The economy of both Utah and the US turned out to be resilient to downward pressures during 2019. In many ways, the year was like a roller coaster.
In December 2018 the Federal Reserve said they would increase interest rates three times in 2019 because the economy was so strong. However, as the new year progressed, signs of weakness quickly began to appear. Weakness in other parts of the world weighed heavily on the US economy. The trade war between the US and China caused economic contagion to spread to many other countries. This, coupled with the uncertainty surrounding Brexit, weighed on business confidence throughout the world.
As a result of these concerns, the yield curve inverted in 2019 and remained inverted for several months. This is typically seen as an early indicator that a recession is on the way. The manufacturing sector moved into contraction territory as a result of the trade war. Many economists and market observers saw signs of an imminent recession. The Fed reacted aggressively, reversing its previous plan to increase interest rates and instead cut interest rates three times in 2019.
We started to see signs of avoiding a downturn in the fall of 2019. The job market held up strongly throughout 2019 and consumer confidence and consumer spending continued to remain strong, holding up the rest of the economy. Inflation also remained in a modest range, which is critical to maintaining healthy economic growth. Markets seem to feel better now and don’t see a recession as imminent.
Going into 2020, analysts are more optimistic than they were six months ago. We still appear to be in the late stages of the economic cycle, and GDP and job growth are expected to continue slowing but at a moderate pace. The Fed announced that they are now taking a “wait and see” approach to the economy, with no plans to increase or decrease interest rates. If the trade war continues to improve and if Brexit can be resolved, there even appears to be some upward momentum in the economy in 2020.
At the state level, Utah continued to have one of the strongest economies in the country in 2019. Our population growth was the 3rd highest in the country in 2018 (we will get new population estimates for 2019 at the end of December). We had over 25,000 people move into the state, which added to our natural increase of nearly 33,000 resulted in the state growing by nearly 58,000 people to a total of 3.16 million.
Job growth in Utah was also very strong in 2019, often ranking at the top in the country. Utah is also now tied for the 2nd lowest unemployment rate in the country. Employment rose by 3.3 percent over last year; unemployment at 2.4 percent, lowest in 12 years. Nationally, rate is 3.5 percent.
In 2020, the Utah economy is expected to continue to grow strongly. Strong job growth will continue and the low unemployment rate will drive continued strong in-migration.
One of the struggles Utah is facing, and will continue to face in 2020 is the result of the strong job market and low unemployment. Labor shortages will become more pronounced, making it difficult for employers to find qualified workers. The housing market is also struggling to keep up with the demands of high population growth. Housing affordability will become more difficult as the growth of the housing stock continues to lag population growth.
One of the positive fundamental aspects of the Utah economy is that the benefits of strong growth are being enjoyed widely among the population. behind just New Hampshire and Hawaii.