Utah's economy suffering from U.S. recession disease
Utah's economy continues to suffer from the recession disease experienced by the vast majority of states.
Economic weakness across the state is likely to continue into 2010, indicated Zions Bank consultant Jeff Tredgold.
Roughly 45 of the 50 states are currently in recession, pointed out the latest Zions Bank Insight report.
The United States Treasury Department, the U.S. Federal Reserve and governments as well as central banks around the world suggest that the national recession could run its course by the end of the year, according to Thredgold.
The Utah economy suffered a net loss of 26,000 jobs during the most recent 12-month period, representing a decline of 2.1 percent employment opportunities statewide.
Utah has the nation's highest fertility rate. Combined with solid levels of net in-migration, the situation should lead to rising demand for new homes and multi-family properties at locations throughout the state.
During mid-September 2008, the American consumer was told "the sky was falling," a factor which led to a sharp plunge in consumer confidence, spending and employment.
The situation led to the sharp Utah and U.S. economic contraction in subsequent months, according to Thredgold
The U.S. Treasury and Federal Reserve are now "throwing mud at the wall" to see what might stick in regard to steps to boost the economy and shaken financial markets, added Thredgold.
On the positive side of the spectrum, more attractive fixed rate mortgages, combined with the lowest level of many short-term interest rates on record, could see U.S. housing markets move closer to stabilization by the end of the year, a critical factor in more broad based U.S. economic stabilization.
A return to modestly positive U.S. economic growth later in the year or early in 2010, coupled with more fluid financial markets, would pay great dividends in Utah and many states dealing with recession.
The current U.S. recession is widely expected to be the longest and deepest of any since the Great Depression.
A renewal of modest, but positive growth during 2009's final quarter would see the current recession approach 20-24 months in duration, explained Thredgold.
The phrase "being in uncharted waters" applies to the level of deficit spending now underway, continued the financial consultant.
The administration's spending initiatives will see a deficit likely exceeding $2 trillion in fiscal year 2009, which began last Oct. 1.
A significant portion of the $787 billion spending package is geared to enhancements to the nation's social safety net, with less toward economic stimulus.
The economic contraction that became widely felt during 2008's final few months has ravaged the nation's employment.
The U.S. economy suffered a net decline of 3.1 million jobs during 2008, the worst year since 1945. A similar number of job losses seems on tap for the present year.
The nation's jobless rate currently exceeds 8 percent.
The U.S. unemployment level rate could easily approach 9.5 percent within the next eight to 12 months, with more bearish forecasters seeing a 10 percent or higher rate, pointed out the Insight publication.
The escalation of oil and commodity prices fueled the sharp rise in consumer inflation during 2007 and the first half of 2008, noted Thredgold.
However, the plunge in oil and commodity prices led inflation pressures much lower.
When all was said and done, the U.S. Consumer Price Index rose 0.1 percent in 2008, the smallest rise in 54 years.
One influential camp of economists sees major inflation pressures during 2010 and beyond resulting from massive budget deficits and highly aggressive monetary policy, explained Thredgold.
The other camp sees a Japanese-style deflation unfolding in coming years, tied to weak home and commodity prices and global recession.
The Federal Reserve's unds rate, at an all-time low of zero to 0.25 percent since mid-December 2008, could stay at that level for the entire year.
Thirty-year fixed-rate mortgages for conventional loans have remained near 4.75 percent to 5 percent in recent weeks, indicated Thredgold. Mortgage finance for higher priced homes remains spotty in many communities.
Treasury and Fed officials have indicated a desire to see mortgage rates approach 4.50 percent. Lwer rates may be the least costly way to see prices stabilize and clear high levels of homes from the market.
Much of the developed world is in recession, with similar emerging market challenges.
The global weakness will likely persist well into 2010, concluded Thredgold.