Economist: Worst may be over but we must stay diligent, smart

By Brice Wallace

While saying “the worst is over” regarding COVID-19’s effects on the Utah economy, the state’s most prominent economist insists Utah already has taken steps that can help if it confronts a virus resurgence.

Speaking at a Salt Lake Chamber webinar about the economy, Natalie Gochnour, executive director of the Kem C. Gardner Policy Institute and the chamber’s chief economist, said Utahns need to be diligent and smart and continue social distancing, mask-wearing and hygiene measures stressed since the spring.

“I do think the worst is over. I could be wrong,” Gochnour said. “We could have something much worse happen in a long winter or a dangerous fall. But my point is, we’ve already made so many adaptions and we don’t have to go make those again. … There is convincing evidence that if we can keep the virus at bay, the economy will be better.”

For business owners, she suggested they formulate a plan, be ready to adjust that plan, and focus not on the problem but instead the solutions.

“We said in May of 2020, with this fresh on us in March, to have a two-year plan, and that would have started in March 2020 and go through March 2022, and I don’t see anything that has changed at least my thinking on that,” Gochnour said. “I think everyone should have a two-year plan and then continue to iterate off that plan. We might have to add another six months to it or another year to it.”

As for the virus’ impacts to date, Gochnour listed several but noted that Utah has fared better than its counterparts. “All in all, I would say this has been a sudden, severe and uneven economic impact, and Utah has performed relatively well compared to other states,” she said.

Among the sudden and severe impacts were in first-time unemployment claims, which last year averaged less than 3,000 a week but shot to 33,000 in April. Continuous claims used to average 8,000 per week, peaked at 126,000 in early May and has shrunk to less than 75,000 — “still a chilling number,” Gochnour said.

Likewise, the number of passengers at Salt Lake City International Airport had averaged about 2 million per month, but it shrunk to 176,000 in April.

“That is the definition of a shock to a system,” she said. “That is the definition of falling off a cliff. I just wanted to show you how stark that is in something as hard-hit as the airline industry.”

The uneven economic impacts can be seen in job statistics among industries. The year-over-year decline in leisure and hospitality is nearly 21 percent, with clothing shops and restaurants also among the job-losers. Seeing an uptick have been online sales, sporting goods, food stores and building materials. Construction has seen 8.7 percent growth.

“It is claiming favorites,” Gochnour said of the virus. “It’s definitely punishing some industries more than others.”

Nonetheless, prior to revision, the number of jobs in Utah was down 2.8 percent year over year in June, which might sound bad but tied Idaho for the nation’s smallest contraction. For comparison, Nevada was down 10.2 percent and California slipped 10 percent. The national drop was 8.7 percent. Utah’s unemployment rate in July was 4.5 percent, lowest in the U.S. and far better than the national rate of 10.2 percent.

Gochnour spoke of the need for further federal stimulus action. Funding from the Paycheck Protection Program (PPP) has run its course, and expanded and extended unemployment insurance “did a lot of what it was going to do,” she said.

She also spoke of the need for Utahns to understand that many changes prompted by the virus’ impacts are structural, or long-term. People have been spending less in restaurants and on gas and clothing, but more on home improvements, outdoor equipment and especially online purchases. Remote work has become commonplace, which is leading to a “reckoning” in commercial real estate. If more people choose to work from home and employers see good productivity from it, expect to see even more remote work in the future and resulting changes to office space.

“You have to just sort of put odds to see what’s happening in the future, and there’s a chance that we get through the fall and get into the first quarter and have a vaccine and this gets behind us more quickly,” Gochnour said. “I’m not going to put odds on that because I just don’t know. There’s another chance that we have the virus come on in the fall in a very significant way and we have to deal with that, and that changes the dynamics.”