A recent survey of Utah business leaders reveals a healthy level of confidence in the current economy, but less bullishness when it comes to the near future. Indeed, there are warning signs on the horizon that savvy executives are wise to watch with a wary eye.
Wages are not keeping up with the cost of living, particularly when it comes to housing. Interest rates and gasoline prices are going up and trade and tariff policy could negatively impact some economic sectors. While no single development is likely to suddenly derail Utah’s humming economy, there are reasons to be worried about the cumulative effect over time.
The state has enjoyed a decade of robust growth following the 2008 recession, but bull markets tend toward bearishness as they age. Slightly fewer than half of the executives surveyed in the Salt Lake Chamber’s quarterly “CEOutlook” express confidence that conditions will improve in the next six months, compared to 60 percent who believe the economy is better off now than it was six months ago.
That signals a marked departure from general optimism. From the perspective of keeping a business running at successful levels, leaders of small and large enterprises must be attuned to long-term trends, and perhaps the most impactful of those is the skyrocketing price of housing along the Wasatch Front. Since 1991, housing prices have risen faster than household income by a factor of 10. Much of the economic growth here has been fueled by the ascendance of the state’s tech sector along what’s called Silicon Slopes — so-named because it has replicated the growth of California’s Silicon Valley. Ironically, there is replication here also in trajectory of housing costs that has led many young tech workers to flee the Bay Area.
A study that likely caught the eyes of Utah CEOs earlier this year showed the housing market in Utah is becoming unapproachable for members of the millennial generation. The survey suggested the market is as tough for young homebuyers in Utah as it is in San Jose and Seattle. Other real estate surveys have shown the cost of housing here is now significantly higher than in Boise, Las Vegas and Phoenix — cities with which we compete for new business recruitment.
That forecasts trouble in coming months. As word gets out that good tech jobs are available in Utah, so does word of $2,000-plus a month rental rates for downtown apartments, or a $3,000 monthly mortgage for a starter home in the suburbs. Businesses may be able to address the situation by offering higher wages, but that could negatively impact profitability. There is scant evidence so far that wages are poised to rise in a way that could bring housing into affordable ranges for younger workers.
Government policy leaders must pay heed to the levels of concern expressed by business leaders that a slowdown may not be on the doorstep, but could well be approaching the porch. In periods of robust growth, success is almost a given.
Effective leaders are those who anticipate disruptions and work to make sure they are prepared when a wave of general prosperity begins to fade. Renegotiating zoning laws, for instance, would increase housing availability and drive down costs in advance of a downturn. Similar strategies should follow suit as state leaders work to protect both Utah’s upward mobility and opportunity for growth.