By: Mark Knold, Supervising Economist
The Utah economy consistently performs well. At times, recessions do arise; but, once they are done, Utah’s upward economic trajectory resumes. The nation’s last recession was 10 years ago. It was rather dramatic given its “Great Recession” label. But that was 10 years ago; Utah has fared well since.
Every state experienced employment loss in the 2008–2010 period. That means every state had an employment count higher in 2007 than in 2009. Those 2007 levels are each state’s pre-recession employment high point (with a few exceptions). To eventually return to that level thereafter means a state has matched its employment count achieved before the recession began. But that level is just economic recovery. What about going over-and-above? To go above is to add prosperity.
The following graphic shows where each state’s current employment count is in relation to each state’s pre-recession employment peak; in other words, each state’s prosperity. Utah tops the national list with an 18.5 percent gain. Utah’s employment peak came in 2008; and, thereafter, job loss occurred. By 2011, Utah had stabilized; and by 2013, it had recovered its job count. Since then, the Utah employment base has increased by 18.5 percent.
Yet the Utah economy itself can be a tale of two economies. Utah has both a metropolitan and a rural component. Economically, rural is not defined by what the eye can see but instead by economic isolation — meaning no discernible interaction with a metropolitan hub. Some Utah areas that appear rural are actually classified within a metropolitan economy. For example, there is much economic interaction between the geographically rural Morgan County and the nearby Ogden metropolitan area. Although Morgan County does not have a lot of industry but does have much farmland, many of its residents commute and work in the nearby metropolitan corridor. Therefore, Morgan becomes classified within the metropolitan sphere. Other Utah counties with a similar classification are Box Elder, Tooele and Juab.
If we were to apply the same economic criteria to all of Utah’s counties (as the previous graphic does for U.S. states), we see that the state’s overall recovery is a mixed bag. About a third of Utah’s counties have not returned to their pre-recession employment. Nearly all of these are considered rural.
We can see from the above graphic that being rural does not necessitate having lost employment. Likewise, being metropolitan does not necessitate having gained employment. Wasatch County is the second-best performing county and is currently considered rural. Still, the lower half of this graphic is predominantly populated with rural counties.
A common thread often characterizing rural counties is a low industrial diversity. High industrial diversity is the economic equivalent of not having all your eggs in one basket. Too often rural counties don’t have the option or prospect of favorably diversified economies. Low industrial diversity can succeed if one or two of your baskets prosper; but, as we’ve seen recently, in historically mining-rich rural Utah that is not the case.
The graphic below intersects an economic diversity measurement with employment growth (or lack thereof). All Utah counties are represented by a bubble that roughly depicts that county’s employment size. The horizontal axis shows each county’s five-year employment change, ranging from a near-20-percent decline in Uintah County to a near-40-percent gain in Wasatch County. The vertical axis is a 0-to-1 scaling of economic diversity as measured with a Hachman Index, with the most industrially diverse economies approaching 1. There is a general pattern to this graphic. The less diverse a county’s economy, the less employment gain over the past five years. Conversely, the more diverse an economy the better the prospects of employment gain.
Too often the lack of economic diversity works against rural economies. There are times when a low-diverse rural county can economically boom. That happens when a dominant industry thrives, as some counties experience when oil prices are high. But conversely, things can soften quickly when prices decline. The nuances experienced by individual industries are often the dictating factor in rural county economic performance.
This post-Great Recession rural-urban economic dichotomy is not just a Utah phenomenon. Nationally, the urban segments have also done much better than the rural, with a few rural oil-producing exceptions. The primary reason is the nation’s ongoing information technology development and resultant economic spinoffs.
America’s technology development has emerged as metro-centric. The technology sector’s blossoming in the 1990s was originally anticipated to be a rural area economic panacea, as the internet meant technology work could be done anywhere. Yet, geographically, the technology industry has not advanced in a rural direction. What was unseen and misdiagnosed was the youth-centric labor force driving technology. That young labor force was looking for metropolitan interaction and amenities — not rural isolation.
The potential remains for technology to expand and benefit rural communities; but, to this point, that has not developed. Until then, the rural economies will largely lack the economic diversity that would power their economic base.
Since the Great Recession, Utah’s rural story is not entirely a story of despair. As a whole, the rural counties have grown by 3 percent since their collective pre-recession peak. That 3-percent contrasts against the states’ overall 18 percent gain as noted earlier — but it is a gain. With the state’s metro areas growing at a greater clip than the rural areas, the rural area’s share of the overall Utah economy is shrinking.
Currently the rural counties constitute around 8.5 percent of Utah’s employment base. That is the lowest share of the past 20 years. At times, energy booms push that share upward, as seen in the graphic below; but a corresponding decline can also have the reverse effect. Couple that with the aforementioned metropolitan technological concentration and Utah’s rural share could further trend downward.
With time, the great weight of Utah’s prosperous metropolitan areas will have a trickle down benefit to the rural communities. It can’t help but. Utah’s population recently passed the 3-million threshold. Prognosticators believe the 4-million mark will be achieved around 2032. It is not difficult to envision that a proportion of this growth will trickle into Utah’s rural areas.
This anticipated population growth will naturally mean statewide economic growth. Given another 1 million in Utah population by 2032, this should grow the economy by roughly another 462,000 jobs. Even if the rural economy was to see its share lowered to around 8 percent of the overall state employment base by then (a pessimistic but not unreasonable possibility), that would mean about 24,000 of those 462,000 jobs would find their way to rural Utah. That would be 38 percent rural employment growth by 2032. While this growth will probably not be equally distributed across all rural communities, there should be enough spread to keep Utah’s rural segment growing and relevant into the future.