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2014 Economic Forecast
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Salt Lake Area
Northern Utah Area
The energized economy has given a shot in the arm to the commercial construction industry as well. “We’ve seen the bottom and I think we’re headed in the right direction,” says Rich Thorn, CEO of the Associated General Contractors of Utah.
He says residential construction is “coming back” and commercial construction is quite strong. “It’s still very competitive, but at least there are opportunities to bid on out there.”
The recession took a significant toll on the construction industry in Utah. Thorn says the number of licensed contractors dropped from 27,000 to about 17,500 today. “They either left the state to look for opportunities or started new careers,” he says.
This contraction is reflected in the job numbers. The industry has grown only 1.6 percent year over year, adding a total of 1,200 jobs.
“We are seeing pretty healthy growth in construction, but we haven’t seen a month of really momentous growth,” says Mayne. As demand for new residential housing increases, she believes that growth will be unleashed in the construction industry, and it will experience several months of above-average growth.
But Thorn notes that during the recession, contractors became much better at doing more with fewer workers. Now those companies “are staying lean and mean,” so they haven’t begun hiring at pre-recession levels.
One sour note for the construction industry is the relative lack of major highway projects. Both the Utah Department of Transportation and the Utah Transit Authority recently completed several major projects—and there is nothing coming down the pipeline to replace those jobs.
Thorn says he is grateful, though, for the Salt Lake International Airport expansion, which will top $1 billion and take a decade to complete.
Exports and Global Trade
The one area of Utah’s economy that has relapsed—ever so slightly—is international exports. But this only demonstrates how closely tied the state has become to global trends.
Last year the state experienced its best year ever for merchandise exports, which totaled $19.2 billion. Unfortunately, this year we’re about 9 percent below the pace of 2012, says Lew Cramer, former CEO of the World Trade Center Utah.
Cramer says there are three reasons for the slump: Kennecott Utah Copper’s landslide, which reduced its exports of metals; the slipping price of metals worldwide; and the global economy. “China and the EU are not buying as much from us as they have been,” he says.
Metals make up a slight majority of Utah’s exports, representing about 55 percent of the total. This proportion has remained fairly steady over the years, says Cramer, even as the volume of exports overall has increased. So the global appetite for metals can have a major impact locally.
This year, exports of primary metals were down a full 20 percent from 2012. With metals being the state’s top export, “That’s a big drop on a big denominator,” says Cramer.
But most other categories saw growth this year. Computer electronics, Utah’s second-largest export category, was up 20 percent. Exports of food and related products rose 14 percent, and exports of transportation equipment grew by 2 percent.
“We’re quite a diversified economy, and quite diversified in our exports,” says Cramer, who adds that the state “must be doing something right” if it can be down 20 percent in its top export category—metals—but only be down 9 percent overall.
Taking into account international exports, imports, “intangibles” like software sales, and travel and tourism, Cramer says one out of every three or four dollars in Utah’s gross state product “has an international tinge to it. … For a small state in the middle of the Rocky Mountains without a seaport, that’s pretty phenomenal.”
In fact, Utah is the only state to have increased its exports every year for the past 10 years. “In a world with a lot of headwinds, to have that kind of continued growth is pretty exciting for our state,” he says.
If the state can continue navigating the rough waters of global demand, Cramer says the future should bring unlimited growth. He estimates that, at the most, 1.5 percent of Utah companies are exporting. “If we could get even 2 percent of Utah companies exporting, nothing would stop us,” he says.
Global and National Threats
What the upcoming year will bring relies heavily on two factors: the global economy and national politics.
With exports accounting for 15 percent of Utah’s gross state product, the economic struggles of foreign countries become Utah’s struggles as well. For example, China is Utah’s third-largest export destination, and exports to China were down 52 percent this year, says Cramer. He believes slower growth in that country has drastically reduced demand for Utah’s metals, coal and agricultural products.