Utah economic outlook signals continued growth
The Utah economy continues to rank among the nation's strongest, with most signs suggesting solid growth continuing in 2006. Such performance is a major departure from the economic weakness that was the Utah norm just a few years ago.
Utah economic strength is in line with similar impressive growth within the Rocky Mountain region. Utah and its neighbors rank as the top four state economies as measured by job gains over the most recent 12-month period. In keeping with trends, Nevada ranks first, with Arizona ranking second. Utah and Idaho have battled it out all year for third and fourth.
The Utah economy added roughly 42,000 net new jobs during the most recent 12-month period, a growth rate of 3.6 percent. Such job gains rank as the strongest since the state added 46,900 net new jobs in 1996.
The state has continued to add jobs in all 11 major employment sectors, led by nearly 10,000 additional construction jobs, up 12.8 percent. Professional and business services added 7,800 net new jobs, up 5.5 percent, while trade, transportation and utilities added 6,800 net new jobs, up 3 percent.
The education and health care sector added 4,700 additional jobs, up 3.7 percent, while government added 3,100 new jobs, up 1.5 percent. More than 9,000 net new jobs were added collectively in the leisure and hospitality, manufacturing, information, financial activities, natural resource, and other services sectors, with annual growth rates averaging 4.5 percent.
In the area of labor, strong Utah economic growth has again led to a substantial tightening of the Utah labor market. The latest estimate of Utah's unemployment rate was down sharply from the 4.7 percent average of the prior 10 months. By comparison, the Utah jobless rate averaged 5.7 percent in 2002 and 2003.
A continuation of tighter labor availability in 2006 for Utah employers will be somewhat reminiscent of the six-year period of 1995-2000, -when the state's jobless rate averaged 3.5 percent. Companies were challenged at that time to maintain staffing needs, reported Zions Bank economic consultant Jeff Thredgold.
Substantial snowfall during early December contributed to a strong beginning for the state's ski industry. Record skier days in each of the past two seasons could be exceeded by skier days surpassing four million in the 2005-2006 season.
The local ski industry generated $872 million in Utah business activity during the 2004-2005 season, a total that should approach $1 billion this season, according to Ski Utah. Ongoing expansion and upgrading of Utah ski facilities bodes well for future growth, explained Thredgold.
Impressive Utah economic growth of the past 24 months has led state tax receipts sharply higher. A surplus exceeding $1 billion has accumulated, providing new funding for departments and programs that saw limited spending increases or spending cuts in 2001-2003.
"A solid increase in spending on education and vital services is now underway. At the same time, it is incumbent on Utah's political leaders to not lock the state into future spending increases that will be problematic when the local economy again slows. A return of some excess funds to Utah taxpayers also needs to draw serious attention," said Thredgold.
Solid U.S. economic performance of the past 30 months has contributed to large surpluses in a majority of states. State and local revenue rose 7.2 percent in the first nine months of 2005, the largest jump in 15 years, according to recent USA Today data. With a majority of states now enjoying surpluses, the call for tax cuts is widespread.
Strong Utah economic growth now finds the state's housing market enjoying appreciation more in line with national trends. The two primary sources of estimated home values, the National Association of Realtors and the Office of Federal Housing Enterprise Oversight, recently reported U.S. gains of 14.7 percent and 12.02 percent, respectively, for the 12 months ended Sept. 30.
The NAR report noted the median Salt Lake City home rose 12.5 percent. The OFHEO report noted an average Utah gain of 11.37 percent (22nd of the 50 states), with Salt Lake City homes up 10.87 percent.
"Solid growth remains our call in 2006, with a modest slowing in employment gains. Employers will face greater challenges in finding and retaining valued employees," commented Thredgold.
He explained that Utah's public sector leaders will have greater ability to meet critical funding needs, with tax cuts expected as well. Utah home price appreciation in 2006 is likely to surpass national gains.
"The Utah outlook remains bright," Thredgold summarized.