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Bright spots in 1992.


In a time of national recession, when many states' economies struggled to create new jobs, Utah's economy emerged as one of the strongest in the nation in 1991, posting respectable job increases in nearly every sector. While jobs nationally declined, Utah experienced the third-fastest growth rate in the country, increasing by 3.1 percent, for an addition of 22,400 jobs. This growth is significantly slower than the 1990 expansion, but still impressive considering national economic conditions.

As a result of this solid economic performance, Utah has received favorable media attention in major periodicals including U.S. News & World Report, Time, Business Week, Money, Fortune, Finanical World, The Economist, London Times, Los Angeles Times, New York Times, Boston Globe, Kiplinger Personal Finance, USA Today and others. These articles have stimulated a high level of interest in Utah from expanding out-of-state companies as well as job-seekers. This is, no doubt, one of the reasons why the Utah economy has so far avoided most of the negative effects of the national recession. As most of these articles have pointed out, Utah offers a high-quality labor force at a reasonable cost, a good location with excellent transportation infrastructure, a very competitive business-tax climate, a reasonable regulatory environment, a growing reputation as a center for high technology, and an outstanding quality of life including world-class recreational and cultural opportunities in a relatively uncongested, clean, and safe setting.

One of the major outcomes of Utah's relative economic strength and national recognition is that the state experienced net in-migration in 1991 for the first time in seven years. Out-migration peaked in 1988 when 14,500 more people left the state then moved in. The net in-migration during 1991 totaled nearly 19,000, the highest level since 1980. In-migration occurred in 27 of Utah's 29 counties. Since the 1950s this magnitude of in-imigration has only occurred three times.

During 1991 there were announcements for a number of new facilities, including Zero Corp. (1,000 jobs, Salt Lake County), Marriott Guest Reservations (800 jobs, Salt Lake County), Sears Payment System (700 jobs, Davis County), OEA Inc. (400 jobs, Box Elder County), Continental Airlines Reservations (350 jobs, Salt Lake County), and several dozen smaller facilities scattered around the state.

There were also announcements during the year for expansions of existing Utah companies. Among the most notable were those of Novell in Utah County and Morton Airbag in Box Elder County, representing two of the fastest-growing industries in the state. Novell is a leader in network systems operating software that links desktop computers with mini and mainframe computers. Novell announced that it will expand in Utah County from 1,200 employees in 1991 to approximately 4,500 by 1995. Morton Airbag is the leading manufacturer in the rapidly expanding field of automobile airbags. Morton announced its intention to add another 400 employees over the next 12 months. Furthermore, two Morton suppliers announced their intentions of building facilities in Utah. OEA Inc., a Denver-based company that makes initiators for airbag inflation, announced its plans to build a $20 million facility in Box Elder County that will employ 400 people. Piper Impact, a Mississippi-based company, will make housings and bases for airbags at its new plant in Summit County. Piper will employ 100 persons initially.

While these expansions and openings demonstrate that Utah's economy is healthy, economic conditions slowed during 1991 and Utah has not been totally immune from the national recession. Annual personal income growth fell from a peak of 9.3 percent in the third quarter of 1990 to 7.4 percent in the second quarter of 1991. Job growth has continued to decline from an annual peak of 5.3 percent in November 1989 to 2.9 percent in October 1991. The unemployment rate in Utah hit an 11-year low of 4 percent in April 1991, but registered 5.1 percent in October. And consumer confidence declined 6.4 percent in October. These indicators show that Utah has not escaped the national downturn unscathed and the longer that the national economy struggles, the more prone Utah will be to recession.

National Outlook

The 1992 national outlook is for a year of sluggish economic growth. The current recession, as measured by declines in real GNP, started in the fourth quarter of 1990 and continued in the first and second quarters of 1991. When real GNP increased 2.4 percent in the third quarter of 1991, many economists declared that the recession had ended. With the advent of the fourth quarter, however, signals of a weakening economy began to reemerge, prompting the Federal Reserve Board and banks to further lower interest rates in November.

Lower interest rates and the reported third-quarter increases in personal income, consumer sentiment, retail sales, and employment suggest the nation will experience a slow, subdued recovery. The Index of Leading Indicators increased an average of 0.8 percent from February through July and, despite a 0.1 percent drop in September 1991, remained 1.2 percent above September 1990. Auto sales, housing starts, worker productivity, and industrial production also posted increases during the third quarter and pointed towards a recovery.

The national economy is expected to grow slowly, but should avoid a double-dip recession. Weak consumer confidence coupled with business, government and consumer indebtedness should dampen the recovery. At the same time, declining real interest rates, increased bank lending and profit margins, easier credit standards, lean inventories, increased exports, lower inflation and labor costs, increased productivity from corporate restructuring, and lower mortgage rates should all help to spur economic growth.

Utah Outlook

Utah should avoid a local recession if the national recession is not severe or prolonged. The economic outlook for Utah in 1992 is for near-average growth. Jobs in Utah should grow at about 3 percent in 1992. The historic 1950 to 1990 job growth rate in Utah is 3.4 percent.

While more defense-related layoffs are looming, numerous openings are scheduled to occur next year. Companies should continue to be attracted to Utah because of the availability of a low-cost, youthful, and educated labor force; inexpensive housing; and a strong work ethic. Utah has the highest literacy rate in the nation, and it tied with Washington state in a 1989 Bureau of the Census survey for the highest number of high school graduates. In addition, Utah ranked 10th in the survey for the number of people who have completed four or more years of college, and Utah's median age of 25.7 years is the youngest in the nation.

Utah continues to have a favorable business climate. Utah is one of only four states which allow for limited-liability companies. This form of incorporation allows businesses, including professionals, the tax advantages of partnerships and the liability protection of corporations. Also, Utah is a right-to-work state that provides enterprise zone tax credits to companies in economically distressed areas.

Net in-migration, low mortgage interest rates, moderate job creation, and local housing shortages should bolster residential construction in activity should benefit from construction of new office buildings, manufacturing plants, and some Winter Sports facilities.

Employment, population, wages, and incomes should all grow moderately in 1992. Population growth should increase at 2.2 percent. Nonagricultural employment is expected to grow around 3.0 percent; average wages are expected to increase by 4.0 percent; total nonagricultural wages should increase by about 7.0 percent; and personal income is expected to increase by 7.2 percent in 1992.

Total Department of Defense spending in Utah has declined substantially from the peak levels achieved back in 1986. During 1991, reduced spending caused a decline of 2,766 direct jobs with greater losses expected due to lagged multiplier effects. In 1992, the expectation is for continued declines in defense spending and jobs. The job loss due to declining defense spending could result in the loss of between 3,000 and 6,000 jobs per year for the next three years. If the Utah economy can maintain employment growth at or above the 3 percent per year level, the adjustment process should occur with minimal disruption. Individual workers, however, may find the adjustment process difficult. [Chart Omitted]
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Title Annotation:economic forecast for Utah, 1992; includes related article on additional highlights of Utah 1992 economic outlook
Publication:Utah Business
Date:Feb 1, 1992
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