increase of 5,200 positions. Approximately 140,000 individuals work in this sector.
Leisure and Hospitality: The economy added some 2,900 jobs in the Leisure and Hospitality sector, a growth rate of 2.8 percent. Roughly 109,000 Utah residents work to feed, entertain, and accommodate both visitors and locals alike.
Government: The three levels of government—federal, state, and local—account for a combined 18 percent of the non-farm jobs in Utah, and grew a modest 1 percent in 2006. Government now employs approximately 212,000 Utahns.
Other Services: Auto repair, personal care, and non-profit organizations are some of the employment categories in this sector. Employment in other services was up 5.1 percent and now totals 35,600 positions.
Job Growth
Strong job growth and tighter labor markets go together like peanut butter and jelly. And Utah’s current labor is no exception. Utah’s unemployment rate was 3 percent in May of 2006 and a miniscule 2.5 percent in May 2007! That’s the lowest on record in Utah and the lowest in the contiguous 48 states.
It’s a testament to the strength of the economy that the Utah jobless has dropped even while the State has enjoyed a record inflow of new residents.
That’s great news for job seekers. But not so good for businesses looking to hire and expand. Small businesses are disproportionately affected. Zion’s Bank Small Business Index for Utah, which weighs 14 factors to predict the chance for small business success declined through four quarters in 2006 and the first two quarters of 2007 largely because of the tightness of the labor market.
Economic Growth
Strong Utah economic growth and heavy inflows of new residents has led to rising home values. In the Salt Lake MSA (metropolitan statistical areas) the median sales price of homes in the Salt Lake MSA rose 12.3 percent in 2006.
The broader data of the Office of Federal Housing Enterprise Oversight (OFHEO) noted an average U.S. home price rise of 4.25 percent during 2006. The average Utah home price rose 17.01 percent, ranking Utah first among the 50 states. Part of the gain is due to slack being taken up in the Utah housing market. Over the last five years home price appreciation has totaled an average of 48.29 percent, which trails the five-year national average of 53.53 percent.
By comparison, the average home price during the past five years rose by 93.76 percent in Arizona, 95.75 percent in Nevada, 21.15 percent in Colorado, 64.25 percent in Idaho, and 60.96 percent in Wyoming. Such an analysis suggests that home prices in Utah still have room to run.
Outlook
“The Utah economy continues to rank with the best in the nation, a position likely to be maintained over the next 18 months,” says Jeff Thredgold.
For up-to-date analysis of Utah’s economy and other economic issues, visit www.thredgold.com.
