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SALT LAKE CITY — Utah’s economy — just like the U.S. and the world — was rattled by the COVID-19 pandemic. In the months since widespread shutdowns over coronavirus concerns, the state has started to reemerge out of a slump faster than other states in the U.S.
That’s true of at least the overall state economy. Some industries and counties were hit harder and thus will recover a bit slower than others in the state.
But as talk of another stimulus package swirls in Washington, Natalie Gochnour, director of University of Utah’s Kem C. Gardner Institute, theorizes that if Utah is able to wade past its COVID-19 uptick without complete shutdowns, then the worst might be over — at least from an economic standpoint.
Earlier this year, Gochnour was tabbed to chair the policy aspect of the Utah Economic Recovery Task Force amid the financial stress of the COVID-19 pandemic. The task force helps shape the state’s "Utah Leads Together" plans that put in place the blueprint of how Utah would reopen its economy during and following the COVID-19 era. A fifth version of it is expected to be released soon.
In a joint KSL/Deseret News editorial board meeting Monday, she explained that April 2020 may have been the peak of the economic calamity in the state. Since then, Utah has recovered among the fastest in the country.
"Don’t expect a V-shaped recovery but rather a checkmark or swoosh," Gochnour explained, describing the economic recovery line graph charts.
"The impacts will continue to be uneven and that’s by socioeconomic, industry, by race, by geography. We’re in disruption right now but we’ll see more of it but not as severe," she continued. "That’s because April was such an overwhelming body blow that seemingly came out of nowhere with no preparation, no adaptations which we’ve now been able to put in place."
Utah’s unemployment rate at the end of June was 5.1% compared to the U.S. unemployment rate of 11.1%. Only Kentucky — at 4.3% — had a lower rate. After Utah, Idaho (5.6%), North Dakota (6.1%) and Maine/Oklahoma (each 6.6%) rounded out the top five. Massachusetts was the worst hit at 17.6% unemployment at the end of June.
Utah was "well-positioned" prior to the pandemic because it had its lowest unemployment rate in state history before the shutdowns and holds a diverse economy, Gochnour said. She compared that to Nevada’s specialized economy; federal data showed that Utah’s overall job loss from June 2019 was down 2.8 percentage points while Nevada’s dropped by 10.2 percentage points. As a result, Nevada’s unemployment rate was 15% in June.
One reason Gochnour doesn’t anticipate a V-shaped recovery, meaning a steep decline followed by a rapid recovery, is that initial unemployment insurance claims have remained steady from the end of June through the first half of July. That period of steadiness comes after there was a significant drop-off between April and June.
The data within the state, however, shows a more complex story. Job growth and loss is all over the place in terms of sectors. Utah’s leisure and hospitality industry jobs dropped 20.7% from June 2019 to June 2020 and natural resources industry jobs — such as mining — dipped 10.4%.
Construction jobs, on the other hand, rose 8.7% during the same timespan. Financial activities and trade/transportation/utilities rose 0.7% and 0.5%, respectively. Gochnour tied some of the resilience of those industries to the CARES Act, which offered more than $2 trillion in support.
She anticipated retail will likely continue to struggle in the coming months while telemedicine and e-commerce will be industries more likely to thrive in the future.
The Utah counties hardest hit by the pandemic economically were areas with heavy tourism, as was the case from early unemployment data released in the first few weeks of the pandemic. No county saw job growth through June 2020. Morgan County was best-positioned at 0% job change. Daggett County (-10%) had the lowest job change percentage; Grand (-9.4%), Summit (-8.8%), Garfield (-8.4%) and Kane (-7.7%) round out the bottom five, according to the U.S. Bureau of Labor Statistics.
Did Utah reopen too soon?
Of course, Utah’s ability to move forward economically faster than nearly every other state has gained scrutiny in recent weeks. That’s because Utah experienced a surge in new cases shortly after Memorial Day, just weeks after loosening business restrictions in most places across the state. Utah health care leaders pleaded with residents to wear masks as hospital capacity stands to reach its limits as early as August.
A White House task force report that the Center for Public Integrity obtained and released last week listed Utah as one of 18 states where economic reopening was discouraged. Among other things, the report recommended that Utah close bars in hot spot communities, decrease public gatherings to a limit of 10 people and increase messaging of the seriousness of COVID-19.
A ProPublica report released on Tuesday questioned if Utah politicians focused more on reopening the economy than they did public health even when health officials warned against it. The report cited interviews and emails regarding a handful of state and local officials.
When asked if Utah should consider retightening aspects of the economy, Gochnour said that’s something state leaders would have to decide on with all of the data available. She said that Utah leaders appeared to look into ways to "double down on the need for mask wearing" ahead of tightening restrictions.
Early data from Salt Lake and Summit counties — the first two areas in the state to mandate masks in public settings — have yielded promising early results.
"There’s no question that these rising case counts are problematic and we’ve got to get on top of it," Gochnour said. "I think you have state leaders working hard on that every single day. … In hindsight, I wish we would have stayed in orange and yellow a little bit longer."
A need for a second stimulus package
Federal leaders are in discussions about another relief package for businesses and possibly even Americans, as well. For economic experts like Gochnour, it’s something that needs to happen.
"We need another stimulus. We’re sideways," she said. "The virus has intensified. We’ve got nervous consumers; hiring is set to slow even more and we think this setback can be a catalyst for more business failures so you’ve got to do some stabilization."
Commercial real estate industry, which could see a "reckoning" soon and there’s a strong possibility of credit default on the horizon. Airlines, restaurants and health care systems are industries that also could be in trouble as well, she said.
But what will that financial package look like and who will get it? How will it be sent out? And will it be finalized before Congress goes on recess in August? All of those are important questions.
Gochnour said she would hope the deal is somewhere near $1.5 trillion, upping total stimulus packages issued to near $4 trillion — double what was given during the Great Recession. If that package includes checks to individuals, she said it should go toward Americans who need it most.
"The higher your income, the more likely you are to save that stimulus check and not spend it immediately," she explained.
Even though every package adds to the U.S. federal deficit, she argues that doing nothing would be worse for the U.S. economy. While the past few months have been difficult, she’s also optimistic that Utah will make it out of the pandemic and thrive. She’s confident in the state’s leadership even when it will change in 2021.
"You can’t read the viral treatment and vaccination things without thinking that pandemics do end. Help is on its way," she said. "I think it’s going to require a fair measure of patience."