Delta variant fuels national concerns but Utah economy continues to spin
A growing number of economic red flags are appearing amid growing concerns that resurgent COVID-19 infection rates could lead to a secondary economic plunge in the United States.
Falling consumer confidence, a freshly unleashed investor community, and further cautious rumblings from budget policymakers could point to a slowing of a recovery that has been moving in a positive direction for months.
For now, the data reflects that Utah’s economy continues to be among the strongest in the country, but it would not be immune to emergencies if they worsened.
Long-standing benchmark consumer survey conducted by researchers at the University of Michigan Sentiment among US buyers took a precipitous turn in the first half of August, declining by more than 13% from July. The report notes that the change is among the largest negative declines on record, pointing to significant economic swings.
“Over the past half century, the sentiment index has only registered larger losses in six other surveys, all linked to sudden negative changes in the economy,” wrote the report’s chief economist. , Richard Curtin. “The only larger drops in the sentiment index occurred during the shutdown of the economy in April 2020 (-19.4%) and during the depths of the Great Recession in October 2008 (-18.1% ). “
The new pessimism, the researchers said, was prevalent in all geographic regions of the United States as well as in income, age, and education subgroups. The change in sentiment has also crossed the boundaries of issues including personal finances, the outlook for the wider economy, inflation and unemployment.
“There is no doubt that the resurgence of the pandemic due to the delta variant has encountered a mixture of reason and emotion,” Curtin wrote. âConsumers have rightly reasoned that the performance of the economy will be diminished over the next few months, but the extraordinary increase in negative economic assessments also reflects an emotional response, mainly due to disappointed hopes that the pandemic would end soon. “
While August data for Utah consumers has yet to be released, Analysis from the University of Utah’s Kem C. Gardner Policy Institute showed a 6% drop in consumer confidence statewide in July from June levels. The change also put Utah’s index below 90 for the first time this year, though the brand, which uses measurements identical to those in the University of Michigan report, is consistently above the national average since last fall.
Investors, shaken by the continued rise in new cases of COVID-19 and fearing that recovery-related inflation rates may rise faster and continue for longer than initially forecast, drove volatility across the three major U.S. stock indexes, all of which closed for the week Friday.
Signs that the US Federal Reserve will withdraw some of its massive contributions later this year, efforts that have been made throughout the pandemic to support the US economy and notably $ 120 billion in monthly purchases of government bonds. US Treasury and mortgage-backed securities have been strengthened. confirmed in the July board meeting minutes released last Wednesday.
But many national outlets reported that meeting notes also showed lingering divisions among board members over when to begin so-called “downsizing” changes amid renewed concerns about the impacts of the pandemic.
Earlier this month, Federal Reserve Bank of San Francisco President Mary Daley told PBS NewshourâThat the functional reality is that as COVID-19 goes, so does the economy.
âWhat we are seeing is that we are not completely beyond COVID,â Daley said. âAnd people are still very disturbed by the handling of a global pandemic. They lost their jobs. They have lost their means of subsistence. They were on the verge of losing their home. Housing insecurity is really critical.
âSo we really have to go through this completely. “
But does current activity reflecting the thoughts of consumers, investors and federal policymakers guarantee an impending slowdown?
Maybe, but even if that’s the result, local economists and business leaders believe Utah is ready to weather the slowdowns of the pandemic recovery better than most.
Phil Dean, former Utah state budget manager and current public finance researcher at the Gardner Policy Institute, said Utah would have the benefit of entering all the troughs in the market ahead in a state of reasonably good economic health.
âUtah is certainly better off economically than the nation as a whole,â Dean said. âWe entered the pandemic stronger and had a more robust recovery earlier. Our economic diversity is one of the reasons for this economic strength.
But Dean also noted that the state economy does not operate in a bubble and that outside forces cannot be completely avoided.
âAt the same time, Utah is not an economic island,â he said. “So what’s going on in the wider US economy is definitely having an impact on us.”
Salt Lake Chamber President and CEO Derek Miller echoed Dean’s sentiments about the state’s current robust performance and positive economic stance, but said he also meant a little more caution from Utah Business Operators.
âIf I had to sum up both my own feelings and what I hear from other business leaders in one word, that would be caution,â Miller said. âThis spring and over the summer there was what I would call cautious optimism about our outlook for ending the pandemic and I think we all thought there was a light at the end of the tunnel.
“This optimism has not turned into pessimism, but the cautious sentiments are there.”
Miller said evidence of this renewed caution can be seen in the adjustments Utah companies are making to short-term strategies, including many deciding to delay return-to-work plans that were made before the rise of the delta variant.
Missy Greis, owner of Publik Coffee Roasters, an independent Salt Lake food and beverage company with multiple locations, said her businesses are not experiencing any slowdown as COVID-19 cases increase. But Greis said she was concerned about the resurgent infection rates and the potential impacts on her employees and customers.
“My biggest concern this week is the increase in cases, associated with back to school and classrooms with younger children who have not had the opportunity to be vaccinated and are not wearing masks.” , she said. âI have employees with school-aged children whose ability to work remotely, if they are quarantined, is difficult.
âThe increase in the number of cases is also becoming a conversation within the community about ordering take-out versus eating there – obviously eating and drinking requires removing your mask inside. Publik is ready to adapt to all CDC guidelines, which we have scrupulously followed throughout the pandemic. “
The most recent statewide statistics also do not reflect any clear signals of a significant slowdown so far in Utah.
Data from the Utah Fiscal Commission for Taxable Sales in June details year-over-year increases for each category of business tracked with an overall average increase of 20%. A few sectors experienced significantly higher growth, notably the hospitality industry up nearly 130% from the same month last year, with mining / quarrying / fossil fuels up over 50% and Utah food / beverage service companies experiencing an increase north of 37%. on June 2020.
An update from the Utah Department of Workforce Services released last Friday fixes the state’s unemployment rate in July at 2.6%, a number currently improved by only New Hampshire, according to the US Bureau of Labor Statistics. The state has also created more than 65,000 new jobs since last July.
Mark Knold, chief economist for Workforce Services, said the state’s low unemployment and stellar job growth rates are fueled by a booming Utah economy that has returned to levels of pre-pandemic performance months ago.
âLabor shortages have been a buzzword lately, but despite this, Utah’s economy has grown significantly over the past three months,â Knold said in a statement. âBy late spring, Utah trade had returned to pre-COVID levels. Jobs were plentiful. The workforce, however, has not returned as quickly, hence the call of labor shortages. But labor reacted.
âOtherwise, the Utah economy would not have been able to generate two percentage points of job growth in the past three months. “