Utah’s economy should continue to grow and maybe even prosper in 2013, provided Congress and President Obama are able to avoid the fiscal cliff of spending cuts and tax increases set to go into effect in the New Year if a deal isn’t reached.
In their 2012 Economic Outlook report released Tuesday, the Salt Lake Chamber and commercial real estate firm CBRE said that if the nation’s political leaders fail to resolve their deadlock and construct a long-term plan to address the country’s budgetary problems, the results will have immediate and damaging effects on Utah’s economy.
Should the country go over the cliff on Jan. 1, close to 90 percent of Utah households would experience a tax increase, averaging $3,500 across all incomes on an annual basis.
“On the spending side, Utah’s greatest exposure to cuts is through defense. Automatic cuts could reach $250 million to $500 million in Utah — affecting jobs across the state,” the report said.
Of particular concern would be the impact on Hill Air Force Base, the state’s third-largest employer.
“We really are a ‘defense-focused’ state,” said chamber economist Natalie Gochnour, lead author of the report. “We’re not nearly the largest, but we do get a lot of defense contracts and have a major military installation here.”
Gochnour said that if it weren’t for the uncertainty over the fiscal cliff negotiations in Washington, she would be confident saying that the state’s economy is “coming together” and ready for continued strong growth in the coming year.
“ was surprisingly strong,” she said. “We’re now back to the job growth rate that we saw pre-recession and we’ve made up for all of those jobs that we lost. Utah has the fifth-fastest growing economy in terms of job growth, and three of the four ahead of us — North Dakota, Texas and Oklahoma — are energy states.”
Job growth rates will be near long-term averages in Utah, if the fiscal cliff is averted, according to the report.
“Some near term slowing in job creation is likely. However, healthy growth averaging 3 percent during 2013 is expected,” the report said. “The tech sector and natural resources, particularly related to energy, will be bright spots in the state’s economy, creating positive ripple effects.”
As the hub of Utah’s economy, Salt Lake County will benefit from that trend.
The report said the county’s economic performance should outshine national averages. It pointed to recent increases in home prices and retail sales to support that premise.
“Provided some degree of resolution to the fiscal cliff is achieved, Salt Lake County wages and salaries are expected to grow by 5.8 percent in 2013. Employment across all sectors is expected to grow by 2.5 percent during the same period, and the unemployment rate will end the year at 5.3 percent,” the report said.
CBRE said the outlook remains positive for the office, industrial and retail property markets.
“We like to call the commercial real estate market the ‘economy in a box’,” said Darin Mellot, senior research analyst at CBRE’s Salt Lake city office. “It literally houses commerce. And when the commercial real estate market is growing, it is a sign that businesses are doing well and expanding.”
CBRE pointed out that:
• Office space absorption is expected to remain positive in 2013, at levels similar to 2012. With little new construction, the marketwide vacancy rate should decline, while lease rates will remain stable.
• Salt Lake City’s central location in the region as an intermodal transportation hub continues to favor the industrial market. Additionally, the stability of Utah’s economy continues to attract new companies seeking to relocate or expand their warehousing and distribution needs.
• Construction of retail space remains healthy, with 1.4 million square-feet expected to be completed by the end of 2012. But the pace of construction will slow next year as existing supply outpaces demand and continued uncertainty in the national economy tempers consumer confidence.
Still, Mellot said, the entry of major new retailers that include Gordmans and Scheels Sporting Goods also represents a vote of confidence in the state’s economy.
The report concluded that without appropriate policy responses, conditions in the world and national economy will continue to deteriorate.
“However, if political leaders in Washington, D.C., can put together a credible package, markets will rally, uncertainty will lift and capital will be freed. The effect of which would be an improvement in the outlook for the global, U.S. and Utah economies,” the report said.
For the full 2012 Economic Outlook
O Go to http://bit.ly/UyL5Xc