Utah, national economies linked

This entry was posted on Wednesday, August 8th, 2012 at 2:13 pm and is filed under Chamber News, Economic Development, Public Policy, Utah Rankings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Earlier this week, Gallup released rankings showing Utah atop the list of the states primed to be the best place to live in the future. The rankings were based on 13 metrics and Utah secured the top position based on factors ranging from the ease of finding clean and safe water, to low smoking habits, to having supervisors who treat workers like partners and not subordinates.

No matter how a publication tries to rank the best places to live, to do business or to play, Utah consistently comes out on top.

Most Utahns need look no further than the comparison between the state economy and the national economy. Unemployment? Utah is at 6.0 percent compared to 8.3 percent nationally. Economic growth? Utah doubles the national rate 2.6 percent to 1.3 percent.

There is certainly reason to be proud of our state, but economists say there is reason for concern.

“Utah’s economy is tied to the national economy,” said Natalie Gochnour, chief economist of the Salt Lake Chamber. “Utah can outperform the nation, but our peaks and troughs match the national trends. Long-term, our success as a state cannot be separated from the success of the national economy.”

And it’s on the national scale where the picture gets a bit murky.

The U.S. Chamber recently released its quarterly small business survey. The results showed a high level of concern:

• Eight-out-of-ten small businesses continue to think the national economy is off on the wrong track and more than half (53 percent) of small businesses surveyed cite economic uncertainty as their top concern. Only 14 percent say the national economy is on the right track.

• Forty-five percent of small business owners surveyed are not sure if their business’s best days are ahead of or behind them. In addition, only 34 percent of small business owners say the business climate over the next two years is likely to greatly or somewhat improve.

• Small business owners’ concerns about the future are impacting their hiring. Since March, the number of small businesses who expect to lose employees over the next year has grown from 8 percent to 12 percent. Only one-in-five (20 percent) of small businesses surveyed expect to add staff in 2013. The majority of small businesses say they are likely to keep the same number of employees over the next year – meaning there is likely to be little change in overall unemployment figures.

That level of pessimism is not a good sign for the economy.

You may have heard more discussion lately of what has been dubbed the “fiscal cliff.” That is the combination of spending cuts and tax increases due to go into effect at the end of the year. As the debate about extending the Bush Tax Cuts and postponing spending cuts ramps up, so does the anxiety level of business leaders trying to plan.

Health care costs are chief on the list of concerns for small business. Only three percent of small business owners report that the Supreme Court’s decision to uphold the law will make them more likely to hire new employees. The vast majority said they would be less likely to hire or that their workforce would stay the same size. When asked directly what the impact would be, 72 percent said that the health care law would make it harder for their business to hire.

There are some business basics everyone needs to understand. A business succeeds when it can provide products and/or services at a price people will pay. The revenue a business generates must exceed what it costs to produce the goods or provide the service. If businesses cannot generate more revenue from taking on the cost of hiring additional employees, they simply won’t do it.

Policies that make hiring new employees too expensive keep business from growing and adding jobs.

In Utah, we’ve embraced policies that help businesses grow. We have a stable tax rate, we avoid burdensome regulation and we invest in the infrastructure to support our growth.

We do things differently and the numbers prove it is working. But over the long haul, Utah needs the rest of the nation to follow suit.


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