PRESS RELEASE

March 7, 2003

Contacts:

UTAH STRUGGLING TO RECOVER FROM THE 2001 RECESSION

Utah Foundation today released its February Research Report on employment, examining the impacts of the March 2001 Recession on Utah's current employment situation. Additionally, the report relays information from the 2003 Economic Report to the Governor comparing Utah and the Mountain West. The report, entitled "The National Recession: Its Impacts on Utah and the Mountain West," should accompany this release; if not, it is available at http://www.utahfoundation.org/reports.html.

The report finds that the employment situation in Utah is comparatively worse than the national employment situation. While national non-farm employment is down 1.3% since December of 2000, Utah is down 2.3%. Furthermore, if the government sector is excluded from the calculation, Utah has lost 3.9% of its jobs during that time period.

This likely has two causes. First, the corporate community is still recovering from a bubble of overcapacity that built up during the nineties. This likely explains the 9.2% decline in the manufacturing sector since December 2000 and the ongoing decline in business investment nationally. Additionally, the Olympic Winter Games generated an estimated 35,000 job-years of employment. This likely created a smaller bubble in the service, trade, and construction sectors.

In Utah, the only sectors registering positive job growth since 2000 are government and the finance, insurance and real estate sector. The net result of this is that while the national media has dubbed the current economic situation a "jobless" recovery, in Utah this could more aptly be termed a "job-loss" recovery.

Despite being among the worst states for job losses, Utah's unemployment rate is lower than the national rate and remains at a moderate level. This seemingly contradictory phenomenon has two possible explanations. The first is a rise in the number of discouraged workers due to the recession. These are workers who have given up looking for a job and are not counted on unemployment rolls. The second reason relates to the Olympics, which may have temporarily drawn people into the workforce who would not otherwise have sought employment. Sara Sanchez, Research Analyst said, "While Olympics-related employment may exaggerate the job losses since last year, looking at the longer trend over two years, it is clear that Utah's economy is hurting. Job losses began well before the Winter Games ended and other sectors, like manufacturing, were affected more than the sectors we would typically associate with the Olympics buildup."

Perhaps the most troubling aspect of this recession, aside from employment, is the failure of indicators of economic health, both on the consumer and business fronts, to recover to pre-recession levels. It has been 23 months since the start of this recession, and the only indicators which have risen to pre-recession levels are Gross Domestic Product (GDP), personal consumption and, as of December 2002, personal income. Sara Sanchez, Research Analyst, said, "The continued downward trend of indicators such as corporate investment and consumer sentiment indicates that full recovery on the employment front may be a while off. On the consumer side, the growth in consumption has significantly outpaced income, suggesting that the savings rate has fallen and consumer debt has increased. This increase in debt loads is likely to dampen future growth in consumption."

Utah Foundation is a nonprofit, non-advocacy research organization. Our mission is to encourage informed public policy making and to serve as Utah's trusted source for independent, objective research on crucial public policy issues.