Optimism for Park City economy might be justified
July 2, 2009
Recent reports from economic experts paint a grim picture for Utah’s economy this year. Bright spots in the national outlook, however, may benefit Park City while the rest of the state continues to slide.
Jim Wood at the University of Utah’s Bureau of Economic and Business Research said in the most recent "Utah’s Economy," a monthly report produced for Commerce CRG, that this decade would go down in history as "difficult."
The state’s job losses in 2009 and 2010 will make this decade one of the worst since the Great Depression in terms of job creation. Since 1980, Utah has been one of the nation’s top states for annual employment growth. From 2000 to 2008, that averaged two percent a year.
While many of the factors that supported or fueled that rate of growth are still present, expected job losses in the rest of 2009 and most of 2010 in construction will be over 20 percent and manufacturing over 10 percent.
the end of the year, Utah will have lost an estimated 55,665 jobs. Woods wrote that those numbers exceed anything Utah has experienced since the 1930s. Only health care and government jobs are expected to increase, all other sectors are predicted to lose jobs some more than others.
Construction employment peaked at 103,450 jobs in 2007. By 2010, that’s predicted to fall to 65,000 an almost 40 percent decline. According to the Department of Workforce Services, the current average wage for construction workers in the Greater Salt Lake area is only about $26,000 a year. For the Eastern area, which includes Wasatch County, it’s only $23,000.
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According to Wood, this year will be the worst year in job growth with a total decline of about 4.4 percent. Job losses should soften next year, but will still decline by 1.3 percent.
States with many high-tech industries are expected to lead the nation out of the recession, but those jobs only account for about six percent of Utah’s total work force.
Utah’s employment growth rate has increased three to four percent every decade since 1950. Despite the current decade’s strong beginning, the recession will lower that average for the current decade to only one percent.
Zions Bank’s most recent "Insight" publication produced by Jeff Thredgold predicted the recession in Utah to continue for another nine to 12 months.
Thredgold called the last 18 months the "most serious economic decline in decades."
The good news is that Utah’s jobless rate, which has doubled since 2007, is still among the six lowest in the nation. The bad news is that rate could reach 6.2 percent in the next six to 12 months.
But, in Park City’s favor, the national economy is expected to recover by the end of the year. Because people from other states make up the bulk of Park City’s best visitors and home buyers, the community often mirrors national circumstances closer than Utah ones.
Thredgold went so far as to predict "robust" growth in the fourth quarter of 2009.
Kendall Oliphant, senior vice president at Thredgold Economic Associates, clarified that that prediction is due to the recovering Gross Domestic Product and stock market. The GDP could be turning from negative to positive as we speak, he said, but that’s only one way of measuring a recession.
"Whether that translates to ‘Are we out of recession?’ still depends on some other factors," he said.
One is employment, and the nation’s employment picture is still bleak.
"If a state is creating jobs, then they’re not in recession, if state is losing jobs, the state is in recession," he said.
Oliphant said most economists understand the nation’s employment situation won’t improve for the next six to nine months. In fact, more jobs were lost in June across the country than experts were expecting.
Lincoln Calder, president of the Park City Board of Realtors, explained that the national economy’s effect on Park City is complicated. The increasing GDP and stock markets are improving consumer confidence, which will prompt many buyers to make the home purchase they’ve been contemplating for months.
"We have seen pending sales activity go up recently," he said.
But the frozen credit markets are still hurting Park City’s real estate market, he said. And the employment situation is still a concern because if someone has lost their job, or fears losing it, they’re less likely to come to Park City for a vacation and/or think about purchasing a home here.
"What it will take to bring things fully back, no one has a crystal ball," he said.
Broker Jess Reid said he’s seeing an incremental recovery locally. He’s heartened by predictions of a national recovery in the fourth quarter and believes the community will see small, but positive changes into 2010.
He said people in the tourism industry he talks to are predicting the coming winter to still be down, but an improvement on last season.
The Mountain Travel Research Program based in Denver reported June 19 that traveler reservations for mountain destinations in Utah, Colorado, California and British Columbia were down 15 percent compared to the same time last year.
Reservations made in May for the summer season were up 9 percent, but the six month forecast predicts occupancy to be down 20 percent and room rates to be down 10 percent.
The report points out that the Consumer Confidence Index is back up from a record low of 25 points in February, suggesting consumers may be experiencing "bad news fatigue" and may be growing more optimistic about their economic situations.
Some trends seen last winter that are expected to repeat this coming season are people vacationing closer to home shorter booking windows and price decreases.
Good news for this weekend, AAA’s latest travel survey predicts about 2.5 million people in the Mountain West states are planning to travel 50 miles or more over the holiday weekend.