Wall Street sees big gains, unemployment remains stubbornly high

Tuesday, March 19th, 2013

Editor’s Note: This article, authored by Marty Carpenteroriginally appeared on KSL.com

Wall Street has been on a hot streak for the past few weeks, but those positive numbers are still in stark contrast to the stubbornly high national unemployment rate and sluggish economic growth.

The Dow Jones Industrial was up over 14,500 as trading began Monday, part of a steady increase dating back to Feb. 25 when trading opened at just over 13,784. The 10-day run was the longest winning streak for the U.S. stock market in 17 years.

Compare that number the 7.9 percent national unemployment rate and an anemic growth rate of just 1.6 percent. To give some level of comparison, Utah’s 3.2 percent economic growth is nearly twice the national rate with an unemployment rate now down to 5.4 percent.

So why isn’t a boom on Wall Street translating into better times on Main Street?

Darin Mellott, a senior analyst at CBRE and a member of the Utah Economic Council, joined KSL Today Monday morning and he says there are a variety of elements that can influence the stock market.

“Generally speaking, businesses are doing well,” says Mellott. “They’ve done a good job of keeping their costs low so any improvement in the economy can make a real difference when it comes to profitability.”

Because the businesses that make up the Dow Jones Industrial average do business outside the U.S., they are growing even when the U.S. economy isn’t keeping pace.

“When it comes to the Dow, we have to remember these are multinational corporations,” says Mellott. “They’re doing business in places where the economy is doing much better than it is here in the United States, although things are improving here. That’s a key ingredient to get into a better pace of job creation.”

Public policy plays an important role in overall economic performance. The high level of uncertainty coming from budget battles in the nation’s capital affects the way businesses invest their earnings. The Wall Street economy is booming, the Main Street economy is primed for growth but Washington is not doing its part.

Congress and the administration make the rules businesses have to operate by and when businesses are unable to reasonably predict the rules (tax policy, regulation, etc.) they hold onto the money rather than investing in new ideas, buying equipment, expanding and hiring.

“Policy is going to have a big say in economic outcomes and performance,” says Mellott. “There’s no doubt we’re waiting to see the impact of the sequester, the higher taxes that were implemented earlier this year, there are certainly some open questions and some risk to where the Dow is at right now.”

Utah’s economy is growing, education key to long-term prosperity

Thursday, January 12th, 2012

Increased investment in education is key to the state’s continued economic growth according to a group of the state’s top economists who spoke at the Utah Economic Review this morning. Members of the Utah Economic Council believe the state will see moderate economic growth this year.

“We are going to face a chicken-and-egg decision,” said Kelly Matthews, emeritus economist with Wells Fargo Bank, outlining the decision between waiting for revenue to increase before investing in education or investing in education to strengthen the economy. “We must be careful to maintain our reputation as a state with a young, well-educated and highly-productive workforce.”

“There are danger signs,” said Steve Kroes, president of Utah Foundation. “We are in the top 20 for states with people holding degrees—but we were in the top five. We need to continue to invest in two areas, one is infrastructure and the other is education.”

There is good news for the Utah economy, which has created over 30,000 jobs in the past twelve months. With a state economy growing twice as fast as the nation as a whole, the unemployment number has dropped to 6.4 percent, more than two points below the national figure.

“Job creation is the key to economic recovery,” said Juliett Tennert, chief economist in the Governor’s Office of Planning and Budget (GOPB). “If every new business in Utah created two new jobs, we would overcome the problem.”

Utah’s projected growth is a positive sign, but there are forces that could hamper it. The European debt crisis could impact growth in the U.S. especially for states with high export numbers. Utah’s merchandise exports have doubled in the past five years.

“The U.S. will feel some pain from the situation in Europe,” said Richard Evans, assistant professor of economics at Brigham Young University. “Utah is like a boxer that can take a punch and if we get hit by some European trade problems in the U.S., it’s not going to be catastrophic here.”

Darin Mellott, a senior research analyst with CBRE, agrees with Evan’s assessment. “The big question is, what happens to the financial ties we have with Europe if we have a collapse? There is a domino effect.”

Another looming threat, gas prices in Utah are currently the lowest in the nation but an increase is probable in the coming months.

“I don’t think the current gas prices in are sustainable with crude oil at $100 a barrel,” said Matthews. “If we see gas prices go up, there’s a concern about consumer confidence and consumer spending.”

GOPB also released the 2012 Utah Economic Outlook. The Salt Lake Chamber and Wasatch Front Economic Forum hosted the event.

Governor, Utah Economic Council to headline Utah Economic Review tomorrow

Wednesday, January 11th, 2012

We hope you will join us as the Salt Lake Chamber and the Wasatch Front Economic Forum host the annual Utah Economic Review tomorrow at 7:30 a.m. at Little America Hotel.

Gov. Gary Herbert will discuss the 2012 Utah Economic Outlook and Utah’s top economists will discuss the issues impacting the nation and the Utah economy.

“There’s so much to cover,” said Natalie Gochnour, executive vice president and chief economist at the Salt Lake Chamber. “From the European debt crisis, to job creation, to energy and housing, there is real value for our business leaders to have access to economic analysis from the state’s top economists.

The Utah Economic Council (UEC) provides economic information, peer review and analysis to the Salt Lake Chamber Board of Governors. Seven of the nine members of the UEC will take part in a moderated panel discussion:

Natalie Gochnour, Salt Lake Chamber
Richard Evans, Brigham Young University
Steve Kroes, Utah Foundation
Kelly Matthews, Wells Fargo (emeritus)
Darin Mellot, CBRE
Juliette Tennert, Utah Governor’s Office
Alan Westenskow, Zions Bank

Those attending the event receive a copy of the 2012 Economic Outlook, produced by the Governor’s Office of Planning and Budget. You can still register for the event by clicking here.

An upper-right quadrant Utah

Wednesday, July 13th, 2011

Becoming an upper-right quadrant state from Salt Lake Chamber on Vimeo.

In almost every major category, Utah is performing very well. We’re innovative, forward-thinking and we have business friendly policies that boost our economy. There is one area where we have need of some improvement.

Our chief economist, Natalie Gochnour, shows how Utah is, in so many ways, an upper-right quadrant state. She gave a similar presentation at the Governor’s Economic Summit earlier this year. She has been kind enough to hit the highlights for us.

‘Economy in a box’ shows reason for optimism for SL County economy

Wednesday, May 25th, 2011

CBRE Salt Lake County Outlook from Salt Lake Chamber on Vimeo.

The Salt Lake Chamber, Utah’s largest business association, recently joined forces with CB Richard Ellis, the world’s largest commercial real estate company, to produce an economic outlook for Salt Lake County. Commercial real estate is often referred to as the “economy in a box,” because the data serves as a barometer of overall economic performance.

We sat down with Mark Bouchard, senior managing director of CB Richard Ellis to discuss the outlook. The study looked at the three major types of commercial real estate: industrial, office and retail.

Of all the commercial real estate sectors in Salt Lake County, industrial properties demonstrated the greatest signs of life over the last five quarters. According to CBRE, Salt Lake’s industrial real estate currently has the second lowest availability rate in the nation at 8.6 percent.

Office demand is primarily driven by the need to house workers within the financial and professional and business service sectors. During 2011, office employment is projected to grow 2.3 percent in finance and 4.1 percent in professional and business services. Employment relating to office demand is growing above the total employment growth average of 2.3 percent.

Based on employment growth projections, 410,000 square feet of office space will be positively absorbed in the Salt Lake metro area during 2011. Taking into consideration new space entering the market, office vacancy for the Salt Lake metro will drop to 16.2 percent.

Salt Lake County’s total compensation is expected to grow 4.7 percent in 2011 and 5.4 percent in 2012. Taxable retail sales are projected to increase by similar rates 4.2 percent in 2011 and 5.8 percent in 2012. The result of these increases will partially be observed through amplified consumer spending which, in turn, drives demand to open new retail space.


Utah Economic Council discusses warning signs, positives for economy

Thursday, April 28th, 2011

The Utah Economic Council discussed warning signs for the national economy and emphasized Utah’s enviable position for managing through economic challenges when compared to other states. Of particular concern: increasing national debt and prices at the pump.

“This situation with gasoline prices and the debt situation has us concerned,” said Kelly Matthews, an emeritus economist formerly with Wells Fargo. “It’s clearly possible that one of these days the bond market will decide to stop buying our debt and we could have a serious situation.”

The Utah Economic Council addressed a CEO Forum sponsored by Fidelity Investments.

Last week, the S&P downgraded its outlook on the long-term sovereign debt of the United States causing alarm about the nation’s financial situation. Richard Evans, a professor of economics at Brigham Young University and a member of the Utah Economic Council, says the warning came at the perfect time.

“Constraints are good,” said Evans. “The U.S. is still the place to go to buy debt. The downgrade may instill some political will to control our spending.”

The clock is also ticking toward a decision on increasing the nation’s debt ceiling. Many say if Congress fails to raise the limit, the nation would default on commitments made to creditors. Matthews disagrees.

“If you have been listening to people who equate not increasing the debt limit with defaulting on our bonds—you have been snookered,” said Matthews. “Not raising the limit is essentially the same thing as passing a balanced budget amendment. We have plenty of money coming in to cover our bonds. We may have to cut back in other places but that’s the point of a balanced budget amendment.”

Oil prices have spiked to nearly $115 per barrel. Here in Utah, we’ve seen gas prices increase almost 30 percent over the past few months. Members of the Utah Economic Council say what many Utahns already know: rising prices at the pump have a swift and negative impact on the economy.

“Higher energy prices effect every product produced in our economy,” said Wes Curtis, a rural Utah economic development expert. “Utah is fortunate to be an energy exporter so increasing energy prices could cushion the impact that will likely be seen by the rest of the nation.”

“The last time gas prices shot up it had a dramatic effect on our economy,” said Matthews. “When we get to a certain level—maybe $4 per gallon—there will be a noticeable impact and it isn’t far away.”

The state’s top economists say Utahns shouldn’t feel completely helpless when it comes to rising fuel prices. The significant investment in mass transit, including FrontRunner and TRAX, provides a choice.

“Economics is about supply and demand,” said Juliette Tennert, chief economist in the governor’s office. “We can’t do much about the supply but we can alter the demand.”

Chamber forms Utah Economic Council

Wednesday, June 23rd, 2010

The Salt Lake Chamber, Utah’s largest and longest-standing business association, has enhanced its role as Utah’s business leader by creating the Utah Economic Council – a handpicked group of economists and analysts who have expertise about the Utah economy. The Council has been created to improve the quality of economic information and interpretation available to business and community leaders as they steer the Utah economy to a more prosperous future.

“The recent economic downturn has reminded us of the importance of credible, thoughtful and robust economic analysis and counsel,” said Lane Beattie, president and CEO of the Salt Lake Chamber. “The Utah Economic Council gives us a dream team to provide an economic perspective that is so critical to the business community.”

Salt Lake Chamber Chief Economist Natalie Gochnour will lead the Utah Economic Council. Gochnour has a long history of studying and interpreting the Utah economy having once served as Gov. Leavitt’s top economist and chair of the Governor’s Council of Economic Advisors. She is joined by seven other council members that include representatives from both urban and rural areas, reflecting the statewide mission of a capital city chamber. The Council includes the dean of the College of Business at the University of Utah and a macroeconomist from Brigham Young University, as well as representatives from two major financial institutions, the state’s top public policy think tank and Gov. Herbert’s top economist.

“Utah’s economy is in transition, moving from contraction to expansion, from regional to global and from less known to well known,” said Gochnour. “The Utah Economic Council will explain economic trends and issues and help improve economic literacy and decision making. The hope is that it will become an economic resource to the entire community.”

Council membership includes the following prominent local economists, public policy analysts and business leaders:

Natalie Gochnour, chief economist, Salt Lake Chamber, and Chair, Utah Economic Council
Gochnour oversees the public policies and communications of Utah’s largest and longest-serving business association and provides economic counsel to the Chamber’s more than 6,000 member businesses In previous roles, she has served as chief operating officer of the Salt Lake Chamber, counselor to Secretary Mike Leavitt at the U.S. Department Health and Human Services and associate administrator of public affairs at the U.S. Environmental Protection Agency. Prior to working in Washington, D.C., Natalie served as Gov. Mike Leavitt’s deputy for policy and communications (where she served as his spokesperson); deputy director of the Governor’s Office of Planning and Budget; State Planning Coordinator; and the Director of the Demographic and Economic Analysis section for the Governor’s Office.

Wes Curtis, director, Center for Rural Life, Southern Utah University
Curtis works with state and federal policy and lawmakers to advance the interests of Southern Utah University. He also works to actively engage the university with businesses, communities and governments throughout the region and state in such things as economic development, community planning, partnering and collaboration – with particular focus on rural communities and issues. He served for six years as senior staff, and as Utah State planning coordinator for both Gov. Mike Leavitt and Gov. Olene Walker, directing programs such as the 21st Century Communities and the Utah Smart Site initiatives. He has degrees from Snow College and Utah State University.

Richard Evans, assistant professor of economics, Brigham Young University
Evans specializes in international macroeconomics and monetary economics. His current research includes the relationship of international trade and inflation, optimal monetary policy rules, the effect of Chapter 11 bankruptcy on industry size, and financial regulation and bailouts. Dr. Evans received a Ph.D. in economics from the University of Texas at Austin and both an M.A. in Public Policy and a B.A. in Economics from Brigham Young University.

Steve Kroes, president, Utah Foundation
Kroes is president of Utah Foundation, a nonprofit research organization promoting a thriving economy, a well-prepared workforce, and a high quality of life for Utahns. He also serves as a member of the Governor’s Council of Economic Advisors, the Utah Health Data Committee, and president of the Governmental Research Association, a national organization of individuals and groups researching governmental issues. Steve received a Bachelors of Science degree in Economics, from Brigham Young University in 1989.  He received a Master of Public Administration degree with an emphasis in public policy from the University of Southern California in 1990.

Kelly Matthews, emeritus economist, Wells Fargo Bank
Dr. Matthews retired from Wells Fargo Bank in November 2009 where he was responsible for local, regional and national economic analysis and forecasting. He was also the Wells Fargo government affairs officer in Utah. Matthews joined Wells Fargo as an economist in 2000 when First Security Corporation merged with Wells Fargo. He served as First Security’s chief economist for 27 years.

Juliette Tennert, chief economist, Utah Governor’s Office
Tennert is the Chief Economist in the Utah Governor’s Office of Planning and Budget.  She oversees a staff of economists and analysts, who prepare the state’s population estimates and projections, analyze the fiscal impacts of state issues, prepare revenue estimates for the monitoring of the state budget, and disseminate economic and demographic information. She holds undergraduate and graduate degrees in economics from the University of Chicago and the University of Nevada, Las Vegas, respectively.

Taylor Randall, dean, David Eccles School of Business, University of Utah
Randall was named dean of the David Eccles School of Business at the University of Utah where he has been a faculty member for over a decade. Randall’s research focuses on the economic impact of operational strategies, strategic performance measurement and product variety management. Randall has served as a director for the University Venture Fund since 2003, during which time the Venture Fund has become the largest independent student-run venture in the country at over $18.3 million. Randall holds a bachelor’s with honors in accounting from the University of Utah and an MBA, master’s and doctorate in operations and information management from the Wharton School of Business at the University of Pennsylvania.

Alan Westenskow, vice president, Zions Public Finance
Westenskow is a vice president at Zions Bank Public Finance where he has spent the last 11 years assisting municipalities and non-profits in Utah, Idaho and Montana issue bonds to finance capital projects. Alan received his undergraduate education at Brigham Young University and received his MBA from the Wharton School of Business at the University of Pennsylvania. Alan has an interest in international development issues and renewable energy and currently serves on the board of directors of Utah Clean Energy.

Initial topics the UEC will probe include the education imperative facing the Utah economy, economic development policy, tax policy, international trade, immigration policy, the urban-rural economic connection and federal/state economic relationships.