National economic woes starting to hit home

A slowdown in housing construction in Utah is taking the edge off the state's once-sizzling job market, according to a report released Tuesday by the state Department of Workforce Services.

The number of nonfarm payrolls in Utah grew 4 percent, or 48,900 new jobs in November from a year ago. That's down from a peak of 5.4 percent in June 2006. But despite the drop, Utah still has one of the strongest economies in the nation with a record-low unemployment rate of 2.8 percent, well below the nation's unemployment rate of 4.7 percent.

"Utah's economy is starting to lose its head of steam at a more rapid pace. This is an event we have been anticipating for over a year now, so it's not a cause for alarm," said Mark Knold, chief economist with Workforce Services. "The steam is coming off the construction sector, which has been the growth leader for the past three years. That's slowing down because of the tightening in credit and mortgage financing and a sharp drop-off in the number of builders' permits for new home construction in Utah."

About one-quarter of a total of 10,700 new jobs created in Utah this year came from the construction sector.

But there are silver linings. Commercial construction is still going strong, but even with that, construction employment growth is expected to taper off throughout 2008, possibly to the point of just breaking even by the end of next year, Knold said. He sees Utah's overall job growth dropping a "full percentage point or more by this time next year."

"We've had huge employment growth in the past three years because of the huge numbers of 20- to 30-year-olds entering the Utah work force. Hopefully, these demographics will help ease the housing crisis somewhat, giving us a soft landing instead of a crash landing," he said.

Knold also warned of possible layoffs from the state's financial sector, particularly in the mortgage lending, title insurance and real estate industries that are typically sensitive to the housing market, should home building continue to slow down dramatically.

But for now, retail employment continues to fuel growth in the trade, transportation and utilities sector, which leads in job creation with 11,400 new jobs added over the past year. The pace of that sector's growth has also accelerated over the past six months, he said.

"With all that has been built in Utah over the past three years -- with much of the new commercial and industrial growth in just the last 18 months -- there is still plenty of new commercial and industrial capacity that needs to be filled with employment," he said.