A growing number of economic warning signals are emerging amid mounting concerns that resurgent COVID-19 infection rates could lead to a secondary collapse in the US economy.
Deteriorating consumer sentiment, a freshly excited investment community and new cautionary mouths on the part of fiscal policy could suggest a slowdown in 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 most resilient in the country, but it would not be immune to urgent circumstances should they deteriorate.
Long-term benchmark consumer surveys by University of Michigan researchers found that sentiment among US shoppers took a steep turn in the first half of August, down more than 13% from July. The report notes that the change was among the largest negative declines in history, all of which indicated significant economic fluctuations.
“Over the past half century, the sentiment index has seen major losses in only six other polls, all related to sudden negative changes in the economy,” wrote the report’s chief economist Richard Curtin. “The only major declines in the sentiment index occurred during the economy stalled in April 2020 (-19.4%) and during the depths of the Great Recession in October 2008 (-18.1%).”
Researchers found that the new pessimism was widespread across all geographic regions of the United States, as well as subgroups on income, age, and education. The shift in sentiment also crossed topic boundaries such as personal finance, the macroeconomic outlook, inflation and unemployment.
“There is little doubt that the pandemic resurgence due to the Delta variant encountered a mixture of reason and emotion,” wrote Curtin. “Consumers have correctly argued that the economy will deteriorate over the next few months, but the extraordinary surge in negative economic valuations also reflects an emotional response, largely out of disappointed hopes that the pandemic will end soon.”
Customers visit Publik Coffee Roasters in Salt Lake City on Friday, August 20, 2021. Businesses in Utah are doing well but are cautious about weathering the COVID-19 pandemic as the Delta variant rages. Laura Seitz, Deseret News
While August data for Utah consumers has not yet been released, analysis by the University of Utah’s Kem C. Gardner Policy Institute showed a 6% decline in national consumer sentiment in July from June levels. The change also took the Utah index below 90 for the first time this year, although the brand, which uses metrics identical to the University of Michigan report, has consistently been above the national average since last fall.
Investors, shaken by the continued spike in new COVID-19 cases and concerns that the recovery-related inflation rates could rise faster and last longer than early predictions, drove volatility in the three major U.S. stock indices all of which were closed at the end of the week on Friday.
Signs later this year that the Federal Reserve Board will withdraw some of its massive contributions to efforts made to prop up the U.S. economy throughout the pandemic, including the $ 120 billion monthly purchases of U.S. Treasuries and mortgage-backed securities -Dollars were further confirmed in the minutes of the July board meeting published last Wednesday.
However, numerous national media reported that the meeting notes also revealed persistent disagreements among board members on when to start so-called “tapering” changes amid renewed concerns about the impact of the pandemic.
Earlier this month, the President of the Federal Reserve Bank of San Francisco, Mary Daley, told PBS Newshour that the functional reality is that like COVID-19, the economy is also going.
“What we’re seeing is that we’re not completely through COVID yet,” said Daley. “And people are still very disturbed from dealing with a global pandemic. They lost their jobs. They lost their livelihood. They were about to lose their home. Housing insecurity is really critical.
“So we really have to go through this completely.”
But does current activity, mirroring the thoughts of consumers, investors, and federal politicians, guarantees an impending downturn?
Perhaps, but even if that is the result, local economists and business leaders believe Utah is poised to weather all of the surges in the pandemic better than most.
Phil Dean, former Utah state budget director and current public finance research fellow at the Gardner Policy Institute, said Utah had the advantage of stepping into any impending market lows in a state of reasonably good economic health.
“Utah is definitely better positioned economically than the nation as a whole. We entered the pandemic stronger and earlier experienced a more robust recovery. Our economic diversity is one reason for this economic strength. ”- Phil Dean, former Utah State Treasurer and current Public Finance Research Fellow at the Gardner Policy Institute in the United States
“Utah is definitely better positioned economically than the nation as a whole,” said Dean. “We entered the pandemic stronger and we used to experience a more robust recovery. Our economic diversity is one reason for this economic strength. ”
However, Dean also noted that the state’s economy does not function in a bubble and outside forces cannot be completely dodged.
“At the same time, Utah is not an economic island,” he said. “So what is happening in the broader US economy is definitely affecting us.”
Salt Lake Chamber President and CEO Derek Miller echoed Dean’s views on the state’s current robust performance and positive economic climate, but said he’s also hearing a little more caution from Utah entrepreneurs.
“If I were to sum up my own feelings and what I hear from other business leaders in one word, it would be caution,” Miller said. “This spring and throughout the summer there has been what I would call cautious optimism about our prospects of emerging from the pandemic and I think we all thought there was a light at the end of the tunnel.
“That optimism has not turned into pessimism, but the cautious feelings are there.”
Miller said evidence of this renewed caution was seen in the adjustments made by Utah companies to short-term strategies, including many that decided to postpone return to work plans made prior to the rise of the Delta variant.
Spencer Turner will be working at Publik Coffee Roasters in Salt Lake City on Friday, August 20, 2021. Businesses in Utah are doing well but are cautious about weathering the COVID-19 pandemic as the Delta variant rages, Laura Seitz, Deseret News
Missy Greis, owner of Publik Coffee Roasters, a Salt Lake City independent food and beverage company with multiple locations, said her businesses are not seeing any slowdown as long as COVID-19 cases rise. However, Greis said she had concerns about resurgence rates and the potential impact on her employees and customers.
“My biggest concern this week is the spike in cases, coupled with back to school and classrooms with younger children who haven’t had the opportunity to get vaccinated and not wear masks,” she said. “I have employees with school-age children whose ability to work remotely is challenging in quarantine.
“The surge in cases is also becoming a conversation in the community about ordering takeaway versus eating – obviously eating and drinking requires mask removal indoors. Publik is ready to adapt to all CDC guidelines, which we have carefully followed throughout the pandemic. “
Even the most recent statistic across the country does not yet reflect any clear signals of significant slowdowns in Utah.
The Utah Tax Commission data on taxable sales for June shows a year-over-year increase for each business category recorded, with an overall average increase of 20%. Some sectors saw significantly higher growth, including hospitality / lodging up nearly 130% year over year, mining / quarrying / fossil fuel extraction up more than 50%, and food / beverage service companies in Utah up 37% north . about June 2020.
An update from the Utah Department of Workforce Services released last Friday puts the state’s unemployment rate at 2.6% in July, a figure currently only surpassed by New Hampshire, according to the US Bureau of Labor Statistics. In addition, the state has created over 65,000 new jobs since last July.
Mark Knold, chief economist for workforce services, said the state’s low unemployment and excellent employment growth rates are being driven by a booming Utah economy that returned to pre-pandemic performance months ago.
“Labor shortage has been a buzzword lately, but the Utah economy has grown significantly in the past three months,” Knold said in a statement. “By late spring, Utah retail had returned to pre-COVID levels. Job offers were plentiful. The labor force was not returning as quickly, however, and with it the call for labor shortages. But the work reacted.
“Otherwise the Utah economy could not have achieved two full percentage points of employment growth in the past three months.”