Economic experts say signs of growth are apparent
February 16, 2010
Experts who track the Utah economy as well as surrounding states this month reported January was a disappointment despite overall optimism for the coming months.
Economist Jeff Thredgold, who gave the Groundhog Day Forecast for Park City Chamber/Bureau members, said in his weekly newsletter, Tea Leaf, the U.S. Department of Labor’s Bureau of Labor Statistics reported numbers for January that appear contradictory.
He believes the paradox suggests positive growth is occurring, but very slowly.
Nationwide, 20,000 more jobs were lost in January even though experts predicted a 10,000-job gain. Revised data for December suggests even more jobs were lost than initially reported.
The losses occurred in the construction, transportation, warehousing, local government and even leisure and travel industries.
But November’s revised data shows job gains – 64,000. The national unemployment rate actually declined because surveyed households reported 541,000 jobs gained, Thredgold explained.
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Additionally, manufacturing jobs were added, retailers nationwide hired 42,000 more people and education and health services industries continued to report job gains.
Another mixed sign of progress comes from the Zions Bank Small Business Index for Utah. The index measures how favorable conditions are for small businesses.
It was up again, significantly, to 88.7 in January. The index has been up every month since its low during the first quarter of 2009 – its lowest point in over 15 years.
Utah’s unemployment rate was reported at 6.7 percent in January, another increase. But ironically, unemployment is considered favorable for the index because there are more applicants for every job opening.
The index reports unemployment as a good thing because it measures the health of the environment for a recovery.
But the state’s job losses finally had a negative effect on the index in December when it increased more slowly than the national small business index. That was the first time since before the 2001 recession that conditions for small business in Utah lagged behind the nation.
A report from Zions Bank explained that regional unemployment also had an effect, adding, "Job losses, leading to lower income creation and softer retail spending, have a negative impact upon Utah’s small businesses."
The Colorado-based Goss Institute for Economic Research reported earlier this month that Utah was lagging behind Wyoming and Colorado in some aspects of recovery – especially employment.
Despite overall optimism for the next six months, the institute’s monthly report revealed January was disappointing for business.
The institute determines this with its own index measuring several kinds of business conditions for the tri-state area.
The Mountain States region Business Conditions Index scores factors on a scale of 0 to 100 with 50 representing growth neutrality. A score above 50 suggests growth for the coming months with the inverse being true.
Although the January index for the region was above 50 for the fourth month – barely – the overall score was down from December. The employment index was slightly down as well.
What growth is occurring is leading to inflation.
According to the report, "rebounding prices have accompanied the improving economy. For the ninth time in the past 10 months, the regional inflation gauge rose above growth neutral."
The inflation gauge tracks the cost of raw materials and supplies and was up almost 30 percent. The "prices paid" index for the region doubled.
Inflation might explain Utah’s rising gasoline prices that are higher than the national average and aren’t falling much, according to UtahGasPrices.com.
Prices today are $1.02 higher per gallon than a year ago and almost 12 cents higher than just last month. The national average has declined 12 cents since last month. The Web site believes one reason is anticipation of more use in homes heated by oil. Many regions, however, have a glut in supplies.
Increased spending is definitely true in the housing market according to Metrostudy, a company that provides primary and secondary market information to the housing industry.
Metrostudy’s most recent report is for the fourth quarter of 2009, not January, but suggests the situation for homebuilders is slowly improving in the Greater Salt Lake area that includes Park City.
Part of the cause of the Utah recession was an overbuilding of new homes. Production has dropped off so steeply that Eric Allen, director of the Utah/Idaho region, said in the report he thought the area may now be under-built.
There’s a lot of pent-up demand for new homes as potential buyers wait for the economy to improve. Also, the state’s population continues to grow. Once people are ready to buy, there may not be enough inventory, the report said.
Currently, many new-home buyers are first-time buyers taking advantage of state and federal incentives. That’s resulting in more new-home starts priced below $300,000. Previously, that price range was only 42 percent of the market. In the fourth quarter of 2009 it was almost two-thirds of the market.
It also resulted in a two-percent increase in the total number of home closings over the previous quarter. That number is still 25 percent fewer than the same time last year, but represents growth. Building starts also increased 13 percent from the third quarter and were seven percent higher than the same time in 2008.
The overall housing inventory is declining as well. The Wasatch Front Multiple Listing Service showed fewer homes listed in December compared to the previous year. New listings declined 16 percent while closings increased 15 percent, the report said.