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SALT LAKE CITY — The new year could be one of economic uncertainty for the nation and the Beehive State, according to one local economic analyst.
Robert Spendlove, senior economist and public policy officer for Zions Bank, said the national and local economic outlooks for 2020 are generally optimistic. However, there are some indicators that could point to a possible downturn.
“Utah’s economy was very strong in 2019 and should continue to be one of the best in the country in 2020,” he said. “Our population growth is the second fastest in the country, our employment growth is the highest in the country ... our unemployment rate matches the lowest in history for Utah at 2.4%.”
He added that Utah’s unemployment rate is now the third lowest in the country, behind only New Hampshire and Hawaii, which indicates that the economic benefits are being held widely. He warned, however, that the big struggles for the state in 2020 will likely be because of the strong economy.
“High employment growth and low unemployment will make labor shortages more pronounced. Also, the high population growth continues to drive strong housing demand and builders are struggling to keep up with that demand because of the labor shortage,” he said. “The resulting housing shortages could become more pronounced this year and affordable housing could be harder to find, especially for first-time buyers or low-income families.”
On the national front, he said how businesses feel about their economic fortunes will have a significant impact on how the rest of the economy performs this year.
“Consumer spending is still really strong. It’s actually holding up really well. In the third quarter (of 2019), it grew about 3%. But business spending dropped in the second quarter of 2019, and dropped even further and contracted 2% in the third quarter of 2019,” he explained. ”So we are right now in a business spending contraction in our (gross domestic product). So you see manufacturing’s weak, business spending is weak. The only thing that is holding up the economy right now is a strong consumer and strong consumer spending.”
Investopedia defines gross domestic product — or GDP — as the monetary value of all finished goods and services produced by a country during a specific period. GDP provides a snapshot of a country’s economic output that is used to estimate the size of a nation’s economy and its growth rate.
Our population growth is the second fastest in the country, our employment growth is the highest in the country.
–Robert Spendlove, senior economist for Zions Bank
He noted the U.S. economy is being heavily supported by consumer spending, particularly as it struggles with challenges on the business spending side. He added that consumer spending generally represents about two-thirds of the overall U.S. economy “and it continues to be the most important component of the economy.”
“As long as consumers continue to feel good, as long as consumer confidence remains high and as long as consumer spending remains high, we’ll be OK and the economy will continue to grow,” Spendlove said. “But if that weakness in the business sector starts to move over to the consumer sector, that’s where we could see a real risk of a slowdown or the next recession.”
He said that while internal factors such as wage growth and inflation growth are not as strong as they could be, they are still stable enough to be considered reasonably healthy in the current economic climate. Contrarily, external forces related to international trade could pose a long-term problem if they are not dealt with in an effective manner.
“So if you look at the trade war with China, it remains unresolved,” he said. Until the trade issues between the U.S. and China are resolved, there will always be a cloud of uncertainty among American business leaders that will prevent them from investing in a way that will continue to grow the national economy at healthy levels in the long run, he warned.
He also noted that uncertainty with Brexit and the potential for conflict with Iran could also impact the stability of the American economy throughout the year.
“Even though businesses aren’t spending as much as they were, they continue to be hiring more people and we continue to be pulling more people off the sidelines,” Spendlove said. “As long as that jobs report remain strong and as long as consumers continue to spend, we should be in a good position.”