New GDP figures will add to the local economic-analysis tool box

New GDP figures will add to the local economic-analysis tool box

By Lecia Parks Langston, Senior Economist

“We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product.”  Robert Kennedy

As a regional economist, I’m routinely asked for gross domestic product (GDP) figures for Utah’s counties. After all, nationally, GDP is routinely tracked as an economic indicator. “Sorry,” I say, “the Bureau of Economic Analysis (BEA) doesn’t produce GDP statistics for counties (unless they are a metropolitan statistical area). But data-lovers, “the times, they are a-changin’.”

The U.S. Bureau of Economic Analysis has just released proto-type county GDP statistics for 2012 to 2015. You can explore the data in the visualization that follows.

Yes, the proto-type information is dated. However, data-users can take a first-look at the series and assist BEA by providing feedback and comments on the prototype data via e-mail at gdpbycounty@bea.gov. Official statistics are scheduled for release in December 2019.

When the official data is released, this new data will add to our ability to analyze Utah’s local economies.

What do the proto-type figures reveal? Here are a few highlights:

In 2015, eight Utah counties experienced a decline in GDP following a trend similar to 2013 and 2014.

• Less-populated counties were most likely to experience a bout of declining GDP.
• Daggett County, one of Utah’s smallest in both geographic size and population, showed the highest GDP growth rate in 2015 with Washington County showing the highest rate of expansion among more-populated counties.
• It wasn’t uncommon for Utah counties to experience at least one year of GDP contraction between 2013 and 2015.
• Not surprisingly, the vast majority of GDP is generated along the Wasatch Front.

Ten Years Later. . .

The Recovery Following the Great Recession

By Mark Knold, Supervising Economist and Lecia Parks Langston, Senior Economist

“The term 'business cycle' is imprecise. Economic fluctuations affect everyone, not just businesses, and they are, unlike astral cycles, anything but regular.” Kevin Hassett

Overview

December 2017 marked 10 years since the Great Recession first cast its long shadow across the American economy. The recession officially lasted 18 months, but its consequences can still be seen across the country without having to look very hard. We have not had another recession since.

Utah was hit hard at the time, losing a larger share of jobs than the national average; but, we were fortunate to be one of the most resilient states in terms of economic rebound. There are plenty of states where the Great Recession continues to weigh upon them. Employment levels in 14 states are still not back to their pre-recession peak, and another 29 states have only grown 5.0 percent or less. As the working-age population has grown by more than 5.0 percent, the job gains nationally have not been enough to fully employ working-age labor.

Utah lost 7.0 percent employment during the recession. Since that low, employment has recovered by 18 percent. That is the second best rebound in the nation. From Utah’s pre-recession employment peak to now, Utah’s employment has increased by 9.5 percent, third best in the nation. Yet, Utah’s job growth has not been enough to absorb all of the labor force growth during that time. Utah’s unemployment rate is low, but the percent of the working-age population in the labor force is several percentage points below the pre-recession norm — telling us that potential labor is still not as fully engaged with the job market as before the recession.

As a whole, Utah has had a notable recession rebound, but those gains have not been shared equally across all regions. Just like the national profile, some areas have bounced back strong while others are still lagging behind. The state’s metropolitan areas have grown well, but many of Utah’s rural areas cannot say the same. Nine counties have employment levels below their pre-recession peaks.

In this issue of Local Insights, we profile Utah’s regional and county economies in light of the 10-year span since the Great Recession.

Central Utah and the Recovery

The five counties in Central Utah — Millard, Piute, Sanpete, Sevier and Wayne — each experienced the Great Recession and the ensuing recovery in their own way. However, in general, the area was slow to join the recovery job-creation party. Most counties participated in the pre-recession boom in only a minor fashion. Yet all suffered from the national downturn. Several counties in Central Utah have yet to regain their prerecession employment levels despite a national recovery of more than 100 months.

Sanpete County

Sanpete County was one of the few in the region to experience a surge of employment during the pre-bust boom. Employment peaked in 2008 at nearly 7,700 nonfarm jobs. Employment totals bottomed out in 2010, after an 11-percent, 800-job decline, then held steady through 2011. A surge in employment during 2012, collapsed in 2013. The county then experienced strong expansion until 2016, when job growth slowed somewhat. While Utah had regained its pre-recession employment level by 2013, Sanpete County took an additional three years to surpass its 2008 employment total.

Economic Hurdles in Rural Utah

by Mark Knold

Utah is a geographically large state. Based on total area, it is the 13^th largest state, implying there is room to spread out. Despite all this space, Utah’s population distribution is quite concentrated. According to the U.S. Census Bureau, Utah is the nation’s 9^th most urbanized state. This dichotomy has shaped a state with two economic profiles — one urban, one rural. It can be challenging for a state dominated and prospering within the urban to extend its economic bounty to the betterment of the rural.

What is rural? It depends upon one’s objective behind the question. Most define rural by a visual scan of the landscape. A lot of open land and not many people — rural. Yet economically, the view can be different. An area may look rural, but if the economic vitality of its populace is strongly integrated with a nearby urban area, then this creates a different perspective. The latter is a preference of the federal government — an entity that often makes allocation or distribution decisions based upon economic factors.

No matter how one technically defines rural, the Governor’s Office recognizes a recent dichotomy in Utah’s economic prosperity. Since the Great Recession, Utah has had compelling economic success. Yet, most of this is concentrated in Utah’s urban centers. Portions of Utah’s rural communities are not seeing matching levels of success. Utah’s Lt. Governor recently observed, “Not all of Utah’s communities are full participants in this economic success. Many counties off the Wasatch Front are experiencing challenges.”

In response to this economic disparity, the Governor’s Office has launched the 25k Jobs initiative — an effort for businesses to create 25,000 new jobs in 25 Utah counties by 2020. With this spotlight on rural Utah’s economics, let’s take a look at some of these rural challenges.

To most, jobs deliver their income and means for living sustenance. Therefore, employment, and peripheral variables associated with employment, becomes the strongest proxy for measuring the Utah economy’s health. We will look at Utah’s counties through the lens of employment, unemployment, the labor force and how the industry structure speaks to the underlying performance of these variables.

A profile of job growth becomes a starting point. Economic performance needs to be viewed with a somewhat long lens. The Governor’s 25k Jobs initiative was not born from a short-term disorder, but instead is recognition of weak longer-term fundamentals. To illustrate this perspective, one needs to backdrop the short-term mechanics against the longer-term dynamics.

The County Job Profile chart is an intersection of the short-term trend with the moderate-term. Each county is a bubble, and the bubble size reflects job counts. The chart is divided into four quadrants. The quadrants tell the story of the intersection of the short and moderate-term trends (growth or contraction) and the general health of the county’s economy.

There are two axes of measure. First, the vertical axis represents the short-term. It is the percentage of county job change between 2015 and 2016. Above the horizontal axis is growth — below is contraction.

Second, the horizontal axis measures the moderate-term. It is the percentage of job change over the past five years (2011-2016). To the right of the vertical axis is growth — to the left is contraction. Where a bubble lies is the intersection of the short and the moderate term.

To illustrate, find Beaver County on the chart. Beaver aligns with around -4.0 percent on the vertical axis, and 8.0 percent on the horizontal axis. This says that over the past five years, Beaver County’s job count has grown by 8.0 percent, but over the past year it has contracted by around 4.0 percent. This implies that Beaver County’s economy may be slipping a bit. A one-year view would imply a problem. A longer-term view places this short-term setback against a broader perspective of overall prosperity.

The quadrant of concern is the Contracting quadrant. These economies have contracted over both the most recent year and the past five years. No matter how one wants to define rural as outlined above, all of these contracting counties identify as rural.

In-county jobs alone are not the complete picture. For example, a large percentage of Morgan County’s residents commute to Weber or Davis counties for work. If jobs are not being germinated in Morgan County, the county and its population can still prosper from its ties with the urban area.

An additional way to look at the economy is through the lens of the labor force. The labor force consists of those 16-years and older who are either working or looking for work. It is based upon where people live, not where they work. A worker living in Morgan County will be represented in Morgan County on the following chart (County Labor Force Change); yet, if they work in Weber County, their job is represented in Weber County on the prior chart. Adding this perspective helps to round out a county’s profile.

The structure of the County Labor Force Change graphic is the same as the prior chart. The area of vibrancy is the upper-right quadrant where the labor force is increasing. The quadrant of labor force contraction is the lower left. A decline in the labor force occurs when people become discouraged and leave the labor force — yet stay in the county, or when people leave the county altogether. Either way, a decline in the labor force signals a fundamental negative in the economic trend.

Depending upon the variables measured, a gain in one and a decline in another can both be positive. Job growth and an unemployment decline are both positive. To associate the positive with low unemployment, the quadrant message on the Unemployment Rate chart has been transposed.

Every month an unemployment rate is calculated for Utah and each of its counties. A county’s unemployment rate can be measured against the Utah statewide average unemployment rate. In the following graphic, county rates are mathematically compared against the statewide rate (seasonally adjusted), recorded and then summed across time.

For example, if a county’s unemployment rate is 5.5 percent and the statewide rate is 4.0 percent, then that county’s difference for that month is 1.5. If a county’s rate were to be 3.5 percent against the statewide rate of 4.0 percent, then the difference is -0.5. These monthly differences are tallied and summed. A high score speaks to a consistent and persistent unemployment rate above the statewide average. In other words, these are counties with a continuous environment of high unemployment.

The horizontal axis is a measure since 2000 and the vertical axis a measure since the beginning of the Great Recession (2008). The axis intersection is not at zero to isolate the “concern area” within the upper right quadrant. The statewide average is consistently close to the Salt Lake County average, so a sizeable number of counties will have sums slightly above the statewide average; yet, this doesn’t imply an unemployment problem. But the non-zero intersection is utilized to emphasize the counties that do have an outstanding unemployment disparity.

Across these various charts, a common group of rural counties emerge in the weak quadrant. These include Carbon, Emery, Garfield, Piute and San Juan counties; with Duchesne and Uintah hanging on the edge. There is a common theme that surrounds this grouping and it centers upon low economic diversity.

An economy’s ability to be consistently positive has a strong foundation in a diverse mix of industrial employment. Think of it in terms of “not putting all your eggs in one basket.” Economic diversity is spreading jobs across many baskets. Diversity is desirable because the overall economy is not dominantly influenced by one or a handful of industries whose poor performance weighs upon the whole.

A Hachman Index is an evaluation tool measuring to what degree an economy may or may not have all its eggs in one basket. In the Hachman Index, a measure of 1.0 means your eggs are well distributed across many industries. Conversely, numbers approaching zero point to a high concentration in one or a handful of industries.

Many of the counties that score low on the previous charts are the same ones on the lowest tier of the following Hachman Index chart. This chart represents the placement of economic diversity upon employment change of the past five years. A county will be placed high or low (vertical axis) on the chart depending upon its Hachman Index score. It will align right or left (horizontal axis) depending upon its five-year employment change. Metropolitan counties have higher economic diversity than rural counties — placing them higher on the chart. They are also further to the right on the chart, showing stronger employment growth. There can be individual exceptions, but the general theme is that lack of economic diversity is a foundational impediment to economic viability. Industrial diversity, though difficult to artificially induce, is a desired remedy to counter sluggish economic performance.

Lack of diversity does not mandate a poor economy. A reproduction of this chart five years ago would have placed Uintah and Duchesne counties still low on the chart, but their five-year growth rates would have been off the chart, needing arrows to point out beyond the chosen 40 percent horizontal axis limit.

Those economies are dominated by energy production. When energy prices are high, their economies can soar. When energy falters, they often do likewise. They are striking examples of economic outcome being determined by a dominant industry.

In summary, there is a dichotomy within the Utah economy between urban and rural. The urban economies are diverse and, therefore, more economically balanced; while many rural economies are not. With some rural counties the economic distinction is not a wide divide; but in the rural counties where the divide is pronounced, the underlying theme is often a low level of economic performance.