For now, Utah's employment growth rate is holding its own above that of the rest of the nation, even as the economy slowed in January.

The number of non-farm payrolls in Utah grew 2.8 percent in January, or 33,800 new jobs, from a year ago, down from a revised 2.9 percent in December, 3 percent in November and 3.2 percent in October. The rate of job creation was just under 1 percent nationally.

The slowdown in job growth lifted Utah's unemployment rate to 3.3 percent in January, but it's still well below the nation's unemployment rate of 4.9 percent.

"Housing construction is now the main cause of the slowdown after an unprecedented three years of being the lead driver of job growth in Utah," said Mark Knold, chief economist for Workforce Services. "The local economy is going to continue to slow down in 2008 and slow down rapidly. What's changed is that the adjustments show the slowdown started in September instead of in November as we had previously forecast.

"The questions are how low will it go and how long will it take to get there. And that's dictated by what happens in the national economy. Will we match the national employment decline, or will we merely mirror it, but at a higher level? The latter is our historical pattern," Knold said.

"If the national downturn is shortlived and ends by middle of this year, then the Utah economy will likely rebound by the second half of the year and the employment rate will probably stay between 2 percent and 3 percent. If it drags on nationally into 2009, then Utah will likely get to 1 percent job growth or lower in 2009," he said.

Helping keep Utah's economy afloat are several industries that continue to be consistent job generators. Industries in the retail trade, which account for 17 percent of all jobs in Utah, grew 10,000 new jobs in January because of continued strength in commercial construction. The government sector, which accounts for 16 percent of all jobs, added 2,400 new jobs in January.

But construction, natural resources and financial activities sectors showed the fastest slowdown in job growth in January, and may even post job losses in the next few months, Knold said.

"The construction sector showed a 4,100 increase in new jobs created in the first seven weeks of 2008, compared with 8,000 more jobs in August before the slowdown started. The financial services sector showed 800 in job gains in the first seven weeks of the year compared with 3,000 in job gains in September. When you decelerate that quickly, you're likely to see job declines in the next few months," he said.

Already the number of builder permits taken out for new home construction showed substantial drops in recent months. In December, the number of builder permits for new homes in Utah County plunged 76 percent to 105 from 429 a year ago. That's down 62 percent in November and down 56 percent in October.

The imbalance between current housing prices in Utah and affordability needs to be corrected, Knold said.

"Past aggressive use of subprime loans and low introductory mortgage rates fueled a housing price run-up that was not only historic, but also unrealistic. Not only does the housing market need a correction, but the financial markets are reeling from defaulted mortgages and nonperforming loans," he said.

"Utah is being influenced by the severe restricting of mortgage financing, the need to lower excessive housing prices, its resultant virtual shutdown of new home construction, and the rapid slowing and weakening of the greater United States economy," he said.

The number of unemployment insurance filings in January jumped to 15,000 claims from 11,000 claims a year ago. The majority of the increase in claims appears to be construction and finance-related, Knold said. "Historically, construction claims tend to spike higher in the winter months. But if those claims remain high in March, which is typically when construction workers are recalled back to work, then it's a sign of weakness in the economy."