ST. GEORGE — Last year was unlike any other for Southern Utah’s economy due to the onset of the COVID-19 pandemic. In the wake of the pandemic there have been economic downturns and rebounds and a combination of factors that have led to the 2020 economy being called a “paradox” by a presenter for the “What’s Up Down South” economic summit held Thursday.
“Just like everything else that we’ve seen in the past year, COVID-19 has been the driving force in the economy, and the effects of our trying to deal with COVID-19 have affected the economy,” said Lecia Langston, a senior economist with the Utah Department of Workforce Service.
Looking back over 2020, Langston said COVID-19 caused sudden and extreme economic deterioration that resulted in a recession. This was primarily caused by the public health response to the virus early on, which resulted in April being a dismal month in relation to the economy.
“It was entirely caused by our actions in response to the pandemic,” she said.
Season of paradox
Despite a bad April – which translated into a bad second quarter for many industries – Washington County and Utah in general have both seen rebounds in the second quarter. Still, people have lost jobs and some businesses have gone under in spite of this.
“This has been a recession of winners and losers” and a “season of paradoxes,” Langston said.
Among these paradoxes, she cited include the following:
- Some industries plummeted while others experienced rapid growth.
- Some unemployment claimants received more money through unemployment insurance than they had been paid while working.
- Average wages grew during the down-turn.
- Higher-than-average unemployment persisted while employers strained to find workers.
- Stocks continued to rise while employment dropped across the nation.
Unemployment and industries hit the most
Unemployment insurance claims reached 650% from last year during the early months of the pandemic. However, new claims are currently below pre-Great Recession levels, Langston said.
The unemployment rate in April 2020 also reached 12.4% and is still running nearly double the pre-pandemic rate. Unemployment in Washington County currently stands at around 5.7% while Iron County’s unemployment is at 4.7%.
In Washington County, nearly 8,000 people filed for unemployment insurance for the first time in 2020, which translated to 18% of covered employment in the county. These numbers are also in the “middle of the pack” in comparison to the rest of the state, Langston said.
Iron County saw nearly 1,900 first-time claims, which accounted for 16% of covered employment in the county.
Utah counties that rely heavily on international tourism are among the most adversely impacted by the pandemic’s economic side effects.
Industries that were hit the most by the pandemic in the county included hospitality and food services, health care and social assistance, and retail. Jobs filled by temporary employment services also saw a decline.
The majority of the individuals who lost their jobs due to the pandemic were those who Langston said were at the low-end of the wage scale, such as waiters and waitresses, retail workers, customer service reps and cashiers making $30,000 or below. The age bracket that was impacted the most was between 25-34, with women being effected slightly more than men at 52%.
Employment claims have been going down and are currently around 1.6% compared to the 0.7% level prior to the pandemic.
Jobs across the county also plummeted by 8% in April; however, Washington County’s own losses have been rebounding.
“We have come back somewhat, but the U.S. is still down about 6% year over years in terms of nonfarm jobs,” Langston said.
Job growth and rebounds
While the second quarter of 2020 was hit by the pandemic, the third quarter showed signs of improvement as most industries added jobs. Construction and professional/business services increased the most, while the information, leisure and hospitality and transportation and warehousing industries saw the most decline.
“We bounced back and were already growing jobs as of August,” Langston said.
Washington County’s job growth is running around 2.3%, and Iron County’s job growth is currently at 0.9%.
Wages have also increased by 8-9% in the county, with financial services seeing the largest increase in monthly wages. This is one of the paradoxes Langston mentioned early on. She attributed the increase in wages to the loss of lower-paying jobs and bonuses had in financial services.
Housing permits also rose slightly in Washington County in 2020, with growth in the demand for multifamily units, like condominiums and apartments, over single-family homes. 2019 saw 3,450 permits issued while 3,551 were issued in 2020. Unlike residential permits, nonresidential permitting was down last year.
There was also an increase in permits involving alterations and additions, which were likely funded by the stimulus money the government supplied citizens over the summer, Langston said.
Housing costs also continue to rise in Washington County, with overall affordability appearing to be stable, though Langston said this view wasn’t necessarily “the word on the street.”
There is a worry that the housing market could be “overheating” and rise to the point where area wages are unable to keep up, she added.
The third quarter of 2020 also saw a 20% increase in gross taxable sales in Washington County over the year.
“This is the highest level of growth we’ve seen since the boom,” Langston said. “In fact, it’s the highest level of growth we’ve seen in 14 years. Almost every industry experienced increased sales.”
A majority of those sales are attributed to retail trade that amounted to $143,000 in the third quarter, which was a $21,000 increase over the second quarter. Taxable sales through online retailers, auto sales and building material and gardening equipment supply stores were the top three contributors to that number.
Leisure hospitality services, which lost an estimated $53,400 in the second quarter, began to rebound with $23,800 in the third quarter.
Factors believed to have added to the 20% increase in taxable sales are COVID-19 stimulus checks, unemployment supplements, no-cost loans made to businesses and Washington County’s proximity to states with higher public health restrictions. The latter, Langston said, has prompted people in those states to come to Utah where public health policy concerning the pandemic was less restrictive.
What does the future hold?
Could there be another recession on the horizon? Langston said she wasn’t certain but gave participants a few factors to watch as the year progressed.
“We have all of these conflicting economic indicators,” she said.
One of those indicators is the “yield curve,” which plots the difference between short-term and long-term bonds. Interest on long-term bonds is usually higher. However, if the interest on short-term bonds becomes higher, causing the yield curve to invert, it is a potential sign a recession is on the way.
“An inverted yield curve has preceded the last seven recessions,” Langston said.
Moving into 2021, the yield curve is currently flat.
Other factors include a “very overvalued” stock market that continues to rise and the increase in the federal debt, which is currently at 135% over the national GDP.
“Somewhere along the way, you’re going to have to pay for that,” Langston said.
There is also the possibility the housing market may overheat, that more civil unrest may occur or that the next round of stimulus checks coming from the government may be supplying more money than is actually needed.
“Don’t panic, but watch the indicators,” she said.
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