By Lecia Parks Langston, Senior Economist
“The One with COVID-19”
If the recent economic downturn were an episode of Friends, it would be titled “The One with COVID-19.” The pandemic recession was unprecedented in modern history. The economic deterioration proved sudden, extreme and profound. More importantly, this downturn was not created by the variations of the business cycle, but resulted from public health directives aimed at curbing the spread of illness and death. Whether you call it a virus-cession or a pandemic recession, this economic downturn evidenced a unique pattern.
Utah joined with the rest of the nation in this plummet of business activity. In the early weeks of the pandemic recession, more first-time Utah claims for unemployment insurance were filed than in the entire previous year. In just one month (April 2020), the state’s unemployment rate skyrocketed from 2.5% to a whopping 10.1%. Plus, Utah went from showing a moderate 2.3% year-over job gain, to a plummeting year-to-year decline of nearly 8%.
Better than Average
However, Utah consistently out-performed the nation as a whole as the pandemic slowdown progressed. The rate of job loss in Utah proved shallower than the U.S. decline (13% at its worst). In addition, Utah’s peak unemployment rate (10.1%) measured nearly 5 percentage points lower than the national figure of 14.8%.
Nonfarm Jobs is Key
One of the best concurrent indicators of the business cycle is the year-over percent change in nonfarm employment. Nationally, once this indicator drops by one percentage point or more, the country is typically in recession. On the flip side, the bottom of a recession is almost always marked by the lowest level of year-to-year job loss. In addition, the nonfarm jobs count is a robust data set which, when Quarterly Census of Employment and Wages data is published, provides data at the local level.
Take it from the Top
Prior to the pandemic recession. Utah and many of its neighbors were showing some of the healthiest employment expansions in the country. In March 2020, Utah ranked number three, with next-door states Arizona and Idaho holding the number one and two spots. In addition, Colorado, Montana and Nevada held spots in the top 10.
When public health restrictions slowed the economy in April 2020, despite its 8% drop in jobs, Utah suffered the least employment contraction of any state in the nation. For the next 12 months, Utah and neighbor-to-the-north Idaho held on to the number one and two spots based on their year-over change in nonfarm jobs. For most of those months, Utah maintained second place. Idaho actually started creating employment in November 2020 while Utah didn’t move into positive territory until February 2021.
Once the pandemic hit the one-year mark. Utah’s job-making status appeared to drop. However, this only occurred because of the initial catastrophic drop in other states’ employment. Utah just didn’t have as much mathematical ground to reconstitute. When the pandemic year is ignored, using a two-year growth rate shows Utah and Idaho employment expansion far outpacing the remainder of the United States. (And, Utah finally overtook Idaho in job growth in August 2021.)
The “Dismal” Indicator
Although the year-to-year change in nonfarm jobs is typically the prime indicator of an area’s economic status, the unemployment rate tells its own story. Generally, the unemployment rate is considered a “lagging” indicator—rising after the recession has begun and improving after it has ended. But, for some reason, human brains are wired towards the negative, making the unemployment rate the usual economic indicator of choice.
Here, too, Utah ranks well. Prior to the pandemic recession, the state registered the third-lowest jobless rate in the nation. In April 2020, its ranking dropped to number 10, but quickly bounced back to range between the lowest and the third-lowest rate through most of the remaining months. Interestingly, even though Idaho generally grew faster than Utah during the pandemic recession, it displayed higher unemployment rates. Also, neighboring states were notably lacking among the states with the lowest jobless rates during the pandemic. In other words, Utah maintained strong positions in both a low unemployment ranking and a high job-growth ranking.
Why did Utah and Idaho fare better during the recession than many of their peers? They did enter the pandemic recession from a point of strength with their already expanding, full-employment economies. However, Nevada, which had the third-fastest growing job market in January 2020, experienced some of the nation’s worst job loss as a result of the pandemic.
This finding shows that industry-mix came into play. The pandemic hit hardest upon the leisure/hospitality sector as restaurants closed and travel slowed to a trickle. Nevada’s share of leisure/hospitality services employment (location quotient) in 2019 was 2.27 (where 1.00 is the national average)—the highest in the nation. Although Utah is a mecca for national park attendees and skiers, its leisure/hospitality service location quotient measures 0.91, thirty-fifth in the nation. However, while some states with high leisure/hospitality quotients suffered terribly during the pandemic recession, others did not. Lower-dependence on leisure/hospitality services seems to tell only part of the story.
The severity of public-health restrictions may also come into play. While this factor is difficult to measure and ever-evolving, Utah and Idaho both routinely show up on lists of states with the fewest COVID-19 restrictions—as do a number of other well-performing states.
In concert with its high economic ranking, Utah also placed among the top 10 states with the highest COVID-19 cases per 1,000. In contrast, the state ranks among the bottom 10 states for death rates from COVID-19. Since COVID-19 has tended to be more impactful upon older adults, Utah’s youthfulness (the nation’s youngest state), may have contributed to the continued economic activity while experiencing relatively low death rates.
Utah’s economy also seemed to benefit from heavier public health restrictions in nearby states. Tourists who may have typically traveled to California, Nevada, New Mexico or Colorado may instead have chosen to visit the less-restrictive Beehive state. Additionally, at least in part, Utah’s building boom during the pandemic seems influenced by in-migration from more locked-down states. The new work-from-home ethic makes this possible.
Whatever the reason, Utah made it through the pandemic recession in better fashion than most of its peers both in terms of job growth and unemployment.