Utah Recession?
Nearly unprecedented domestic and global financial stress has contributed to a major slowing of the state’s economy. The powerful Utah job creation pace during 2004 through 2007 has now given way to a slight decline in total employment during the most recent 12-month period.

Weaker Utah economic performance seems on tap during 2009, particularly during the year’s first half. Dismal new home construction activity, weak existing home sales, soft home prices, low levels of consumer and corporate confidence tied to a serious U.S. recession, and paranoid credit markets all suggest a Utah recession is unfolding.

Weak Numbers
The Utah economy lost an estimated 2,200 net jobs during the most recent 12-month period, a decline of 0.2%. Future measures of Utah job creation are highly likely to get worse before they get better. Current employment weakness compares to Utah having one of the nation’s strongest job creation rates during 2004 through 2007, when the state added an average of 44,300 net new jobs annually, a growth pace averaging 3.9%.

The state’s goods production sector has suffered, with a net decline of more than 14,000 jobs during the past 12 months. The construction sector accounted for more than 90% of these lost jobs, while manufacturing lost 1,800 jobs. Natural resources added 900 jobs.

Utah’s service-providing sector fared better, with a gain of roughly 12,000 jobs. Employment additions were found in education & health services; trade, transportation & utilities; government; leisure & hospitality; and professional & business services. Employment declined in the financial activities and information sectors.

From the Outside
What happens outside of Utah’s borders can have either a positive, or negative, influence upon the state’s economic performance. This reality is perhaps more clear than ever before. Domestic and global economic and financial pain is also local pain.

Utah has been severely impacted by ongoing shocks to domestic and global financial markets during the past 18 months. Initial concerns about subprime mortgage securities soon gave way to massive anxiety about all types of credit instruments, a list which now includes commercial real estate loans and credit card portfolios.

The U.S. Treasury Department, the Federal Reserve, and the FDIC have each introduced new programs to deal with severe financial sector stresses and a major lack of investor and lender confidence. Innovation has been critical as the majority of the steps taken were nowhere to be found in their respective operating manuals.

Commitments of trillions of dollars of support for major U.S. financial institutions and a wide array of credit markets has now given way to massive investment in similar support by governments around the globe. What many initially perceived to be an American problem is now clearly understood to be a major global economic and financial reality.

Steps enacted in late November to push mortgage interest rates lower were initially successful. Further actions to stabilize home prices and minimize foreclosures will be critical to eventual economic stability.

New Leadership
The new Obama Administration will hit the ground running early in 2009 to help address what is the most serious threat to the domestic and global economies since the Great Depression. The painful and costly dismantling of an enormous financial “house of cards” constructed during the past 10 years will fully occupy the new Administration in 2009.

The Obama Administration is expected to propose a mammoth economic stimulus program in January, with billions of dollars for infrastructure investment and support for state and local governments. Various campaign promises will, by necessity, be temporarily placed on hold.

Utah in 2009
Domestic and global financial contagion severely tainted the Utah economy in 2008, with net job creation falling to zero. Even weaker economic performance seems likely in 2009, with frequent references to a Utah recession.

If misery loves company, the state has plenty. More than 30 states are currently in their own recessions, with falling employment, rising jobless rates, declining tax revenues, and increasing financial challenges tied to adequate funding of social programs.

Most economists suggest the national recession will have run its course by mid-2009. A return to positive, if not impressive, economic growth is soon anticipated for the American economy. Such stabilization should establish a foundation for a return to positive Utah economic growth later in 2009 as well.