Tuesday, January 14, 2014

Sales in Utah Trending Up

Tyson Smith, Economist

There are several broad indicators that point to economic growth and continued recovery from the Great Recession. While analysis from the Department of Workforce Services typically focuses on trends within the labor market – like new hires, total employment and the unemployment rate –  several other pieces of data that may help to illuminate the overall health of the economy, indicators like housing prices, new construction permits and taxable sales revenue.

Taxable sales data are a great gauge for assessing the demand for products and services in an economy. Figure 1 shows that taxable sales have been trending upward in Utah since the beginning of 2010.

Over the last year taxable sales revenue has continued on its upward trajectory, although the rate of expansion has slowed compared to the previous two years. Of the 29 counties in the state, 23 saw year-over taxable sales growth in the third quarter. Figure 2 ranks the counties from highest 3rd quarter taxable sales growth rates to lowest. Growth in many of the small counties, specifically Beaver and Daggett, outpaced the state average by a considerable margin. While the double-digit rate increases in the Beaver, Daggett, Millard, Wasatch, Sevier, Rich, Iron, Wayne, and Grand counties were impressive, it is worth noting that counties with smaller tax bases are more likely to experience large percentage changes (both positive and negative) from year-to-year. Ultimately, the 23 counties that saw increases in taxable sales from third quarter 2012 to third quarter 2013 represented 94 percent of all taxable revenue in Utah.

Although aggregate taxable sales in Utah increased over the year, revenue in the goods production sector decreased 6.5 percent. The goods production industries are vital to a healthy economy because their outputs are often exported to other states and countries, bringing “new” money into the state. Furthermore, goods producing firms create relatively high paying middle-class jobs. On the bright side, some of the industries that generate the highest paying jobs in the service production sector increased year-over taxable sales. For example, the management of companies and the professional, scientific and technical services industries employ highly skilled and highly compensated workforces, and taxable sales in those industries increased 106 percent and 28 percent, respectively. As Figure 3 clearly shows, sales growth does not directly correlate with job growth in a given industry, however long-term increases in revenue can encourage firms to hire more employees to meet customer demand.

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