Utah poised for rebound
That is the prediction of area economists
By JEFF DEMOSS
Standard-Examiner staff jdemoss@standard.net
SALT LAKE CITY - While the current economic picture looks bleak, fears about recession may actually help Utah and the United States avoid that fate, two leading local economists said Wednesday.
A growing number of economic experts are saying the U.S. is either headed for a recession or is already in one, but the current situation is really more of a "fear-session," said Kelly Matthews, vice president and economist for Wells Fargo in Utah.
Economic growth in Utah will slow noticeably this year, but the state should remain in positive growth mode for the foreseeable future, according to new forecast data from Wells Fargo.
The fallout from last year's drastic slowdown in home construction will drive unem- ployment in Utah beyond the 4 percent mark and push job growth down into the 1 percent range by the end of 2008, but strong population growth will help Utah rebound in the second half of the year, Matthews said.
There are several forces at work that should spur economic optimism and growth later this year, said Sterling Jenson, regional managing director for Wells Capital Management.
Jenson said the mere perception of a looming recession has pushed businesses to cut back on inventories, caused households to slow their spending, and prompted the federal government to take "massive" measures to stimulate the economy - despite the fact that unemployment remains below 5 percent nationwide and less than 4 percent in Utah.
"Family budgets are feeling the pinch as gas and food prices are up," he said. "That creates a lot of fear and consternation."
Matthews said the economy is slowing, but not recessing.
"Growth is significantly slower than what we've become used to, but Utah is still in full employment mode in every sense," he said. "We're a lot better off than we were several years ago."
Utah experienced essentially no net job growth from 2001 to 2003, according to the Department of Workforce Services.
Utah's job growth rate in January, the most recent month for which data are available, was 2.8 percent. Matthews said that will likely be revised downward to 2.2 percent later this month, and growth will fall to 1.3 percent by the end of the year.
Much of that is due to a decline in home building. Statewide, permits for single-family homes fell more than 32 percent from 2006 to 2007, according to the University of Utah's Bureau of Business and Economic Research.
Permits are currently down as much as 75 percent in some areas. But the recent downturn in residential building should reverse in mid-year, helping single-family building permits rise more than 3 percent over a dismal 2007, Matthews said.
"With 3 percent population growth and more than 1 percent in job growth, I believe we will have to build more single-family homes this year," he said.
Utah still leads the nation in home price increases, with an average increase of nearly 10 percent in 2007.
With the strong price increases, Matthews said, housing affordability remains an issue in some parts of the state. He said average home prices in Salt Lake County would have to fall from $286,000 to $260,000 this year to bring the market back into equilibrium.
Prices in Davis and Utah counties would also have to come down at similar rates, he said. But in Weber County, where prices have not risen as sharply, affordability is not as much of an issue.
"The gap between home prices and incomes is not as wide in Weber County," he said.
Market forces, combined with federal government efforts to help home buyers, should help reign in the affordability problem along the Wasatch Front by the end of the year, he said.
Jenson said there are several factors pointing toward national economic recovery later in the year, including lower interest rates, strong corporate profits and a reduction in the federal trade deficit.
He said much of the current economic sluggishness can be attributed to recordhigh energy prices and a downturn in the automobile industry. Those sectors combine for only 7 percent of the national gross domestic product, he said.
Outside of those two areas, the U.S. economy expanded by nearly 4 percent last year, he said.
"The economic crisis we're in now is a mile deep, but only an inch wide."
Matthews said Utah is positioned to retain the strongest economy in the nation.
"Utah's position of number one remains pretty solid in terms of demographics and the quality of our labor force," he said.
"A year from now, I think we will feel a lot better about the situation." 
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