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ST. GEORGE — Utah’s unemployment rate rose slightly for the first time since the beginning of the pandemic, and experts say it is because “idle” individuals are looking for work again amid rising gas prices, inflation and interest rates.
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Utah’s seasonally adjusted unemployment rate rose from 1.9% to an estimated 2% since April, but it remains in “rock-bottom territory,” Mark Knold, the chief economist at the state’s Department of Workforce Services, said in his recent SoundCloud analysis.
The unemployment rate in Iron County has held steady at 2.2% since March, according to a data sheet provided by Workforce Services. The rate was recorded at 2.8% at this time last year and was near its record-low of 1.9% last November, said Benjamin Crabb, a regional economist with the department.
Washington County’s unemployment rate was at 2.1%, down 0.1% since March and 0.7% since last May, the data sheet reports.
Comparatively, the national unemployment rate was 3.6%, according to Utah’s Employment Summary, released last Friday.
Knold said there are usually two reasons for a statewide increase: people become unemployed or individuals who were previously not counted among the labor force “come off the sidelines” and begin looking for work amid a loss of purchasing power.
Until these job seekers find employment, they are considered unemployed. Knold said people are not losing their jobs in Utah’s current economy.
“If one doesn’t have a job and then decides to look for a job, their decision to look for a job moves them into the labor force,” he said.
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Increasing economic pressures could be motivating more citizens to look for employment, said Knold, noting that Utah’s total labor force has increased by 25,800 since February. That is above the expected seasonal increases that occur when students graduate. The labor force includes those 16 and older who are either employed or seeking employment.
“Utah’s labor force participation rate has risen quite a bit in the past three months and that may be signaling something to us,” he said. “It may be telling us that rising prices and a concerned perspective by households of making ends meet may be incentivizing formerly idle workers to come back to the labor market to find a job to help make ends meet.”
The percentage of individuals participating in the labor force was 68.5% before the pandemic, during which it fell to 67%, Knold said.
“Meaning a sizable chunk of former workers walked away from the labor market,” he said.
The current participation rate is 68% after rising from 67.4% since February.
Utah wages have grown 5.5% over the past year but Knold said with inflation over 8% during that same timespan, all consumers in the United States are losing purchasing power, which could compel some to reengage in the workforce.
“People are rational,” he said. “They make decisions about their means to sustain their lives.”
A job growth slowdown
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Washington County has historically had a higher job growth rate than Utah overall, Crabb said. Long-term average job growth in St. George has averaged around 5%, which held true for approximately 10 years prior to the pandemic.
However, job growth in the St. George metropolitan statistical area is currently at 2.8%, which Crabb said is down from April’s 3.4% and March’s 4.9%. The decline is likely due, in part, to the city’s strong recovery.
Other factors that could be impacting the growth are concerns from employers about increasing interest rates and talk of a potential recession on the horizon, which hasn’t come to pass yet, Crabb stressed, adding that he doesn’t have a “perfect crystal ball.”
“So we’ll see what happens,” he said. “But we are seeing a slight slowdown in the rate of job growth.”
Utah’s job growth remains above average at 3.5% over 12 months, Knold said. According to the Employment Summary, the state has added approximately 55,000 jobs since last May, putting the current job count at 1,662,300. The job growth rate is expected to reach its yearly average of 3.0% by later this year.
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“The labor-related economic variables for Utah remain strong,” he said.
However, Knold noted that the state’s job growth rate is also trending downward, decreasing .5% since March, which he anticipates will continue for the rest of the year. The downward progression is due to comparing this year’s job counts against last year’s economy while it “aggressively recovered” from the effects of the pandemic.
“The leisure and hospitality sector and … restaurants travel, recreation entertainment — all of this sprang back to life at this time last year,” he said. “Therefore the slowing of Utah’s growth rates throughout this year, are merely a reflection of comparing back against an economy that was aggressively reawakening — expanding a year ago.”
Because the trend is “inevitable” due to the comparison between this year and last, Knold said it can be tricky to gauge whether downward movement is the result of the “expected normal mathematical pace” or if additional downward pressure has crept into the equation.
The small monthly decline is not “something to perk one’s ears up at,” but the amount of decline in private sectors’ year-over-year growth in particular, caught Knold’s attention, he said, adding that private-sector growth slowed from 4.2% to 3.7% in the past month.
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Job creation can be divided between the public sector, encompassing government jobs and the private sector, which Knold described as the “economy’s driving force,” as it accounts for 81% of all jobs in Utah, while the government creates the remaining 19%.
Utah’s overall job growth rate has been lower than that of its private sector over the past two years, due to government job losses pulling the overall number down while jobs were added by private industries, Knold said. For instance, April’s private-sector job growth rate was 4.2% compared to the overall rate of 3.8%.
In May, the private-sector rate is 3.7% compared to an overall rate of 3.5%, which indicates that private-sector job growth is slowing down, Knold said. While it is not unexpected that the Utah economy has slowed, private-sector growth slowed by an “unexpectedly large amount.”
“Admittedly, these percentage point declines aren’t much, but May largely represents the first month where we are starting to get a full impact view of how higher gas prices and higher inflation and the Fed increasing interest rates may be impacting Utah’s economy,” he said.
Additionally, housing prices are increasing statewide, Crabb said, adding that rising interest rates could potentially have a negative effect on construction activity. However, recent data reported strong growth for the natural resources, mining and construction sectors at a rate of 7.3%.
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“Everything is doing quite well in terms of growth (in Southern Utah) for the time being but there are some headwinds and some areas in flux and we’ll see how things pan out,” he said.
Knold said that significant, emerging economic forces affecting the nation’s economy could have begun influencing Utah’s labor market, and while the current impact is nearly imperceptible, he expects to gain a clearer understanding in the coming months.
June’s employment information will be released July 22 at 7 a.m, according to the Utah Employment Summary. For additional information visit the Utah Department of Workforce Services’ website.
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