Report on COVID-19 predicts 2020 will be a ‘lost year’ for Utah’s economy
(Francisco Kjolseth | Tribune file photo) Euro Treasures Antiques places "we give up, store closing," signs in downtown Salt Lake City as the COVID-19 pandemic takes its toll on businesses on Wednesday, April 29, 2020.
The coronavirus could cost Utah 73,000 nonagricultural jobs this year and shave an estimated $16 billion from its gross domestic product, according to a new economic forecast.
Home sales will slow. Construction will slump. And overall, the global pandemic will likely make 2020 a “lost year” for employment, income and output in the state, say economic experts at the University of Utah’s Kem C. Gardner Policy Institute
“It’s a serious short-term shock to the economy, we think,” said James Wood, a Gardner Institute researcher who wrote the new report on the economic impacts of COVID-19. “I hope it’s short-term. ... Who knows what’s going to happen in the fall.”
The economic forecast, he notes, assumes that the state will begin to bounce back in the second half of this year and that Utah’s leaders won’t have to shut down businesses again
to contain the virus. Even so, the pandemic has roughly cut in half the state’s expected growth in total personal income and doubled its anticipated unemployment rates.
But in an unexpected twist, the global pandemic appears to have brightened the outlook for at least one part of the Utah economy — the retail sector.
“That’s a conundrum,” Wood said. “It was surprising.”
He said that while restaurants and clothing stores have suffered because of the public health emergency, shopping is way up at grocery stores and outlets such as Walmart, Target and Costco. Consumer spending on home and garden products has also increased, he said.
Dave Davis, president and chief legal officer for the Utah Retail Merchants Association, said grocers and convenience stores have struggled to keep up with the demand, as many consumers have been stocking up on supplies and cooking instead of eating out. The impulse to store away food and other goods has been especially pronounced in Utah, with its culture of preparedness, he said.
“For those that are part of the predominant religion, they have been told for years and years to prepare themselves,” he said. “So I think that part of it, I attribute to a lot of the stockpiling that has been going on.”
With the pandemic limiting in-person social interaction and recreation, many people are also turning their attention to tasks around the house, he added.
“We’re all sitting around here, looking at our houses and saying, ‘Hey, there’s a project that needs to be done,‘” he said.
As a result, stores such as the Home Depot and Lowe’s Home Improvement have fared well in recent months, he said. And there was a burst of buying in the electronics sector in the early part of the pandemic, when people were scrambling to set up their home offices for teleworking.
It’s hard to pin all the changes in the retail sector on any one aspect of the pandemic, Davis said, adding that the coronavirus is affecting each type of business differently. However, the cumulative effect is positive, according to the Gardner Institute’s report.
Earlier this year, economic experts expected that retail sales in Utah would go up by 4% in 2020. Now, these analysts are predicting a much bigger increase of roughly 8% for the year.
To quantify the financial impacts of COVID-19, Wood compared state officials’ economic predictions from February with a revised version from June. The work group that generates these forecasts includes analysts from the Utah Office of the Legislative Fiscal Analyst, the Governor’s Office of Management and Budget, the Utah State Tax Commission, BJO Capital Management and the Gardner Institute.
State leaders use these predictions to set their revenue expectations and make budgeting decisions.
In the Gardner Institute report, Wood wrote that “some positive signs of recovery have emerged lately,” including a drop in Utah’s June unemployment rate
and strong state sales tax revenues.
But his brief also noted that:
Experts think Utah’s gross domestic product (GDP) will shrink by about 5.4% over the year. Before the pandemic hit, they expected the state GDP to grow by nearly 6% to $194 billion in 2020;
Instead of gaining 42,000 nonagricultural jobs this year, as analysts had predicted in February, the state is now on track to lose 31,000 of these jobs;
Pre-pandemic, the state’s unemployment rate was expected to sit at about 2.7% this year. Now, the experts are predicting a rate that tops 5%, the state’s highest level of unemployment since 2012;
Total personal income is still slated to climb, but the anticipated increase is about $4 billion smaller than economists had forecast earlier this year.
The pandemic will also slow residential and commercial construction and has put a chill on home sales, according to the Gardner Institute report. At the same time, housing prices have remained stable amid the public health crisis.