Friday, October 12, 2018

The Economy Responds to the Trump Tax Change

Mark Knold, Supervising Economist

I have been observing the Utah economy for nearly 30 years. In many cases, its ebbs and flows are quite predictable. So when economic surprises pop up, it brings a little flavor to the economy-watching game. Such a surprise occurred in 2018’s first quarter.

The Utah employment high point occurs every year in the fourth quarter – the October, November, December period. It is related to the hiring spike of the holiday shopping season. On average, that quarter’s job count is 29,000 higher than the average job count of the year’s remaining three quarters. Naturally with more jobs comes more earnings, and with year-end bonuses, the highest total quarterly payrolls occur in the fourth quarter.

The move into the next year’s first quarter brings a return to routine employment and total payrolls declining. On average, first quarter employment is 28,000 jobs lower than the fourth quarter, and total payrolls decline by more than $600 million. It is a phenomenon that occurs like clockwork every year within the Utah economy.

Except for this year. Yes, the 2018 first quarter employment came in 28,400 lower than 2017’s fourth quarter. But the total payroll? Therein lies the surprise. Whereas, first quarter total payroll is always lower than fourth quarter, this year, total first quarter payroll was $112 million higher than the fourth quarter. What caused this seismic shift?

The quick answer is the Trump tax law changes implemented in 2018. Those changes were labeled as the most sweeping U.S. tax overhaul in decades. For many wage earners, ones tax burden should be lower in 2018 than in 2017. Therefore, savvy wage earners found it advantageous to defer wage bonuses and payouts for 2017 to 2018. With most bonuses paid at the end of a calendar year, it is not much of a burden to wait an extra week or two to instead receive those bonuses in 2018.

Wednesday, October 10, 2018

Poverty Rates and College Students: A look at the impact on Utah’s college towns

Andrew Reeve, Economist

Poverty rates are an indicator of how well an economy of any size can provide the economic means to support its citizens. High poverty rates suggest that an economy has underlying issues that are not allowing the citizenry to reap the benefits of a truly prosperous and healthy economic environment or that there is simply not enough economic opportunity in the area. It’s easy to blame the issues on a lack of management by local governments or institutions that are designed to help those they serve. However, published poverty rates neglect to factor in the presence of poverty populations who may have domestic tranquility and a strong sense of general welfare. Those are, at least for the sake of argument presented in this article, college students.

Friday, July 20, 2018

Utah: A Tale of Two Economies

Mark Knold, Supervising Economist

The Utah economy consistently performs well. At times, recessions do arise; but, once they are done, Utah’s upward economic trajectory resumes. The nation’s last recession was 10 years ago. It was rather dramatic given its “Great Recession” label. But that was 10 years ago; Utah has fared well since.

Every state experienced employment loss in the 2008–2010 period. That means every state had an employment count higher in 2007 than in 2009. Those 2007 levels are each state’s pre-recession employment high point (with a few exceptions). To eventually return to that level thereafter means a state has matched its employment count achieved before the recession began. But that level is just economic recovery. What about going over-and-above? To go above is to add prosperity.
The following graphic shows where each state’s current employment count is in relation to each state’s pre-recession employment peak; in other words, each state’s prosperity. Utah tops the national list with an 18.5 percent gain. Utah’s employment peak came in 2008; and, thereafter, job loss occurred. By 2011, Utah had stabilized; and by 2013, it had recovered its job count. Since then, the Utah employment base has increased by 18.5 percent.

Yet the Utah economy itself can be a tale of two economies. Utah has both a metropolitan and a rural component. Economically, rural is not defined by what the eye can see but instead by economic isolation — meaning no discernible interaction with a metropolitan hub. Some Utah areas that appear rural are actually classified within a metropolitan economy. For example, there is much economic interaction between the geographically rural Morgan County and the nearby Ogden metropolitan area. Although Morgan County does not have a lot of industry but does have much farmland, many of its residents commute and work in the nearby metropolitan corridor. Therefore, Morgan becomes classified within the metropolitan sphere. Other Utah counties with a similar classification are Box Elder, Tooele and Juab.

Friday, May 11, 2018

New Utah IT Labor Study

Mark Knold, Supervising Economist

Our Workforce Research and Analysis Division recently released a study looking at the labor structure of the Utah information technology (IT) industry. At the core of any IT industry are the coding workers — those who design and build a company’s product. We identified industries that can be labeled as Utah’s IT nucleus, and then focused upon that industry’s occupational core — its coding workers.

Utah’s IT industry is dynamic and fast-growing. Industry leaders regularly speak of the industry’s need for additional workers — on top of Utah’s strong and consistent IT industry growth. The call for supplying labor to this key Utah industry can, at times, bring pressure upon Utah’s education system. But, what about in-migration as a labor source? It was to gauge labor in-migration that our study took root. But as economic studies often do, it grew into something bigger.

In discovery, in-migration is not a defining labor source for the Utah IT industry. Yes, labor does migrate in; but, each year a roughly equal number migrates out. What migration does do is produce a bit of an education exchange. In general, about half of the Utah IT labor in-migration comes with a bachelor’s degree or higher. Conversely, nearly three-quarters of those who migrate out have a bachelor’s degree or higher.

On a consistent basis though, the majority (more than 90 percent) of Utah core IT new hires come from workers already employed within Utah. Utah workers migrate from other industries to enter the core IT industry. This implies that the vast majority of the education behind these workers is obtained within Utah.

The Utah IT market employs coders with a bachelor’s degree or higher. But it does not do it as extensively as seen in other national IT markets. Nationally, about 68 percent of IT labor has a bachelor’s degree or higher. In Utah, that percentage is 52 percent. This reality places a greater appreciation of the role and support the technical and vocational training pathways provide in sustaining Utah’s IT industry growth.

The Utah IT market is rapidly growing and successful with its near-balanced mix of higher and lesser education levels. This balance creates attractive work and income opportunities for those who have not attained an advanced degree, or whose innate interest or capacity may not align with an advanced degree. The median earnings of these IT occupations can reach upwards $85,000 or more — even for workers without a bachelor’s degree or higher. This is an integral industry in Utah that provides high, middle-income earnings for workers with less than an advanced college degree.