This time last year, inflation had been on a six-month streak of declines after peaking at 9.1% in June 2022 and Federal Reserve Chairman Jerome Powell was sounding cautiously optimistic about the road ahead, but hedging any predictions that the U.S. economy could emerge from its profound, post-pandemic imbalance without bottoming out in a recession.

The monetary body had just assessed a .5% increase to its benchmark federal funds lending rate, marking the seventh consecutive increase going back to March 2022. The Fed’s Open Market Committee would go on to levy four more increases in 2023, bringing the overnight lending rate into the 5.25%-5.5% range.

“I just don’t think anyone knows whether we’re going to have a recession or not,” Powell said at a press conference on Dec. 14 last year. “And if we do, whether it’s going to be a deep one or not ... it’s not knowable.”

A year later, there remain plenty of economic questions that still aren’t knowable but following the conclusion of the Fed’s final meeting of 2023 in December, Powell signaled the end of an unprecedented, nearly two-year-long series of aggressive rate hikes and a potential trio of reductions in 2024.

And, the U.S. economy has, so far, been able to avoid the oft-predicted recessionary conditions in which spending retracts, unemployment rises and wages stagnate or drop even as prices on goods and services continue to increase.

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That resilience has, perhaps, been the most significant hallmark for the U.S. economy overall throughout 2023 as it has been for economic activity within Utah’s borders.

While the national inflation rate in 2023 marched down from 6.4% in January to November’s 3.1% rate, regional inflation for Mountain West states, which include Utah, saw an even bigger decline, falling from 7.4% at the start of the year to 2.9% in November, according to U.S. Labor Department tracking.

Along the way, the U.S. job market moderated a bit, wage growth slowed but remained strongly in positive territory and national unemployment hovered in the mid 3% range throughout the year.

Amid the mostly positive economic flow, however, 2023 saw a worrying island of specialty bank failures, widespread concerns over regional bank solvency as the commercial real estate sector tanked and ongoing, and critical, housing affordability issues as prices remained elevated and the cost of debt soared.

Phil Dean, senior economist for the University of Utah’s Kem C. Gardner Policy Institute, said the economy outpaced expectations for the year and is segueing into 2024 with positive energy.

“The U.S. economy showed remarkable resilience in the past year,” Dean said. “I didn’t expect doom and gloom but the national GDP, as a broad measure, showing growth every quarter was a surprise.

“I think it just demonstrates the strength of the U.S. economy ... and how many things we really do have going for us.”

Dean said even with the “gut punches” of the bank failures in the first quarter of the year, and ongoing challenges in affordable housing, the overall economy appears to be churning positively forward as 2023 draws to a close.

Dean expects easing inflation and likely upcoming cuts to federal fund rates will help move the cost of debt down in the coming year and make home mortgage borrowing more affordable. Even ahead of those potential adjustments, Freddie Mac was reporting the average rates on a 30-year fixed-rate mortgage had dropped for eight straight weeks and came in at 6.67% in late December, the lowest mark in four months.

Cheaper mortgages may not only ease the path of affordability for first-time buyers, Dean said, but motivate current homeowners, who have been mostly hunkering down amid high rates, to consider property turnovers and build the supply side of a market that’s been skewed heavily toward demand.

“There’s been a lock effect in play,” Dean said. “One way I’ve heard it described is we find ourselves in a market where no one can afford to sell and no one can afford to buy.”

A Zillow report from late November 2023 showed that the average value of a home in Utah was $502,647, down 1.2% from 2022. In the current market, over half of homes have sold under listing price and $481,703 is the median sale price. To afford a house at that price, a household would need to be earning $100,000 to $130,000, a level well north of Utah’s current median household income of just under $80,000.

U.S. consumer debt saw a widespread reset amid pandemic lockdowns as spending, particularly on services, declined to a trickle, savings accounts grew and households paid down outstanding balances. But economists note collective debt was on the rise in 2023 and one report found Utah topped the list of states with the most household debt.

But Dean notes, as the report did, that part of the dynamic behind Utah’s nation leading debt is that it’s also the youngest state in the country with an average age of just over 31 years. Those in the early stage of their life journeys typically earn less and have had less time to pay down mortgages, auto loans and student debt.

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Even as the distribution of pandemic-related subsidies have passed, Dean said Utah’s economy is set to see a boost in 2024 from some of that money as public capital projects that were infused with relief funds begin construction. He also cited massive private investments, like Northrup Grumman’s ongoing expansion in Utah and Texas Instruments’ upcoming $11 billion microchip fabrication facility in Utah County and the beginning of the redevelopment of the former Draper prison site as signs of ongoing dynamism and diversity in Utah’s economy.

Dean said he’s watching extraneous forces, including the downstream impacts of multiple international conflicts, mounting federal debt and an ongoing congressional impasse when it comes to effectively addressing the nation’s fiscal health, as factors that could create widespread economic stressors.

But, Dean remains cautiously optimistic about the near-term economic prospects for the state, and the nation, on the cusp of the New Year.

“There’s a lot of uncertainty out there,” Dean said. “But also a lot of potential for growth. Our state has weathered the recent challenges as well or better than most and is headed into 2024 with a lot of positive momentum.”

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