The Recovery Following the Great Recession
By Mark Knold, Supervising Economist and Lecia Parks Langston, Senior Economist
“The term 'business cycle' is imprecise. Economic fluctuations affect everyone, not just businesses, and they are, unlike astral cycles, anything but regular.” Kevin Hassett
Overview
December 2017 marked 10 years since the Great Recession first cast its long shadow across the American economy. The recession officially lasted 18 months, but its consequences can still be seen across the country without having to look very hard. We have not had another recession since.
Utah was hit hard at the time, losing a larger share of jobs than the national average; but, we were fortunate to be one of the most resilient states in terms of economic rebound. There are plenty of states where the Great Recession continues to weigh upon them. Employment levels in 14 states are still not back to their pre-recession peak, and another 29 states have only grown 5.0 percent or less. As the working-age population has grown by more than 5.0 percent, the job gains nationally have not been enough to fully employ working-age labor.
Utah lost 7.0 percent employment during the recession. Since that low, employment has recovered by 18 percent. That is the second best rebound in the nation. From Utah’s pre-recession employment peak to now, Utah’s employment has increased by 9.5 percent, third best in the nation. Yet, Utah’s job growth has not been enough to absorb all of the labor force growth during that time. Utah’s unemployment rate is low, but the percent of the working-age population in the labor force is several percentage points below the pre-recession norm — telling us that potential labor is still not as fully engaged with the job market as before the recession.
As a whole, Utah has had a notable recession rebound, but those gains have not been shared equally across all regions. Just like the national profile, some areas have bounced back strong while others are still lagging behind. The state’s metropolitan areas have grown well, but many of Utah’s rural areas cannot say the same. Nine counties have employment levels below their pre-recession peaks.
In this issue of Local Insights, we profile Utah’s regional and county economies in light of the 10-year span since the Great Recession.
Southwest Utah and the Recovery
The five counties in Southwest Utah — Beaver, Garfield, Iron, Kane and Washington — each experienced the Great Recession and the ensuing recovery in their own way. Unfortunately, this corner of Utah generally took longer to pull out of the downturn than did Utah or the nation.
Washington County
Washington County was an uninhibited participant in the housing bubble that was the precursor to the Great Recession. Not surprisingly, its crash was longer and deeper than other less-involved counties. For almost three years prior to the economic collapse, Washington County showed 10-percent job growth as construction industry employment exploded. In this case, what went up definitely came down. The worst job-loss month in Utah registered a 6.2-percent decline (year-to-year), while the nation’s worst comparable loss measured 5.0 percent. Washington County’s loss imitated its prerecession gains at 9.7 percent. Moreover, Washington County just kept losing jobs at this rate while the state and the nation bounced back.
On an annual basis, peak-to-trough, Washington County lost more than 7,700 jobs between 2007 and 2010. That’s a hefty decline of 14.4 percent. It wasn’t until 2014 that Washington County recovered sufficiently to reach the peak employment levels of 2007. While both Utah and the U.S. returned to job creation in 2010, Washington County’s job growth did not resume until 2011.
Nevertheless, the current recovery has been good to Washington County. Beginning in 2012, the county has shown employment expansion generally modulating between 5 and 7 percent. That rate of growth is more moderate (at least for fast-growing Washington County) and certainly more sustainable than the boom-level growth of the mid-2000s.
Industry expansion has proved broad-based in the recovery period. While construction has expanded in recent years, it has yet to reach the peak levels of the housing-bubble years. While most industries have maintained their prerecession employment shares, construction’s employment share is now less important, while the healthcare/social services industry has become a more important source of Washington County jobs.
As per usual, unemployment rates lagged the business cycle. Washington County’s lowest joblessness occurred in 2007 at an extremely low 2.6 percent and peaked at 10.5 percent in 2010 (higher than both state and national averages). Since that time, rates have trended downward and currently measure at about 3.5 percent. Washington County now finds itself in the full-employment range with a tight labor market.
Not surprisingly, average wages took a growth vacation during the recessionary years, but started improving once employment expansion resumed. The strong recent improvement points to the strong economic pressure of a tight labor market on wages.
Recession’s hardship on Washington County manifested itself in its population numbers as well. In 2009, Washington County experienced its first net out-migration in 45 years. While population growth has improved as the recovery progressed, rates of expansion still remain lower that before the recession.
The home-building market reflected its part in the Great Recession and recovery. In Washington County, dwelling unit permits peaked at nearly 3,900 in 2005 and bottomed out at 605 in 2009. Recovery has been fairly slow with 2017 likely to turn in the highest activity since the end of the downturn.
In Washington County, gross taxable sales have shown the most consistent expansion of any economic indicator during the recovery period. At their worst in 2009, sales showed a 13 percent decline, but have shown annual gains of 8 percent or greater since 2012.
Iron County
Along with its neighbor Washington County, Iron County joined in the home-building craze that preceded the recession. In addition, the county’s larger-than-average and recession-sensitive manufacturing sector meant the recession hit Iron County doubly hard as economy stalled. While its recovery began on schedule, Iron County was quite late to the job-growth party.
In Iron County, employment hit its pre-recession peak in 2007 after a second year of near-7 percent employment expansion. The county’s worst job loss occurred in mid-2009 with a year-to-year decline of more than 9 percent. While Iron County moved to job growth in early 2011, that employment expansion just never took hold in any meaningful way until two years later. In fact, consistent, strong employment improvement did not return until the last several years.
Peak to trough (2007 to 2010), Iron County lost 1,900 nonfarm jobs for a decline of 11 percent. Iron County’s slow return to economic health is reflected in the fact that it did not return to its pre-recession peak employment level until 2016. In contrast, Utah had regained its pre-recession peak by 2013. Although both construction and manufacturing have expanded during the recovery period, the strongest employment gains have occurred in leisure/hospitality services, private education/health/social services and the public sector (which includes Southern Utah University and public education).
Unemployment rates lagged behind the improvement in jobs. In Iron County, joblessness fell below 3.0 percent in 2007 and peaked at 9.6 percent in 2010. Despite spotty employment gains, the county’s unemployment rate declined steeply through 2014 and has plateaued near the 4 percent mark. This rate of joblessness suggests the county is at “full employment.”
As Iron County’s labor market has tightened, average wages have shown more rapid improvement in recent months. As elsewhere, few wage gains were evident during the recession itself.
One reason the county’s unemployment rate fell so rapidly in the early recovery years can be traced to population changes. Joblessness wasn’t falling because workers were finding jobs; it was declining because workers had left the area. Iron County suffered from five straight years of net out-migration following the recession.
Home-building has also slowly returned. After peaking in 2005 at 941 permits, only 65 home permits were issued in 2011. Although more homes are being built, the numbers remain about a third of the prior peak figures.
Kane County
While Kane County returned to employment expansion fairly early in the recovery game (mid-2010), it had a difficult time maintaining those gains. Annual job growth did not exceed 2 percent until 2013. Since that point, the county has managed strong to moderate expansion.
The county’s annual pre-recession employment peak of nearly 3,200 nonfarm jobs occurred in 2007. At its lowest point in 2010, the county’s employment totals had dropped by more than 200 positions, for a decline of 6 percent. For the next few years, the county didn’t show employment losses or gains of any note. In contrast, Utah was producing moderate employment growth beginning in 2011. Kane County did not regain its prerecession peak employment level until 2014; seven years after the recession began.
While most industries eventually shared in the overall expansion, the leisure/hospitality services industry has been the primary contributor of new employment during the recovery period. Kane County is now more dependent on this tourism-based sector than ever. Roughly one-third of the county’s nonfarm jobs are currently encompassed in this sector.
As in most other southwestern Utah counties, Kane County’s jobless rate peaked in 2010 (7.9 percent). The area’s unemployment rate has steadily declined since. Average wages have slowly increased since the recession ended, but have barely exceeded inflationary increases.
Interestingly, despite its economic difficulties, the county experienced net out-migration in only two years (including 2015).
Dwelling unit permit data is not complete for many of the years following the recession, making analysis of this data problematic.
Garfield County
Garfield County displayed an atypical recovery pattern, even for Southwest Utah. Garfield County shed a notable number of jobs during the recession, but it surged back with rapid job growth in 2010 while the state and nation were still losing jobs. However, those early gains were not a sign of things to come. After that quick-start gain, the county did not show annual job growth again until 2015.
While employment gains have picked up in recent years, as of 2016, the county had not regained its top pre-recession employment level. Garfield County lost about 200 jobs between 2008 and 2009 for a decline of roughly 7 percent. But after a brief stint of job growth the losses returned and by 2014 the county had fewer jobs than during the recession. Not all industries have shared in the recovery either, but private healthcare/social services made substantial job gains.
Garfield County’s post-recession job losses kept its unemployment rate from falling substantially until 2012. Because of the seasonal nature of this tourism-dependent economy, Garfield County’s jobless rate remains perennially higher than average. Although the unemployment rate headed downward after 2012, the declines are slight compared to those shown by the state and nation.
Slow employment growth has provided little upward pressure on wages in Garfield County. In fact, average wages actually slipped slightly between 2010 and 2012. In addition, net out-migration has proven the rule since 2012 — a sign that workers have left the area.
Home-permit data is incomplete for the post-recession years and therefore provides no information for this post-recession analysis. On the other hand, when prior-period adjustments are removed from gross taxable sales, it shows the strongest and most consistent improvement of the county’s economic indicators in the post-recession era.
Beaver County
In Beaver County, the effects of the business cycle were overshadowed by other factors. In particular, wind-farm construction and the coming and going of mining jobs kept Beaver County’s employment numbers on a unique cycle of their own. Employment ebbed and flowed based on the phase of construction projects or whether miners were at work. While these factors obscure the business cycle, the county’s employment base does appear to have improved over time.
Construction employment stages meant employment levels bounced around leaving Beaver County without a notable pre-recession employment peak. The county did lose a sizeable number of positions in 2010, but these lost positions can be traced primarily back to the completion of one phase of wind farm construction. Shifts in mining employment also wreaked havoc with the area’s indicators.
The business cycle was reflected in the county’s jobless rates. Typically construction workers on large projects leave the area once their job is done, making minimal influence on unemployment levels. Indeed, like many other counties, Beaver County’s unemployment rate peaked in 2010 only to contract until 2016 when mining layoffs took their toll.
Again, construction had a stronger influence on wages than did the business cycle. Average wages increased when construction was ongoing and slipped when it ended. Building investment also affected gross taxable sales totals as dollars cycled along with the projects.
As in many less-populated counties, Beaver County has experienced sustained out-migration of its population in the post-recession era. Between 2009 and 2016, Beaver County experienced net in-migration in only two years. Slow home permitting reflects this pattern of out-migration.
