Pub. 2 2019-2020 Issue 4

5 N ovember was the eighthmonth since theMarch 2020 economic shutdown, and itwas also themonth for Natalie’s 2021 economic outlook. When she worked with Mike Leavitt at the U.S. Department of Health and Human Services, she learned that all pandemics end. She promised this pandemic would end, too. She expects the timebetweenNov. 11, 2020, and Jan. 20, 2021, to be difficult for the U.S. for several reasons: • The nation continues to struggle with a public health emergency. • Educators and parents have challenges with schooling. •Thepresidential transitionwon’t begraceful. • Social unrest as a result of systemic discrim- ination is ongoing. Utah is different from the rest of the nation. Although hard-hit by the pandemic, the state has done better than the country as a whole. Part of the reason why Utah has fared sowell is because of the thriving con- struction industry, which is leading theway in Utah’s economic recovery. To put Utah’s situation in context, consider theU.S. economy. Annualizedgrowthduring 2019Q4 was 2.4%. That ended with the recession, which took place during 2020Q1 (-4.7%) and 2020Q2 (-32%). Recovery began in April 2020; during Q3, the U.S. economy has recovered35.3%.The shapeof the recov- ery initially looked like a“V”during the spring months, but it has slowed down consider- ably since then and now looks like a slow, long, sideways-moving slog. Natalie compared the length and severity of the current recession, in terms of nonfarm employment, to five other recessions: 1973, 1980, 1990, 2001 and 2007. It ismore severe than any of the others, with employment dropping about 14%. Except for the Great Recession that started in 2007, it looks as though recovery may take longer than the other recessions until at least 30months in. Travelwas alsodown substantially, especially when compared with 2019, and so was the demand for U.S. petroleum products. How strong is the recovery? In early September 2020, the different regions of the U.S. have recovered but are still, at best, between 80% and 85% of what they were. However, Utah is doing better than the nation as a whole when it comes to unem- ployment and PPP funds. Consider unemployment first. Some states see year-over percent employment changes that are as steep as -5.9% to -9.9%, but Utah is at -0.9%. The only state doing better than Utah is Idaho, at -0.5%. The U.S. is now at -6.4%, but that’s where Utah was in April when the U.S. averaged about -13.5%.Who has been hit the hardest? Eastern and red states are the worst. Places that are doing well now, like Utah, were doing well when the nation went into recession, were hurt less initially and got more than their share of PPP help. However, not all of Utah is doing equally well. Natalie calledUtah’s recovery K-shaped. Cache County has unemployment rates of 3.4%. In contrast, San Juan County has unemployment rates as highas 12.8%. Other hard-hit counties include Grand County (12.6%), Uintah (12.2%), Garfield (12.0%) and Duchesne (10.6%). When it comes to PPP funds for companies with less than 500 employees, Utah is in the top tier. As of Aug. 8, 2020, PPP and can- cellations were ≥ 21% of the total annual payroll. For comparison, the nationwide average was 19.4%. The hardest-hi t industr ies between September 2019 and September 2020were tourism (-15.7%) and energy (-11.6%). In contrast, construction grewby 6.6%. Single- family construction was the most success- ful area in construction. It peaked in 2018 at 6,846 units, fell in 2019 to 5,861 units, and started rising again in 2020 to 6,422. The story is a little different for apartments. Apartments had 3,186 permitted units in 2018, and theywere gaining on single-fam- ily homes. That growth accelerated in 2019. Where the number for single-family homes was 5,861, the number for apartments was 4,834 — a difference of only 1,027 units. But in 2020, they pulled apart again. The number of new apartments fell to 3,585. The difference between the number of new homes and the number of new apartments increased to 2,837. In other words, the pan- demic may have shifted the market away from apartments and toward single-fam- ily homes. Despite all these building projects, Utah’s housing shortage continues to grow and would have still occurred even if there hadn’t been a pandemic. Utah was short 53,100 units in 2019, but the deficit was 15,381 a decade ago. The construction industry set record levels of newhousing constructionbetween January 2020 and July 2020. At the same time, there has been a historic lowwhen it comes to for- sale inventory. For-sale inventory usually rises during the spring and summer and then decreases during the fall and winter. That wasn’t true in 2020. Inventory peaked in May and fell sharply in August. Instead of a list of approximately 9,000 or 10,000+ homes, the number was 5,183. (In August and September 2016, there were about 10,540 homes. These were maximums. The minimums in September 2019 and August 2018, respectively, were 9,836 and 9,347.) The sold-to-active ratio also showed stress. Its usual pattern is similar to the pattern of for-sale inventory: the ratio of sold to active listings has a maximum value at 50-60% during the spring and summer, then decreases during the fall and winter to about 35-42%. This year, the sold-to-ac- tive ratio dropped fromabout 55% inMarch to about 43% in April. Then it increased sharply to about 98% in July. The big problem is affordability. Consider housing price appreciation in three catego- ries betweenAugust 2019 andAugust 2020: • The mortgage rate went down 0.68%. • Monthly payments went up 3.74%. • The median sales price went up 13.03%. What lies ahead? That part isn’t clear. Recovery may take all of 2021, or we might improve by May 2021. However, Natalie quoted an Indian writer named Arundhati continued on page 6