Dr. Aric Krause with Westminster College joined ICEL in April to present his annual economic update. He started by noting that the economy is not as bad as it could be, but we are still looking at several serious challenges. He summarized by stating that "things are murky."
On the positive side, Aric pointed out that several industries are rebounding nationwide, including professional and business services which encompass credit. Also, the national bankruptcy rate started to decline in 2011 and household debt decreased dramatically in the years between 2008 and 2011. Both unemployment and under-employment are also dropping. In Utah job creation is outpacing the rest of the United States, and almost every industry in Utah has improved, including construction. The state's poverty rate is the third lowest in the country.
On the other hand, construction is still contracting nationwide. Long term growth has continued to be in government, leisure and hospitality, education and health services, most of which is tax funded. Consumer confidence still has not hit numbers high enough to indicate an economic growth phase. Income, in terms of purchasing power, is at the same level as it was in 1986 and the percentage of home ownership has decreased dramatically since 2008. More Americans now live in poverty, fewer Americans have health care, and more Americans are behind or delinquent on their mortgage payments. In Utah, salaries are at only 80% of the national average, and on average, those salaries support 20% more people.
Looking forward, Aric expects many more foreclosures in 2012. Liquidity is still a problem and companies are not yet looking to expand. However, his big picture forecast for 2012 is generally good. He suggests that job growth will continue, GDP growth will continue to be positive and inflation will remain below 2%. In Utah, home prices will most likely bottom out in late 2012 or early 2013.
Aric suggests that the country needs to work on securing a real competitive advantage, either technically or in terms of human productivity, to ensure continued growth. We need to invest in things that will not only provide that advantage, but will also bring returns such as roads and infrastructure, education and electricity infrastructure.
Aric's presentation was lively and informative, and as always, he provided valuable insight into economic conditions in both Utah and the United States. View Meeting PowerPoint