U TA H ’ S QUAR TER LY EC ONO M IC S U RVEY OF BU S IN ES S EXECU T I V ES 2019 - QU ART ER 4
Optimism High for Utah’s Future According to the CEOutlook Confidence Index, Utah business leaders entered 2020 optimistic about the future of our state’s economy. The 2019 fourth-quarter report Index ranked third-highest since we began collecting the Index in early 2017. There are several reasons for this optimism. First, Utah led the nation in job growth from December 2018 to December 2019 and has the lowest unemployment rate recorded to date. Second, every major Utah industry is growing, from our strong tourism and business services sectors to the surging growth in Utah’s construction and health care industries.
Derek B. Miller President and CEO Salt Lake Chamber
Beyond these indicators, Utah’s vibrant economy is spreading throughout the state, including rural Utah. We still have two counties (Beaver and Sevier) with job declines, but this is an improvement over previous years. Other counties, like Wasatch, reached sizzling job growth rates of 10% or more in December 2019. There is good reason for optimism. Utah’s economy is expected to remain strong for the foreseeable future and this is thanks in part to its hardworking citizens and business leaders.
Utah Economy puts up Impressive Numbers Again and CEOs Agree With an unemployment rate of 2.3%, the Utah economy closed out 2019 with its lowest unemployment rate ever. With low unemployment, rising wages and inmigration, all that is left for a strong Utah economy is “frictional unemployment” or the unemployment that exists because of people moving from one job to another. Utah CEOs recognize the strength of the Utah economy. The CEOutlook Confidence Index increased in fourth-quarter 2019 to its highest level since second-quarter 2018. Utah year-over job growth in December tallied 3.3%, topping the nation… again. Construction is leading the way with a white-hot 9.5% job growth from December 2018 to 2019. Government job growth remains in check with a modest 1.5% year-over growth rate. Natalie Gochnour Director and Chief Economist Kem C. Gardner Policy Institute and Salt Lake Chamber
The Utah Economic Council’s consensus forecast for 2020 includes continuing strong growth, albeit at moderating levels. The Council expects job growth to moderate from 3.0% in 2019 to 2.7% in 2020. If this forecast occurs, I expect Utah CEOs to be upbeat again in our next survey. Utah’s high-performing economy is a gift. Let’s keep it going.
SALT LAKE CHAMBER’S CEOUTLOOK CONFIDENCE INDEX AND JOB GROWTH The Salt Lake Chamber’s CEOutlook Confidence Index increased from 53.3 in 2019-Q3 to 61.2 for 2019-Q4, as executives report economic conditions should remain the same or improve. The Salt Lake Chamber’s CEOutlook Confidence Index is based on responses to the four standard questions included in each quarter’s survey (Questions 1-4). The Index can range from 0 to 100. A score below 50 indicates executives believe the economy will worsen; a score above 50 indicates a belief among executives that the economy will improve. 4%
Year-Over Job Growth
60 2%
45
30 1%
62.0
60.6
62.4
62.3
60.9
55.5
53.2
60.1
53.3
61.2
Index Utah Job growth
62.8
0%
66.3
15
17-Q1
17-Q2
17-Q3
17-Q4
18-Q1
18-Q2
18-Q3
18-Q4
19-Q1
19-Q2
19-Q3
19-Q4
66.3 3.0%
62.8 3.1%
62.0 2.5%
60.6 3.0%
62.4 3.4%
62.3 3.3%
60.9 3.4%
55.5 3.2%
53.2 3.1%
60.1 2.9%
53.3 2.9%
61.2 3.4%
0
Concern <50
75 3%
>50 Optimisim
90
Source: Index is produced from the Salt Lake Chamber’s CEOutlook with support from the Kem C. Gardner Policy Institute, including analysis of the U.S. Bureau of Labor Statistics seasonally adjusted series of current employment statistics.
ABOUT THE SALT LAKE CHAMBER’S CEOUTLOOK The Salt Lake Chamber’s CEOutlook is a statewide economic survey of Utah business executives. Modeled after other national business sentiment surveys, it provides a forward-looking view of the Utah economy. The results of the survey are intended to help business and community leaders make informed decisions about likely future economic conditions. The survey will continue to be evaluated through 2020 to assess its predictive value.
2019 - Quarter 4
QUARTER
CONDUCTED
SAMPLE
Quarter 1
February-March 2019
40
Quarter 2
May-June 2019
40
Quarter 3 Quarter 4
August-September 2019 November-December 2019
42 39
1
MAJORITY OF EXECUTIVES BELIEVE UTAH’S ECONOMY HAS HELD STEADY Q1- How would you describe the current economic conditions in Utah compared to six months ago?
CURRENT ECONOMIC CONDITION INDEX 70
67.0
65.9
65.0
64.4
64.2
65.0
67% 61.7
60
59.0
58.8
55.6
54.8
50
50.0
40 30 23% 20 8%
10
3% 0 2017 Q1
2017 Q2
2017 Q3
2017 Q4
Significantly Better
2018 Q1
2018 Q2
2018 Q3
Somewhat Better
2018 Q4
2019 Q1
2019 Q2
About the Same
2019 Q3
2019 Q4
Somewhat Worse
0%
2019-Q4 N=39
Significantly Worse
BUSINESS OUTLOOK GOOD: MAJORITY OF EXECUTIVES EXPECT ECONOMIC CONDITIONS TO REMAIN THE SAME OR IMPROVE SIX MONTHS FROM NOW Q2- What is your expectation for economic conditions in Utah six months from now?
CURRENT ECONOMIC EXPECTATION INDEX 70
66.1 59.2
60
61.7
58.8
61.4
61.4
57.7
56.3
55.5 50.0
50
51% 48.2
45.6
40
33% 30 20 10
8%
5%
3%
0 2017 Q1
2017 Q2
2017 Q3
2017 Q4
Significantly Better
2018 Q1
2018 Q2
2018 Q3
Somewhat Better
2018 Q4
2019 Q1
2019 Q2
About the Same
2019 Q3
2019 Q4
Somewhat Worse
2019-Q4 N=39 Significantly Worse
*Some totals may appear to exceed 100% due to rounding.
2
CEOutlook: Utah’s Quarterly Economic Survey of Business Executives
MAJORITY OF EXECUTIVES EXPECT ECONOMIC CONDITIONS IN THEIR RESPECTIVE INDUSTRIES TO HOLD STEADY OR IMPROVE SIX MONTHS FROM NOW Q3- What is your expectation for your own industry six months from now?
INDUSTRY EXPECTATION INDEX 70
67.9
62.5 59.9
60
63.6
59.7
58.3
57.8 53.1
58.1
50
49%
53.1 48.2
40
36%
30 20 10
8%
5%
3%
0 2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
Significantly Better
2018 Q2
2018 Q3
Somewhat Better
2018 Q4
2019 Q1
2019 Q2
About the Same
2019 Q3
2019-Q4 N=39
2019 Q4
Somewhat Worse
Significantly Worse
MAJORITY OF EXECUTIVES OPTIMISTIC FOR THEIR OWN FIRM’S PROFITS Q4- What are your expectations for your firm’s profits in the next 12 months?
EXPECTATION OF PROFIT INDEX 70 60
68.6
66.5 61.7
64.3
61.3
63.3
61.4
64.1
69.7
66.0 61.9
59.3
55%
50 40 30 20
18% 13% 13%
10 0%
0 2017 Q1
2017 Q2
2017 Q3
Increase Considerably
2017 Q4
2018 Q1
2018 Q2
2018 Q3
Increase Moderately
2018 Q4
2019 Q1
Remain the Same
2019 Q2
2019 Q3
2019 Q4
Decrease Moderately
2019-Q4 N=38 Decrease Considerably
*Some totals may appear to exceed 100% due to rounding.
2019 - Quarter 4
3
OF THE RESPONDENTS ANTICIPATING INCREASING PROFITS, INCREASED DEMAND TOPPED LIST OF CITED PRIMARY DRIVERS Q5- Which factor do you anticipate will be the primary driver in increasing profits over the next 12 months? 5% 13% 7% 26%
12% 17%
14% 34%
7% 14%
22%
13% 17% 17%
22% 29% 4% 4%
12%
17% 9%
13%
27%
10%
43%
73%
67%
38%
48%
63%
52%
50%
2018-Q1 N=23
2018-Q2 N=15
2018-Q3 N=21
2018-Q4 N=29
2019-Q1 N=23
2019-Q2 N=24
2019-Q3 N=23
2019-Q4 N=26
Increased Demand
Increased Prices
Reduction in Costs
Other
OF THE RESPONDENTS ANTICIPATING DECREASING PROFITS, NO CONSISTENT PRIMARY DRIVERS Q6- Which factor do you anticipate will be the primary driver in decreasing profits over the next 12 months?
25% 33%
33% 40% 50%
43%
25% 13%
20%
20% 33%
67%
29% 20%
50%
14%
17%
33%
50%
38%
40%
33%
14%
20%
2018-Q1 N=6
2018-Q2 N=6
2018-Q3 N=2
2018-Q4 N=8
2019-Q1 N=5
2019-Q2 N=3
2019-Q3 N=7
2019-Q4 N=5
Increase in Costs
4
40%
Decrease Prices
Decreased Demand
Other
CEOutlook: Utahâ&#x20AC;&#x2122;s Quarterly Economic Survey of Business Executives
EXECUTIVES HOLD STEADY: MAJORITY BELIEVE THAT HEADCOUNT WILL INCREASE OR STAY THE SAME IN THE NEXT YEAR Q7- Do you expect the overall headcount at your company to increase, decrease or stay the same over the next 12 months? 3%
9%
6%
5%
8%
3%
2%
3%
36%
34%
43%
41% 45%
46%
48% 56%
57%
54%
53%
47%
48%
48%
41%
51%
2018-Q1 N=44
2018-Q2 N=35
2018-Q3 N=32
2018-Q4 N=49
2019-Q1 N=40
2019-Q2 N=39
2019-Q3 N=41
2019-Q4 N=39
Increase
Stay the Same
Decrease
KEY COMMENTS FROM EXECUTIVES ON EMERGING TRENDS EXECUTIVES REPORT POLITICAL CLIMATE, LABOR, TRADE AND HOUSING AFFORDABILITY AS LEADING CONCERNS FOR UTAH’S ECONOMY Q8- What emerging trends, risks and other factors do you think may have a positive or negative impact on Utah’s economy in the next 12 months? Below are highlighted, anonymized quotes from executives:
Tariffs and trade deals raise consistent concern. Could lead to a recession based on the fear of a recession.
Housing costs and talent availability. Both will slow our economy.
Qualified, educated employment prospects are a challenge.
Continued in-migration from surrounding western states brings both benefits and challenges. Housing prices are still very high. Tight labor markets are having an upward impact on wages.
Pressure on interest rates, political uncertainty and continuing trade issues. Positive Impact - Tax reform, investment in infrastructure and transportation, a new mayor in Salt Lake, and growth. Negative Impact - Political uncertainty, not addressing immigration at a federal level, trade war, impeachment inquiry and the rising cost of housing.
Air quality, affordable housing, transportation. International economic and political uncertainty — US-China trade war, Iran, North Korea, Brexit, interest rates, and US Government stalemates. Limited housing will continue to limit growth.
National elections. International crisis. Locally the most critical factor that could curb Utah’s growth will be housing affordability.
2019 - Quarter 4
5
KEY COMMENTS
The following two questions change quarterly to reflect current economic conditions:
FROM EXECUTIVES ON UTAH’S ECONOMY COMPARED TO THE NATION Q9- The Utah economy continues to outperform the nation. What do you attribute this to? Below are highlighted, anonymized quotes from executives:
Young, skilled workforce. A political climate favorable to business, with free-market and modest regulatory principles.
Continued growth and in-migration, well-managed state investments and spending, airport reconstruction and consumers continuing to spend.
The 3 Cs in Utah: we collaborate, cooperate and communicate sufficiently to ensure good outcomes. Stable regulatory and legal environment. Reasonable legislature and government approaches. Visionary political and business leaders.
Job growth and competitive salaries. Also, the state being open and friendly for outside investment.
Utah has a strong workforce and a friendly business environment, which helps us continue to thrive. Predictable local political environment, friendly regulatory management and entrepreneurial encouragement. Our growing population, growth of tech sector and physical room for growth in state. Tax incentives, educated workforce, safe and pretty place to live, and overall growing population. Diverse economy, business-friendly policies and savvy consumers.
Predictable local political environment, friendly regulatory management and entrepreneurial encouragement. Growth, growth, growth in population and lower than average real estate taxes. We need the taxes to stay lower than average. Attractive quality of life and pro-business governmental policies. A long history of pro-business governance at the state level has been key to attracting and retaining national businesses. Innovation from Utah’s education core. The young population has allowed businesses to grow in Utah and lever relatively low cost of living.
Q10- Do you expect the Utah economy to continue to outperform the nation for the foreseeable future? Why or why not? Below are highlighted, anonymized quotes from executives:
Yes. The ability to surpass and overcome adverse times in the past and the leadership to help preserve local businesses. Yes. More diversity, more responsible government, more entrepreneurial in nature, climate, culture and opportunity.
Utah has the key elements of pro-business regulation and taxation, a commitment to infrastructure and education and a diversity of industries within its economy to continue to outperform the nation. These factors combined with the natural environment and expanding cultural lifestyle options will continue to keep Utah at the top of national lists.
Yes, Utah tends to be on the cutting edge of innovation and collaboration. We have a pro-business leadership that has set the stage for future growth.
Yes, population continues to grow; but we will soon hit a ceiling due to air pollution and pollution in general.
Yes, but I think it will slow down. The lack of workforce will impact us negatively.
Yes, particularly due to the diversity of our economy. We can benefit from hot industries and weather down cycles in cooler industries.
Yes, Utah continues to look for ways to attract business and tourism to the state, which helps the economy. Utah is generally conservative which helps when the economic climate changes. Yes, particularly due to the diversity of our economy. We can benefit from hot industries and weather down cycles in cooler industries.
6
Yes, because I expect the population to grow and for businesses to continue to move into the state. Yes. We may slow down but the diverse economy and favorable living environment will continue to fuel growth.
CEOutlook: Utah’s Quarterly Economic Survey of Business Executives
KEY ECONOMIC INDICATORS FOR BUSINESS LEADERS QUARTER 4 AVERAGES
UTAH’S EMPLOYMENT SUMMARY
The Utah Department of Workforce Services reported, as of December 2019, that Utah’s employment grew by an estimated 3.3 percent, adding 50,400 jobs to the economy since December 2018. Utah’s current employment level registers 1,599,500. November’s year-over job growth is revised upward twotenths of a percentage point to 3.5 percent. December’s seasonally-adjusted unemployment rate lowered one-tenth of a percentage point to 2.3%. This becomes Utah’s lowest recorded unemployment rate. Approximately 37,900 Utahns were unemployed and actively seeking work during December. The national unemployment rate remained unchanged at 3.5%. “Utah culminates 2019 with a resilient and convincing employment picture,” reported Mark Knold, chief economist at the Department of Workforce Services. “The economy continues adding to multiple years of robust job creation. This dynamic has carried Utah to its lowest recorded unemployment rate. The job market is humming along at a feverish pace and is absorbing as much labor as possible.” Utah’s private sector employment grew by 3.6% year-over with the addition of 46,700 positions. Nine of the 10 private sector major industry groups measured in the establishment survey posted net job increases in December, with only the Other Services group adding no net jobs.
BUSINESS LEADER SENTIMENT
The Salt Lake Chamber’s CEOutlook Confidence Index increased from 53.3 to 61.2 for 2019-Q4, as a growing number of executives believe economic conditions will remain the same or improve over the next six months (a reading of more than 50 points reflects more positive than negative responses). The Conference Board Measure of CEO Confidence™, which declined to 34 in the third quarter of 2019, rebounded to a reading of 43 in the fourth quarter (a reading of more than 50 points reflects more positive than negative responses). “CEO Confidence improved in the final quarter of 2019, after having declined to its lowest level in a decade in Q3,” said Lynn Franco, senior director of Economic Indicators at The Conference Board. “While the abatement of trade and tariff issues has helped improved confidence, CEOs still remain apprehensive about global growth prospects in early 2020.” The MetLife & U.S. Chamber of Commerce Small Business Index reached 71.3 this quarter, up 0.6 points from 70.7 last quarter. This is the highest score since the survey’s inception in 2017 and marks the second consecutive quarter that the Index has set a new record. This quarter’s increase is explained by two factors: small businesses’ strong outlook on their local economy and optimism about their own business health. For both indicators, the percentages of those that report optimism are the highest they have ever been. Other key indicators remain mostly unchanged from last quarter. Some key findings this quarter include: 69% percent of small businesses report good health, up slightly from last quarter (66%). This is the first time this measure has grown over four consecutive quarters (66% in Q3 2019, 65% in Q2, and 64% in Q1). An unprecedented 59% say their local economic outlook is good. This is the most optimistic businesses have felt toward their local economy since the survey’s inception (56% last quarter and in Q4 2018). 57% say the U.S. economy is in good health, similar to last quarter and continuing an overall positive trend since Q1 (was 58% in Q3, 59% in Q2, and 53% in Q1). The Business Roundtable’s 2019-Q4 CEO Economic Outlook Index is a composite of CEO plans for capital spending and hiring and expectations for sales over the next six months. The Index decreased 2.5 points from last quarter to a value of 76.7, which remains below the Index’s historical average of 82.7 – an indication of continued moderation in the pace of economic growth. The 2.5-point decline, while modest, marks the seventh consecutive quarterly decline and indicates that CEO plans have eased from Q3. CEOs remain cautious in the face of uncertainty over trade policy and an associated slowdown in global growth and the U.S. manufacturing sector, which is currently contracting. 2019 - Quarter 4
7
KEY ECONOMIC INDICATORS FOR BUSINESS LEADERS QUARTER 4 AVERAGES
CONSUMER PRICES
The Zions Bank Wasatch Front Consumer Price Index (CPI) increased 0.7% from October to November on a non-seasonally adjusted basis. Year over year, the Wasatch Front Consumer Price Index has grown 3.5%, while the national Consumer Price Index has increased 2.1% since November of last year. Rising prices within the housing sector caused most of the price growth in November as apartment rental rates and hotel and motel prices ticked up. Housing prices grew by 1.2%, the largest single-month increase since May 2018, ending a five-month streak of slowing 12-month price growth. Year over year, housing prices have increased 3.6%. Increasing prices in the recreation and transportation sectors also contributed to higher prices along the Wasatch Front. Prices in the recreation sector rose 3.2% in November due to increases in prices for cable and satellite TV, while higher gas prices drove up transportation prices by 0.6%. The 12-month price growth for the recreation sector has risen for four-consecutive months and is now at 16.7% — the highest level ever recorded in this index. It is now the second-largest factor contributing to year-over-year price growth along the Wasatch Front.
CONSUMER ATTITUDE
The Zions Bank Utah Consumer Attitude Index increased 2.1 points to 119.1 in December. The year-over-year CAI bumped up by 3.3 points. In comparison, the national Consumer Confidence Index® decreased 0.3 points to 126.5 this month. The Utah Present Situation Index rose 3.6 points to 133.4 in December, driven by increased optimism regarding the current job market. In December, only 8% of Utahns believe that jobs are hard to get, down 2% since November and back to the lowest level recorded since November 2018. Utahns also believe business conditions are favorable; 95% of Utahns feel business conditions are either good or normal. The Utah Present Situation Index has increased 1.3 points since December 2018. The Utah Expectations Index edged up by one point to 109.5 in December. Job availability was once again a bright spot as Utahns’ expectations improved compared to November. In December, 12% of Utahns believe that there will be fewer jobs available six months from now, a 3% drop from last month. Additionally, compared to December 2018, more Utahns are optimistic about their personal household income increasing; 39% of Utahns believe that their income will increase in the next six months, compared to 33% of Utahns who held that expectation one year ago.
8
CEOutlook: Utah’s Quarterly Economic Survey of Business Executives
RESPONDENT INDUSTRY MAKE UP SECTOR
NUMBER RESPONDING
QUARTERS
Q1
2018 Q2 Q3
Q4
Q1
2019 Q2 Q3
SAMPLE GOAL
3-YEAR CONTRIBUTION
Q4
11
10
9
11
10
13
13
13
11
25%
Manufacturing
5
3
4
6
3
4
4
2
6
14%
Professional & Business Services
5
5
4
5
5
0
6
6
5
12%
Retail Trade
4
2
3
3
5
7
4
4
3
8%
Education, Health Care & Social Services
2
2
1
3
5
4
6
2
3
8%
Construction
4
4
1
3
5
3
3
2
3
6%
Wholesale Trade
3
1
2
3
1
1
1
2
3
6%
Information
2
2
1
2
1
0
0
0
2
5%
Mining
2
2
2
2
1
1
1
1
2
4%
Arts, Entertainment, Recreation & Accommodation
2
2
1
2
2
0
2
5
2
4%
Transportation & Warehousing
1
1
1
2
1
5
0
1
2
4%
Other
1
0
2
1
0
1
1
0
1
3%
Utilities
1
1
1
1
1
1
1
1
1
>1%
Agriculture, Forestry, Fishing & Hunting
0
0
0
0
0
0
0
0
0
<1%
Finance, Insurance Real Estate, Rental & Leasing
*Sample attempts to proportionally represent Utah’s business sectors. Sectors are determined by the Utah Department of Workforce Services FirmFinder.
METHODOLOGY The Salt Lake Chamber partners with the Kem C. Gardner Policy Institute at the University of Utah to design, tabulate and assist in analyzing the survey. Sixty business executives from Utah’s fourteen major industries are asked to respond to 6-8 questions, depending on their responses, about their company and Utah’s economic performance. Respondents are selected by each industry’s contribution to the Utah economy. Panelists come from a range of firm sizes and locations within Utah.
FOR MORE INFORMATION
ABOUT THE SALT LAKE CHAMBER
Jacey Skinner General Counsel and EVP of Public Policy Salt Lake Chamber 801-364-3631 jskinner@slchamber.com
The Salt Lake Chamber is Utah’s largest and longest-standing business association. A statewide chamber of commerce with members in all 29 Utah counties, the Chamber represents the broad interests of the state’s 63,000plus employers, which employ more than 1.4 million Utahns. This includes thousands of members and their employees.
Natalie Gochnour Director and Chief Economist Kem C. Gardner Policy Institute and Salt Lake Chamber 801-585-5618
ABOUT THE KEM C. GARDNER POLICY INSTITUTE
natalie.gochnour@eccles.utah.edu
The Kem C. Gardner Policy Institute at the University of Utah develops and shares economic, demographic and public policy data and research that help individuals and the community make informed decisions. Housed in the David Eccles School of Business, the Institute seeks to be a vital gathering place and center for independent economic, demographic and public policy thought leadership that helps the Utah economy to prosper. The Institute is a strategic partner with the Salt Lake Chamber in serving Utah.
Dianne Meppen Director of Survey Research Kem C. Gardner Policy Institute 801-585-5618 dianne.meppen@utah.edu 9
CEOutlook: Utah’s Quarterly Economic Survey of Business Executives