Let’s talk recessions.
Very generally, recessions are periods of economic decline. Americans saw a decline in gross domestic product during the first half of 2022, but that turned around by the second half of the year.
Nonetheless, many people are still talking about a recession. This is due in part to the efforts of the Federal Reserve to slow – or even reverse – growth to rein in still-elevated inflation figures. Further, some suggest that the U.S. was already in a recession in 2022 or likely will be by mid- or late-2023.
And now we see this banking crisis.
That said, at a recent meeting of Utah economists, economic optimism in the room was palpable. Most suggested that even if the U.S. experiences a 2023 recession, Utah might be largely exempt due to its robust labor market. The Beehive State’s economy will likely slow down, they postulate, but will probably not shrink. That should obviously make us happy.
On the opposite side of the happiness coin is misery. The Utah Foundation recently completed its 2022 Quality of Life series finding that Utahns’ quality of life is in decline, driven primarily by financial factors. To explore this, we produced a Misery Index report using a financial misery formula designed by Johns Hopkins University professor Steve Hanke. His key components were gross domestic product change, unemployment, interest rates and the dreaded specter of inflation.
Gross domestic product growth, as noted, seems to be marching on and unemployment rates are at historic lows. However, the Federal Reserve has pushed up interest rates – making debt of all sorts more expensive for households and businesses. And inflation? Well, we are now all experts on that. And it is painful for many of us. While inflation reached 40-year highs not long ago, it has been moderating recently, due in large part to bank lending rates levels. Yet it remains well above the Fed’s long-term target of 2%.
This combination of factors led to a Misery Index spike in 2022. Preliminary 2022 calculations show levels of financial misery nearly matching the Great Recession. That is miserable.
What about Utahns’ misery? Utah has consistently performed well compared to the nation. However, it neared the U.S. average in 2022 due to the particularly high inflation in the region, notably emanating from the housing, energy and food sectors. Utahns are feeling the pinch.
However, Utah seems well positioned to remain a strong economic beacon in the nation, returning to a relatively low level of financial misery, due in part to our nation-leading unemployment rate and expected economic growth.
Furthermore, inflation is down to 6% over the past year. That is still high, but no one was hoping for 2%. Why? That would have meant significant deflation in February to balance out massive inflation of last March, April, May and June. In fact, if you just look at inflation since July – but annualized for a 12-month period – inflation is at a relatively healthy 3%.
Is that helping regular Utahns? We will find out in the next round of the Utah Foundation Quality of Life research. With an expected – though not guaranteed – improvement in the Misery Index in 2023 and beyond, we can only hope that it translates to a better quality of life for all Utahns.
Read the Utah Foundation’s Quality of Life reports and the Misery Index report at: https://www.utahfoundation.org/quality-of-life-series/
This op-ed was originally published in the Salt Lake Tribune: https://www.sltrib.com/opinion/commentary/2023/03/22/shawn-teigen-utah-good-position/