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.
Eastern Utah Overview
This post relies on analysis of employment shares and growth by industrial sector. Sectors are defined using the North American Industrial Classification System (NAICS).
The general theme in Eastern Utah (with certain prominent exceptions) is that the Great Recession initiated a trend that shrunk the share of private-sector revenues driving the local economies and increased the share of the public sector
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All industries receive their funding from either the private or public sectors. Receiving funding from the public sector means that some level of government is paying for that industry’s services, even if the services themselves are provided by non-government businesses. For example, hospitals are generally private-sector ownership (non-government), yet through Medicaid and Medicare receive much government funding.
This post will highlight three industries due to their significant level of government funding: 1) public administration, which is exclusively government-owned services; 2) educational services, which in Utah is also predominantly government-owned; and 3) health care and social assistance. These will be identified as “public sector.” All other industries will be the “private sector.”
In the tourism-dependent counties, the above definition of public sector itself may not fully capture the government-funded importance. Throughout parts of eastern Utah, tourism is due to scenic beauty and national parks, with government ownership and funding the economic underpinning. Hotels, restaurants and gas stations may not get their revenues from the government, but they do from the tourists who come to see and pay for the government-provided access. All one has to do is observe a government budget shutdown to see the permeating effect the government-funded foundation has even on the private sector.
This analysis will evaluate the share of the three, above-cited industries that receive much government funding, how that funding may have changed between the Great Recession and now, and discuss, as needed, where tourism is also prominent.
Southeastern Utah
Employment growth in Southeastern Utah (Grand and San Juan counties) has lagged the statewide average since the Great Recession. Growth since the third quarter of 2008 has registered at 10 percent compared with the 17 percent rate for Utah. However, these two counties do not behave as a single economic unit, so their stories differ.
Grand County
Grand County pulled out of the recession and has experienced strong employment growth. Its 19 percent rate slightly exceeds the state’s growth of 17 percent. These gains have been fueled by tourism. The history of other sectors is mixed.
Table 1 shows the employment shares by sector for the third quarter of 2017 and the corresponding quarter in 2008, which corresponds to the depth of the recession. For ease of reference, NAICS codes are included.
Table 1
Grand County Employment Share by NAICS Sector
In 2008, 81 percent of Grand County’s employment share was in the private sector. In contrast to the general Eastern Utah trend, this private-sector share had increased to 82 percent by 2017. Tourism (defined as NAICS sectors 71 and 72) dominated the labor market with 40 percent of the total in 2008, and increased its share to 44 percent by 2017. However, if tourism is excluded from the calculation, the remaining private sector share actually decreased from 41 percent to 37 percent.
Table 2 shows total employment change by sector from the third quarter of 2008 to the third quarter of 2017.
Table 2
Grand County Employment Change by NAICS Sector
Private sector employment has grown by 20 percent across the 2008-2017 period. Moab’s national prominence as a recreation center has fueled explosive growth in the leisure and hospitality sectors (sectors 71 and 72). This has swamped the modest growth experienced in large sectors, such as retail trade and public administration. In fact, private sector growth was only 8.0 percent when excluding the tourism sectors. Employment losses associated with the Moab Uranium Mill Tailings Remedial Action Project was a small but still significant drag on private sector employment. Since this is a clean-up project, employment is by nature of limited duration and should approach zero in the immediate future.
Of interest is the growth in manufacturing. This is driven by the local brewery. Regional beer distribution has also had a complementary effect on the relatively small warehousing and transportation sector.
San Juan County
In contrast to its northern neighbor, San Juan County’s employment growth has been stagnant and increasingly dependent on public funding. Table 3 shows 2008 and 2017 industry shares by their associated NAICS codes.
Table 3
San Juan County Employment Share by NAICS Sector
In 2008, more than 57 percent of total employment was concentrated in sectors independent of government funding. This share had shrunk almost 8.0 percentage points to a little less than 50 percent by 2017.
Table 4 evaluates current–quarter employment against 2008. The cumulative employment in sectors not dependent on government funding decreased by more than 14 percent.
Table 4
San Juan County Employment Change by NAICS Sector
Even the leisure and hospitality industry (sectors 71 and 72) saw a decline of almost 5.0 percent. This is surprising given the area’s natural beauty and the tourism boom in neighboring Grand County.
The only significant growth in spending came from the public sectors. At 47 percent, the healthcare sector was by far the greatest contributor of jobs since the Great Recession, followed by education at 10 percent. The comparable growth rate for the nation is only 20 percent.
Castle Country
The story of Emery and Carbon counties since the Great Recession mimics the coal industry story across the United States. The value of coal production has fallen 34 percent since the third quarter of 2008. During the same period, regional employment has fallen by 15 percent. The correlation between these two numbers is overwhelming. Statistically, the correlation coefficient value is 0.9 where a value of 1.0 is perfect correlation.
Table 5 shows shares by NAICs sectors between 2008 and now. What is obvious is the striking decline in the mining sector’s employment share. Less obvious is the associated fallout to the rest of Castle Country’s private sector. The share of jobs not dependent on government funding shrunk almost 5.0 percent from 71 percent to 66 percent.
Table 5
Castle Country Employment Share by NAICS Sector
Even the leisure and hospitality industry (sectors 71 and 72) saw a decline of almost 5.0 percent. This is surprising given the area’s natural beauty and the tourism boom in neighboring Grand County.
The only significant growth in spending came from the public sectors. At 47 percent, the healthcare sector was by far the greatest contributor of jobs since the Great Recession, followed by education at 10 percent. The comparable growth rate for the nation is only 20 percent.
As Table 6 shows, with the economy shrinking, most of the increase in the public share is due to a smaller rate of decline rather than growth.
Table 6
Castle Country Employment Change by NAICS Sector
For example, the education sectors’ employment share increased from 10 percent to 11.5 because employment only shrunk by a “moderate” 2.0 percent from 2008 to the present.
In sympathy with the coal industry’s decline, the Castle Country’s private sector has shrunk by 20 percent. There really has been no substitute for the high paying mining jobs that formerly powered Castle Country’s economy. In keeping with the national trend, health care has been a net creator of jobs but the 8.0 percent growth in the area badly lags the national statistic of 20 percent.
Uintah Basin
As of late, the changes to the Daggett, Duchesne, and Uintah County economies have been dominated by the oil and gas industry. However, since the Great Recession, changes in oil prices do not completely explain the region’s economic history. In fact, the correlation between the price of oil and employment is only moderate/strong at 0.59. This is due to public sector growth in the Uintah Basin.
Table 7 shows Uintah Basin employment shares from 2008 and 2017.
Table 7
Uintah Basin Employment Share by NAICS Sector
In 2008, the mining sector was more than 23 percent of the employment base. The price of a barrel of West Texas Intermediate crude oil (the U.S. benchmark) averaged $118/barrel. In 2017, the mining sector had shrunk to almost 16 percent of the base. The average price of West Texas Intermediate averaged $48/barrel.
Private sector employment, defined as those sectors not directly dependent of government spending, declined from almost 80 percent of the total to 71 percent. Other sectors reacted similarly. Construction declined by almost 3.0 percent. This loss is not just due to fewer homes built; the oil and gas industry requires substantial amounts of construction services.
As shown in Table 8, total employment has declined by 16 percent and the majority is attributable to the 43 percent employment decline in the mining sector. Associated industries like transportation and warehousing, and wholesale trade declined in sympathy.
Table 8
Uintah Basin Employment Change by NAICS Sector
The biggest increase in public sector employment was the 34 percent gain in the education sector. This principally an expansion in higher education. In 2010, Utah State University opened the Bingham Entrepreneurship and Energy Research Center in Vernal, a 70,000 square-foot research hub with an entrepreneurship center, classrooms, teaching labs and student services. In addition, the Uintah Basin Applied Technology College opened an 83,475 square-foot industrial technology facility and classrooms.
As with other Eastern Utah regions, the healthcare sector was a strong net job contributor, but less than the comparable national statistic.
Of note is the 18 percent increase in the public administration sector. Since public administration is typically funded by local taxes, this kind of growth is unusual in the face of declining total employment.
