As 2017 comes to a close, economic indicators suggest it was a good year for businesses and consumers. Robert Spendlove, senior economist for Zions Bank, says economic growth for the past year was surprisingly strong.
“What we have seen is continued strength and even a little bit of acceleration in our economic growth throughout 2017,” says Spendlove. “That was a little bit of surprise, but a good surprise because it shows that we still have a lot of resilience in the economy.”
He says some major indicators for the health of Utah’s and Cache Valley’s economy are employment growth, consumer confidence, low unemployment and business optimism.
Cache County saw a higher population growth than the state average, but its employment growth was slightly less. Cache County’s employment growth (2.5%) was slightly below the state rate of 2.7% largely, only, because of the county’s low unemployment.
“Cache County has such a low unemployment rate,” Spendlove explains. “It’s actually the lowest unemployment rate in the state. The state is 3.3% while Cache County is at 2.7%.
“What we see is a tight labor market in Cache Valley which is constraining a little bit on that overall economic growth.”
But generally, consumer confidence and business optimism remain very high throughout Utah and the nation.
“We’ve seen a 17 year high in our consumer confidence, scoring around just under 130,” explains Spendlove. “One-hundred-ten indicates a strong economy and we’re way above that. So we’re seeing very high consumer confidence. We’re also seeing very high business optimism.”
Though some impacts of the recent passage of the Congressional tax plan are yet to be determined, Spendlove is confident the significant cut of the corporate tax rate from 35% to 21% will lead to more hiring by businesses and more business investment. The new tax plan will also reduce individual tax rates, giving people more disposable income.
One area of the economy which is particularly struggling to keep up with employment demand, Spendlove says, is the housing market.
“The struggle we are seeing, this is true in Utah and in Cache County, we are not able to keep up the demand for new homes. Before the recession we built about 20,000 homes per year in Utah. Now we are building about 10,000 homes.
“We are accelerating, we are building more, but we can’t keep up with demand. So we’re not building enough homes.”
Spendlove says that the Federal Reserve has been steadily raising interest rates, and has indicated it plans to raise them three more times in 2018. That means borrowing costs will not be as cheap as they have been and likely means home builders will not be including as many amenities as they have been.
With a strengthening economy, Spendlove says we will see higher wage growth as well as higher inflation. He says that while the economy has been steadily improving, there are some signs that indicate the U.S. economy is in the late stages of its economic expansion. Job growth is slowing down, interest rates are going up and inflation is rising. He doesn’t see a recession on the near horizon, but one could be looming in a year or two.
“We still have pretty good strength right now,” he continues. “In terms of planning for the future, I think things are looking good and people should continue to plan as they have been planning in recent history.”