How Utah’s economy bounced back from COVID, and how much better it could get

Six months ago, Utah’s newfangled road map to brisk economic health after COVID-19 seemed almost like magical thinking.

Now, as vaccination rates rise, it’s looking more real than imagined.

Early September’s COVID-19 cases were jumping daily as the state careened toward its worst surge of the virus so far. Utahns were behind on bills and unemployed by the thousands, many of them displaced from their jobs since the first shutdowns in mid-March.

Hundreds of retail, hospitality and tourism businesses struggled without walk-in customers. Minority, female, rural and lower-income workers and their communities suffered more than the rest of the population. Congress dickered and bickered as that initial multibillion-dollar dose of federal relief for business loans, jobless aid and food stamps was about to run dry.

Amid those grim conditions, deaths and hospitalizations rose and fall arrived. It looked like Utah not only faced a long crisis but also long-term economic struggles.

Instead, several big numbers on that road map now indicate the Beehive State’s economy is buzzing along, emerging from the pandemic far less harmed overall than the rest of the nation, surprising even veteran economists.

“If someone had told me a year ago, that we were going to end 2020 with positive job growth — even though it was only a half a percentage point — I would have called them crazy,” said Salt Lake Chamber CEO and President Derek Miller.

The Utah Legislature closed its 2021 session this month with budget surpluses, record spending and a round of tax cuts. The state’s gross domestic product — among the broadest measures of economic performance — is now expected to grow this year by about 6.2%.

So how did Utah weather the pandemic this well?

• For starters, don’t forget that the state entered the health crisis with one of the country’s strongest economies: a growing population, fastest in the U.S. at creating jobs, and an enviably tiny unemployment rate of roughly 2.5 in every 100 workers. While strengthening the state’s private sector before COVID-19, those years of relative prosperity also let the state build several huge funds of emergency reserves.

• The state issued detailed industry-by-industry guidelines in April for businesses to operate while under COVID-19 restrictions, ahead of most states. Thousands of employers would also adopt the chamber’s “Stay Safe to Stay Open” standards on face masks, social distancing and other public health steps designed to protect workers and customers in commercial settings.

• Saying the diversity of Utah’s economy also helped is an understatement. By several measures, the state has one of the widest spreads among industries of any economy in the country. So while its tourism, hospitality and energy sectors got creamed, others saw more modest slowdowns or even gains, offsetting the total impact.

• The pandemic also brought untold amounts of new federal spending to Utah in relief money. Stimulus bonuses on top of regular state unemployment checks totaled at least $928 million, the latest data shows, while payroll-protection cash to businesses now exceeds $5.9 billion. By comparison, Utah’s total spending budget for fiscal 2022 will include about $9.8 billion in state money.

• Utah has been leader in telecommuting, with large shares of adults working remotely from home. Nearly half said they live in households where one or more members altered their routines to telework, according to weekly U.S. census surveys. Only the District of Columbia has had a higher share of teleworking households week to week.

But in taking stock of how Utah’s economy has fared, Miller said it’s also vital to look past economic metrics and recognize the deep, ongoing and widespread hardships many residents still experience.

“In the aggregate, Utah has come out very well, by measures of jobs, best in the country,” the chamber president said. “But if you’re someone who lost a job, that impact is a 10 out of 10. If you’re someone who lost a loved one, that’s a 10 out of 10.

“Yes, we have a lot to be grateful for and a lot to cheer about,” Miller added. “But while we’re cheering with one hand, let’s reach out the other hand and continue to lift up those people who are still hurting.”

Six months on, the chamber road map also now counts rising vaccination jabs into Utahns’ arms each week, along with other benchmarks of recuperation. There are plenty of signals, too, that Utah will be rebuilding well into 2021 and beyond.

Here’s a look, through the numbers, at Utah’s recovery — so far:

Jobs grew during the pandemic

Utah reached February on a par with where total employment was the year before, while the U.S. was down 6%, meaning the state ended one of its worst years with more jobs than when it started.

February unemployment was at 3%, for one of the lowest levels in the nation and putting its rate only half a percentage point behind what it was as 2020 dawned. The U.S. unemployment rate overall was 6.2% in February.

Mark Knold, chief economist at the Department of Workforce Services, said private-sector employment drove much of that growth, while losses in public-sector jobs, especially education, slowed things down.

The heaviest layoffs, furloughs and pay cuts over the past year came for workers in natural-resource and leisure, hotel and other hospitality and travel-related jobs. But other employers in Utah added jobs, especially in construction; financial, professional and businesses services; and retail sectors focused on general goods and household improvements.

Despite that low jobless rate, about 48,774 Utahns were out of work in February, according to Knold’s estimates. But an average of about 33,000 residents were drawing state unemployment benefits week to week last month, other data shows.

That difference points to thousands dropping out of the workforce, with evidence suggesting many of them may be caregivers staying home to help children with online schooling or to assist elderly relatives.

Without knowing which lost jobs will come back long term, state officials are pointing idled and underemployed workers toward new positions in what will be “hot” sectors in Utah’s economy post-pandemic: construction, finances, health care, light and advanced manufacturing, information technology, and life sciences.

A 2021 report submitted to Gov. Spencer Cox predicts Utah will add 58,000 jobs this year, for the largest one-year employment gain in the state’s history.

Construction boomed during COVID

If you get the feeling there are lots of buildings going up right now along the Wasatch Front, you’re right. The value of residential, commercial and other construction in Utah in January topped $1.1 billion, according to data compiled at the U.’s David Eccles School of Business, well above where it was last March.

With construction and real estate deemed essential services since last spring’s initial health orders, demand for housing and a pipeline of building projects have kept that boom and record home sales rolling.

Construction spending has pierced that $1 billion-a-month mark three times since July, and it is now hovering at or near its highest level in 11 months, data indicates, with home and apartment building making up about 55% of the total.

Part of that has been powered by an unprecedented wave of permits for new apartments and homebuying fueled by historically low interest rates.

People in large numbers are seeking suburban living in search of more rooms, home offices or bigger backyards, while others are migrating to Utah from larger cities to find relatively less expensive real estate with more access to open landscapes and outdoor recreation. That’s pushing Wasatch Front home prices to new levels. Of course, the skyrocketing demand and skimpy supply have brought legendary headaches to house hunters.

Commercially, there are short-term signs of slowing in office and retail construction, particularly downtown. With office workers continuing for now to dial in from home, vacancy rates are going up.

But construction in the state’s industrial sector — think of all those warehouses and distribution centers you see on Salt Lake City’s western fringe — keeps going gangbusters, partly due to heightened demand for online shopping and shipping.

“I don’t think there’s any slowdown on that horizon,” predicted Gary Ellis, CEO of Salt Lake City-based Jacobsen Construction. “That’s going to be a continuing strength of force in our marketplace for the next many years to come.”

Retail sales are already rising

This is not what you’d expect.

Sales of retail goods in Utah, as tracked by the state Tax Commission, have topped their 2019 averages every month since last May — before vaulting 20% month over month in December. While those numbers usually leap with holiday shopping, many feared they’d be depressed due to COVID-19.

So, while cyclical, the December jump “is still really important because we’re in a very tough economy and still have what turned out to be record taxable retail sales,” said Natalie Gochnour, head of the U.’s Kem C. Gardner Policy Institute and the chamber’s chief economist.

The number also reveals a lot about the deeply uneven nature of the pandemic’s impact on consumers as it does for the broader economy, Gochnour said. Hotels, arts, entertainment, recreation and similar sales lagged, while general merchandise, building materials, home and garden supplies all thrived.

In a surprise, the better-than-expected trend has also boosted revenues for local and state governments, bolstering public spending and outlays on capital improvement when those might have dropped instead.

“We were correct to quickly cut spending early on,” Gochnour said, “but as the year went on, it became evident that we could actually invest. And, of course, we’ve done that big time.”

A forecast from the institute, issued in July, projected that Utah’s retail sales will grow by 5.9% this year.

Bankruptcies are falling

These filings by businesses and individuals have not spiked in Utah with the pandemic — despite so many employers and employees facing revenue losses, disrupted supply chains and a resulting financial squeeze.

Yes, they did shoot up last March to just short of 900 cases, well above their monthly average for all 2019 of over 807 cases, but filings in U.S. Bankruptcy Court in Salt Lake City have declined steadily since July and were at 376 in January 2021. That’s well below where they were just before COVID-19.

The prevailing theory is that payroll-protection money through the Coronavirus Aid, Relief, and Economic Security Act, and later extended in Congress’ second stimulus bill, has helped avert millions of business closures for now, including thousands in the Beehive State.

Kristen Lavelett, executive director of Local First Utah, said the latest changes to those Payroll Protection Program loans also have let more business owners spend more strategically to support their long-term survival.

“It almost feels like the power behind the punch of that money is going to be a little stronger now,” said Lavelett, who advocates for small independent businesses.

How many businesses supported by the payroll extensions will be able to keep going once that aid runs out remains an open question.

Air travel, conventions poised for takeoff

Utah loves tourists — and their dollars — and after six years of construction, officials have debuted the first phase of the new $4.1 billion Salt Lake City International Airport. But air travel flattened with the pandemic.

On top of that, with ski resorts and several of Utah’s Mighty 5 national parks closed for a stretch last spring, the tourism industry was losing millions a day at the pandemic’s worst, and hundreds of hoteliers, tour operators, guides, festival organizers, outfitters, restaurateurs and their workers were idled.

Passengers flowing through the airport plummeted from about 2.1 million in January 2020 to 176,525 by April. That had inched up to about a million a month by August but still has a lot of altitude to gain.

That’s already started, too. An average of 15,000 passengers a day flowed through the airport last week, compared to 10,000 a day in October.

The U.S. Travel Association now predicts spending on domestic travel will grow by as much as 23.2% in 2021 and by 25.5% in 2022. Utah is likely to catch a significant piece of that, judging from visitations last year to its state parks — which drew record crowds — and national parks.

Conventions are also a big deal not only for Utah’s urban core but also statewide, with average attendees spending $1,000 or more when they visit. That brings a total economic impact of up to $4.5 billion a year — that is, when people are flying and meeting in large groups.

The tourism-promoting Visit Salt Lake reported 124,546 visitors used conference and convention facilities in Utah in September 2019, counting only those in groups over at least 1,500. But, similar to air travel, that figure plunged last year with COVID-19. By January 2021, it was only at about 4,200 visitors.

Visit Salt Lake announced that in the first two months of 2021, however, it had booked 27 new meetings, athletic events and conventions, with the potential to draw up to 64,000 attendees to Utah’s capital in the coming years.

Officials now expect Utah’s tourism sector to begin approaching 2019 visitor levels over the next 12 to 18 months, said Karen Boe, a spokeswoman for Visit Salt Lake. “We are excited to be finally talking about the recovery of the visitor economy.”

Consumer confidence

Though it measures people’s feelings through surveys, this might be the most important number of all on Utah’s recovery dashboard, analysts say, because it represents the faith of residents to reengage in the economy.

Until October, experts in Utah did not have a way to measure this among residents. Under then-Gov. Gary Herbert, the state created one shortly after the chamber’s dashboard launched. Under Cox, lawmakers have now paid for state analysts to update the index every month.

As of October, that index has shown Utah consumers are more confident than other U.S. residents — and that gap has only widened since December.

Utah CEOs are also more optimistic, according to a separate metric. For the first time since 2017, their sentiment had turned sour in the second quarter of 2020, with more company leaders than not fearing the economy would worsen.

That quarterly confidence measure has since turned positive again, indicating most CEOs in the state now believe the economic outlook is improving.

Call it COVID Recovery 2.0.