UTAH'S ECONOMIC AND DEMOGRAPHIC TRENDS

UTAH'S ECONOMIC AND DEMOGRAPHIC TRENDS

BY: KEM C. GARDNER POLICY INSTITUTE AT THE UNIVERSITY OF UTAH

The Kem C. Gardner Policy Institute serves Utah by preparing economic, demographic, and public policy research that helps the state prosper. We are Utah’s demographic experts, leaders on the Utah economy, and specialists on public policy and survey research. We are an honest broker of INFORMED RESEARCH, which guides INFORMED DISCUSSIONS, and leads to INFORMED DECISIONS™.

EMPLOYMENT, WAGES, AND LABOR FORCE UPDATE

The foundation of Utah’s consistent economic growth is its highest-in-the-nation birth rate. Year after year, a greater volume of new labor ages in than out. Yet over the past two years, in-migrating labor is believed to have become a larger labor force growth component than Utah’s internal additions. This is a marked change from Utah’s long held labor-supply routine and is the lead feature for labeling 2022 as a continued pandemic-influenced year.

Utah finished 2022 with above-average job growth alongside a historically low unemployment rate. Such a combination seems an oxymoron. An exceptionally low unemployment rate implies no excess labor for additional job growth, let alone above- average job growth. Yet for 2022, Utah has performed with above-average 3.7% job growth alongside a historically low 2.0% unemployment rate. High labor in-migration is the only plausible explanation.

Normally, available labor flows from weak economies to strong ones. But the pandemic unearthed a new addition — teleworking migration. Utah is showing itself to be a net receiver of both migration movements. This labor-dynamic combination emerged in 2020 and was still at work in 2022.

Despite fueling Utah’s high growth in the post-pandemic environment, this growthcomponent shift is not expected to be maintained. Labor migration turns on and off in short order in response to immediate economic stimuli. Conversely, internal labor force expansion is largely established 20 years prior through the birth dynamic, and therefore is of greater consistency with less variability than in-migration. Labor markets are tight in both Utah and the nation. The nation hasn’t experienced such low unemployment since the 1960s, just before the Baby Boom generation aged in as new workers.

Labor shortages are a new element within the nation’s economic landscape. National demographics have morphed to where labor tightness will now become the economic norm, not the exception.

International in-migration has become the only avenue for additional labor force growth. Tight labor markets are demanding wage increases. Utah’s average payroll wage increase for 2022 should register at 6.8% if not higher. Significant wage gains are often a trigger point for inflation. Yet wages alone have not brought forth 2022’s high inflation. The Russia/Ukraine conflict inflated energy prices, and the lingering COVID-influenced world supply chain restrictions have added additional pressure.

Utah’s 2023 economy is not expected to perform at the same vigorous pace as 2022. Addressing inflation will be 2023’s dominant national economic story. Anticipated national actions will be of such force as to lean heavily upon Utah’s economic momentum.

PERSONAL INCOME UPDATE

Utah’s total personal income in 2022 was an estimated $195.7 billion, a 4.7% increase from $187 billion in 2021. Utah’s estimated 2022 per capita personal income was $57,578, up 2.8% from $56,019 in 2021. U.S. total personal income grew by an estimated 2.1% in 2022 and per capita, personal income grew by 1.8%. Utah’s 2022 estimated total personal income growth and per capita personal income growth were above the national average.

Personal income growth is likely to continue to grow in most Utah industries. Those that experienced wage pressures in 2022, such as industries related to leisure and hospitality, are likely to see similar impacts in 2023 as the limited pool of available labor will drive wage inflation. Industries that are sensitive to interest rate increases, such as real estate and finance and insurance, are likely to experience weaker income growth in 2023.

DEMOGRAPHIC UPDATE

Migration continued to drive Utah’s population growth in 2022. Net migration contributed more than 60% of the growth between July 2021 and July 2022, an increase from 59% between 2020 and 2021. The state continues to age and becomes more diverse. This is the second year of a 1.8% increase, reflecting the peak of intense growth that began to slow midyear in 2022.

Utah’s population grew by 61,242 and reached 3,404,760 by July 1, 2022, according to estimates prepared by the Utah Population

Committee (UPC). After a significant decrease in natural increase (births minus deaths) in 2021 due to increased deaths from COVID-19, levels remained similar in 2022 due to a slight increase in births and a less dramatic increase in deaths. However, like in 2021, net migration (in-migration minus out-migration) contributed the majority of population growth at 62% or over 38,000 new residents.

HOUSING, CONSTRUCTION, AND REAL ESTATE UPDATE

Construction activity in Utah started close to the pace it experienced in 2021. However, mid-second quarter, the market started to slow. From the real estate market perspective, 2022 is best characterized as the year of the Fed. The aggressive stance on raising the federal funds rate at a record pace brought new construction to a drip in the second half of the year. This has brought much uncertainty into the market and as a result, activity is expected to slow further into 2023.

The impact of the rate hike was more severe for residential activity. Worsening affordability continues to thwart demand. Nearly three out of four Utahns cannot afford the median-priced home. As a result, new construction activity is estimated to decline by 30.3% in 2022 after a record 40,144 units were permitted in 2021. The declining trend is expected to continue into 2023 as homebuilders face one of the most challenging markets in history. Residential construction activity is expected to decrease by another 21.0% next year.

While Utah’s economy continued to recover into 2022, the commercial construction activity was uneven. Overall, permitted construction value is estimated to stay relatively similar to 2021. However, the industrial sector continued to outpace its record-setting 2021 by 8.0%. The office market construction value returned to a pre-pandemic level increasing approximately 35.0% over 2021. The rising interest rates are expected to put new projects on pause as the underwriting financial characteristics have changed. Therefore, the expectation for 2023 is that permitted construction value will decline by close to 18.5%.

CONTRIBUTORS

Mark Knold, Utah Department of Workforce Services Robert Spendlove, Zions Bank Mallory

Bateman, Kem C. Gardner Policy Institute Dejan Eskic, Kem C. Gardner Policy Institute