want field housing. Our leaders have decided to develop the land for a public purpose. Point of the Mountain will be a job creation center with some housing and open space. Our state has decided to push the Inland Port through and has set aside money for it. The Inland Port is a generational investment and will make Salt Lake City a place where we are tightly tied into the global supply chain. Q: What are you keeping an eye on in terms of possible Federal Reserve missteps? A: There is a lot of liquidity in this economy. The Federal Reserve brought the rates down and did what it needed to keep the United States of America performing as well as it could during the pandemic, but now they’ve got to get rates up. We have a fed that is very proactive. It won’t rest on the sidelines. What am I watching? I’m watching labor force participation, consumer confidence, employment and job growth. I don’t want to be surprised, and I don’t think markets want to be surprised, either. Q: Howmuch will inflation slow down when rates rise, and how persistent will it be? A: Anybody who studies economics is in the spotlight right now. Everyone is suddenly talking about inflation, which hasn’t happened for a long time. Channel 5 did a special about it. I want people to understand that economists and policymakers know what inflation is and how to work with it. To give you an example, they asked whether it is transitory or long-term. I answered that the fed can absolutely stop it; they just cause a recession when they do. Nobody wants that. Recessions are hard, and we just had one. The question is, what do you need to do to manage it in this environment? I’m going to be a little vulnerable here, but I think people are a little too skittish and afraid. Let me give you an example. I think the inflation for the calendar year 2021 was 4.3%. People see bigger numbers, and it scares them, but they don’t realize that you are always dealing with starting dates and ending dates for that reference. They want to see December of last year and December of this year, and if it’s 5.6%, boom, they tear their hair out, but the average is 4.3%. I look at the state forecast about what’s going into the budget. In October 2021, their forecast was 3%; hence, the governor’s budget added a 3.5% cost of living increase. They looked at the 4.3% and the 3% and picked an average. What’s the root cause of the inflation? We know supply chain problems are pushing costs up, so there’s a supply-side phenomenon. There’s also all this money out there. Too much money is chasing too few goods. We know they will figure out the supply chain. On the demand side, the demand is from excess savings, which gets spent; stimulus, which gets spent; and pent-up demand: things we couldn’t do, like travel. We couldn’t travel before, but we want to travel now. All of that will happen. The amazing thing is that markets correct. For me, the question is, how well do we manage it moving forward? I have some optimism about inflation because of our leaders and the monetary policymakers. I don’t think we’ll be through with inflation, but I think we’ll be a lot better than we are now. Some of the causes are temporary, we have the tools to deal with inflation, and we are on a roll. Perhaps the worst is behind us. Q: Unemployment is a natural part of the economy. But there has been a lot of discussion at every level about full employment fixing the economy. What is the rate of natural employment you are looking at to maintain a healthy economy? A: As a rule of thumb, you want to have at least a 3.5% unemployment rate and a labor force participation of about 63%-64% nationally. That’s what we’re looking at. The other thing we’re looking at for full employment is rising wages. We expect wages to rise when there is full employment. We have both of those things challenging the Utah economy right now. Our unemployment sits at about 1.9%, which is incredibly low. I would make the case that we are at full employment in Utah, and the nation is getting close. Q: What is the relative value of education going forward? How do we as a state make sure that those most vulnerable among us have educational opportunities? A: I’ve worked with higher education. It has the most incredible mission to save people’s lives and give them the skills to be successful and prosperous, and I think we absolutely have a world that rewards education, but education has to change with the world. What can we do to help the people among us who are socially and economically disadvantaged? Give them the skills to succeed. I think an earned income credit on Capitol Hill will pass this year. [It did.] It’s a tax credit that rewards people who work on the lower end of the pay scale. It’s proven to increase neighborhood participation rates and targets the exact people you want to help. We would join other states that do this, and there’s also a federal EITC. It’s one of those areas that both liberals and conservatives agree on. We’re getting a big income tax cut that benefits the rich, and the earned income tax credit benefits low income. They’re also going to change Social Security income. [They did.] That way, there will be a fair spread of our tax cuts. 3 Natalie Gochnour is the director of the Kem C. Gardner Policy Institute at the University of Utah, the associate dean in the David Eccles School of Business, and the chief economist for the Salt Lake Chamber, which represents 7,700 business members. She received a bachelor’s and master’s degree in economics from the University of Utah and has specialized in teaching public finance. Her public service includes working as an associate administrator at the Environmental Protection Agency and as a counselor to the secretary of Health and Human Services during the presidency of George W. Bush. Later, Natalie advised Gov. Norm Bangerter, Gov. Mike Leavitt and Gov. Olene Walker. The Salt Lake Chamber recently honored her with the 2021 ATHENA leadership award. Natalie often speaks about what she sees in Utah’s economic future. Her recent forecast, “A Warm Winter Stew,” was used to write the above article, but her presentation and the Q&A session at the end are not transcribed exactly and have been edited for length. 30
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