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22 February 2012

On the Job

Leaders Looking for Ways to Get the Beehive Buzzing Again

by Gaylen Webb

22 February 2012—

If the financial markets of Europe don’t collapse…if Iran doesn’t go crazy…if the U.S. stock market doesn’t tank…then Utah’s employment picture will remain among the best in the nation.

Like most states, Utah’s economy is still fragile; but unlike most other states, Utah is currently among the top five for job growth and should remain so—contingent on no big blowups. So prognosticates Mark Knold, senior economist with the Utah Department of Workforce services.

While Utah’s unemployment rate is down to approximately 7 percent, the falling unemployment number doesn’t hold as much credence for Knold as does job growth, which is currently at 2.6 percent.

“We are still below our long-term average of 3.1 percent job growth, but in this overall environment, 2.6 percent is about third best in the country—at least within the top five,” he says. “Considering where the recession hit, the depth of it, and how long it lasted, 2.6 percent is still good. We are gaining momentum. I think we will be able to inch this thing up as we move into 2012—as long as there isn’t a huge collapse in Europe or something else.”

To be sure, the jobs picture is improving across the state, but the recession dug a fairly deep hole. “We are just now starting to fill the dirt back in, so to speak, but it will take several years of good job growth to do that,” Knold says. “We should have good job growth, but our unemployment rate may still end up higher than we want it to be, as we re-employ people that lost jobs in the recessionary slide.”

On the Rebound

If job growth continues as expected, Knold thinks Utah will look like what he calls a rubber ball economy: “The harder you throw the ball down, the faster it bounces back up. It may end up being a bit like that.”

The Utah economy went down hard, indeed. The recession brought massive layoffs to the construction and manufacturing sectors and hit the state’s younger population especially hard. Now certain sectors are bouncing back strongly.

Manufacturing is one such sector. Last November, during a luncheon with Gov. Gary R. Herbert, leaders from 21 of the state’s manufacturing companies told the governor they all planned to increase their hiring within the next six to 12 months. Thomas Bingham, president of the Utah Manufacturers Association, notes that it’s fairly typical in recoveries for manufacturing to lead out in bringing people back to work.

“Most everything you buy that isn’t a service is a manufactured product; 95 percent of Utah exports are manufactured products,” he says.

Still, job growth rates vary greatly among the different manufacturing sectors. Some manufacturers actually grew during the recession and were fairly recession proof, like the state’s medical device manufacturers, while those manufacturers tied to the residential housing market continue to struggle. “Those folks have really had some issues and will continue to until the housing market rights itself,” Bingham says.

Knold adds that job growth in the manufacturing sector is significant to the overall economy because manufacturing in Utah is closely tied to exports, thus pulling outside dollars into Utah. “It is certainly good to see manufacturing get its legs back under it,” he says.

Bingham cautions that, at least within some areas of the manufacturing sector, not all of the jobs that were lost will come back. The reason, he says, is because manufacturers have gotten lean in their approaches and have found ways to do more with less. Further, when more manufacturing jobs do open up, “they won’t just be adding bodies. These are very high-tech, sophisticated manufacturing companies. They will be hiring highly trained workers.”

Rich Thorn, president and CEO of Associated General Contractors of Utah, says jobs within the commercial construction sector are also coming back a bit, but the improvement is nothing to write home about. “We just need to make it through 2012. I think in 2013 we will see some breathing room,” he says. “But at least for the foreseeable future, we are just not going to see the levels of commercial or residential building that we saw four or five years ago. As a result, the industry has had to reshape itself.”

From a geographical perspective, job growth is hotter in some areas of the state than in others. The St. George area, for example, still has high unemployment, with the economy being well below what the area is historically used to. Box Elder County is another area of the state with higher unemployment and a struggling economy.

On the other hand, Utah and Cache Counties are experiencing healthy job growth. Knold says the Provo area is experiencing employment gains around 3.5 percent—better than the state’s historical average—and “almost without the help of the residential construction sector.”

100,000 Unemployed

While the Utah Department of Workforce Services lists about 20,000 jobs on its website, approximately 100,000 Utahns are presently considered unemployed. Another 100,000 have quit looking altogether and do not get counted in the state’s labor force participation rate (the percentage of those 16 and older who are working or looking for work). With this additional group, the Bureau of Labor Statistics would put unemployment up around 14.3 percent in Utah and 16.2 percent nationally. Knold says the latter group essentially got tired of looking. Some went back to college.

“College enrollments have shot way up because of the recession. The upside is that a larger portion of the labor force will be more educated down the road. Rather than sit idle, many from this group have gone back to school and are making the most of their time,” he says.

Another block of workers fit within the label of the “under-employed,” a segment of the population that is either working part time when they would rather be working full time, or working in jobs beneath their capabilities.

“What can’t be measured are those people working way below their capabilities. We have to make the assumption in this economic environment that a lot of people are doing that,” he says, adding that career movement is kind of like trying to climb up a ladder. When the economy is good, a large portion of the labor pool climbs up the ladder, leaving a vacuum at the bottom. That vacuum is what encourages immigration and illegal immigration.

On the other hand, “in a recession you get a lot of people falling down the ladder. What we have right now is an incredible pent-up desire within the workforce to move upwards or sideways into something different. We have seen a lot of non-movement or backward movement in the past five years…but we won’t see [upward] movement until we see a stronger economy, or until workers are confident they can get something else rather than sitting silent because there is nowhere else to go,” he explains.

Agenda for Growth

Mark Lehman, president of the Utah chapter of the Association for Corporate Growth, describes the Utah job market as stabilizing and in a holding pattern, but says competition for jobs is fierce with a flood of applicants vying for the limited number of open positions. With the glut of applicants, employers are relying more and more on referrals, especially when filling skilled and managerial positions. Nonetheless, he believes that Utah is unique in how it is dealing with the recovery.

“The exciting thing about Utah is the enthusiasm and determination about job development, from Governor Herbert to the Salt Lake Chamber and on down. The focus on job development is significant. The people that I deal with feel a sense of community, a sense of being on the same team and moving in the same direction,” Lehman explains. “People talk about the unemployment numbers, but the numbers don’t matter. What matters is we are on the same page and we are creating jobs in a way that is efficient and sustainable.”

Lehman points specifically to two job growth agendas: Herbert’s “100,000 jobs in 1,000 days” initiative, and the Salt Lake Chamber’s “Utah Jobs Agenda.” The governor’s initiative seeks to help the private sector create 100,000 jobs in a little less than three years. Meanwhile, the Salt Lake Chamber’s Utah Jobs Agenda seeks to create 150,000 jobs over five years through a variety of measures that include investments in transportation, the state’s energy economy and corporate recruitment.

Are the two initiatives doable? They both are, says Knold.

“If you take the environment we are in now and freeze it, and then repeat it for the next three years, we would be at 100,000 jobs,” he says. “The same for the Salt Lake Chamber’s initiative: if we repeat it for the next five years we will be at 150,000 jobs.” The governor’s initiative requires job growth of about 2.8 percent for three years, while the Chamber’s jobs agenda requires about 2.4 percent job growth for five years.

“Both of those job numbers are quite achievable, but not guaranteed,” Knold adds. “For the past year we are estimating employment growth of 2.6 percent, which is 31,000 jobs.” Extrapolate that growth rate out for three or five years and the state will have achieved the desired 100,000 or 150,000 jobs.

Salt Lake Chamber Director of Communications Marty Carpenter notes that adding 150,000 jobs would put the state at near full employment and says after one year of the Utah Jobs Agenda, the state is on track to achieve the goal.

100,000 Jobs in 1,000 Days

Gov. Gary R. Herbert recently pulled together an 11-member Governor’s Economic Development Coordinating Council with a single purpose: supporting private-sector efforts to create 100,000 jobs in 1,000 days.

Along with a focus on public education, workforce readiness and employer needs, the council will key in on seven action items:

Continuing to recruit new companies to the state
Reducing taxes on business expansion inputs for local Utah companies
Increasing access to capital for small and startup businesses
Assisting the growth of companies in rural Utah by expanding
the Business Expansion and Retention program and the Rural Fast Track Program
Doubling Utah exports in the next five years
Implementing the state’s 10-Year Energy Plan to ensure access to affordable, reliable and sustainable energy
Ensuring a stable business environment and maintaining Utah’s AAA bond-rating through regulatory reform and fiscally prudent management of state government

Utah Jobs Agenda

In January 2010, the Salt Lake Chamber announced a five-year plan to create 150,000 jobs in the next five years. To reach that milestone, the chamber crafted the following goals to be completed over the five-year timeframe:

Education – Ensure that 90 percent of 3rd and 6th graders achieve reading and math proficiency and that two-thirds of Utahns have a certificate, degree or equivalent endorsement in a skilled trade or academic pursuit by 2020

Transportation – Invest $4 billion in transportation infrastructure

International – Double the value of international merchandise exports

Energy – Invest $1 billion in Utah’s energy economy

Business costs – Secure a third or better ranking among states for the cost of doing business

Statewide corporate recruitment – Land three regional headquarters

Immigration – Create a federally approved, employer-sponsored
work program

Tax policy – Make incremental improvements in the efficiency, fairness and stability of the Utah tax structure

Air quality – Attain and maintain the national ambient air quality standards

Rural development – Create a private-led business partnership with representatives of rural Utah