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After months of improvement, Utah’s labor market is bumping against a ceiling that it won’t break through until the U.S. economy picks up, the top economist at the Department of Workforce Services said Friday.
"The nice bounce that we had coming out of the bottom of the recession 18 months ago [is losing momentum],’’ Mark Knold said. "Now, we are going to need other factors to step in to push the growth to a higher level."
On Friday, the department reported that the statewide unemployment rate had moved to 5.8 percent in March, up a notch from 5.7 percent in January and February. The jobless rate during those months was the lowest since November 2008, when the recession was less than a year old and getting worse.
The department also noted that the all-important 12-month employment growth rate remained unchanged in March at 2.5 percent. The rate of job formation topped out at 2.9 percent last September and has held in the mid-2 percent range ever since. Utah’s annual job growth rate historically has averaged 3.1 percent.
Knold said the growth ceiling probably will stay in place through the rest on this year and may persist into the early months of 2013. That’s because Utah, which often operates at a higher rate than the U.S. economy, is facing headwinds that it can’t overcome alone. Rising gasoline prices are eroding consumer spending power and adding to business costs. Applications for initial jobless benefits are rising across the country, housing is still stuck and the stock market seems to have reached a plateau. The U.S. economy is expected to continue growing through the year but at a more moderate pace.
In Utah, the latest unemployment rate is down from 7.1 percent a year ago. But the improvement is overstating the condition of the labor market, Knold said. Job gains are helping the state’s economy, but much of the 1.3 percentage point reduction is the result of discouraged workers leaving the labor force. The number of people actively looking for work is 5,000 below the level of a year ago.
"Utah has gone as far as it can, and if [job numbers are] going to get any higher, the U.S. economy is going have to pick up and give us some oomph to move us to a higher level," Knold said.
Even though the state’s labor conditions have cooled, they are still among the best in the country. Nationally, the unemployment rate in March was 8.2 percent and the number of jobs created across the country has increased just 1.5 percent in the past year.
In Utah, all but one of 11 industrial sectors added workers last month. Only the leisure and hospitality sector shed jobs. Employment at the state’s ski areas, resorts and comparable businesses dropped by 800, or 0.7 percent.
Manufacturing and the professional and business services sectors continue to be the biggest job generators. They added 5,200 and 5,600 workers, respectively. The financial activities and trade, transportation and utility parts of the economy also expanded employment.
In Ogden, online home furnishings retailer Wayfair is continuing to hire workers for the call center and warehouse it opened on the city’s west side in April 2011. Right now, the Boston-based company employs 170 people to handle incoming telephone calls and emails and prepare orders for shipment. It expects to hire another 100 people by the end of this year, including 30 to 40 people in May with starting wages of $11 an hour, said Al Gonzalez, director of operations.
Given the muted state of the U.S. economy, Gonzalez is amazed at how vigorous sales are. Company-wide, sales totaled $500 million last year. Sales on Cyber Monday 2011 — three days after the start of the holiday shopping season last November — jumped 50 percent.
"I would think it would be a lot slower. But I’m not that surprised,’’ Gonzalez said. "With our pricing, our speed of delivery and our no-tax in most states, I can see that people are looking for value."
Utah’s labor market still leads most of the nation. But, said Knold, its potential is being held back by economic conditions and events out of its control.
"If I’m not pleased, it’s because of the recession overall, the economic environment that we’ve been stuck in for years, and it’s one that we’ll be stuck in for a while," he said.
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