For the first time since 2001, Utah's job growth is slipping into negative territory as aftershocks from the unprecedented financial events of the past month work their way through the national economy, a state economist said.

Already, Knold is considering revising down the employment outlook for Utah for 2009. Instead of initial projections of 0.2 percent job growth for 2009, there'll probably be job losses of about 1 percent, or 12,000 jobs for the year as fallout from the housing slump and financial meltdown take their toll on consumer spending and other sectors, he said.

"The recent national economic meltdown makes me wonder whether Utah will be able to continue to keep its job creation machine functioning," he said in a report released by the Workforce Services on Tuesday. "The seizing up of the financial markets may be even more than the Utah economy will be able to bear."

The credit markets have gone into a deep freeze as banks have become wary of lending to each other, as well as to businesses and consumers. Economists worry that the breakdown in the flow of credit is clamping down on business and consumer spending and pushing the economy into recession.

For now, Utah's growth rate still outpaces that of the nation, which has been in negative territory for the past six months, hitting minus 0.4 percent in September.

Utah's employment growth edged up 0.1 percent, or saw a slight gain of 1,800 jobs, in September from the same month a year ago, according to Workforce Services. But job creation is off from its record high gain of 5.4 percent, or 55,000 jobs, in the period ended June 2006.

Still, the state's unemployment rate remains low, which indicates the labor market is not in a stressful situation yet, Knold said. At 3.5 percent in September, Utah's unemployment rate remains significantly lower than the nation's unemployment rate of 6.1 percent. The state's unemployment rate last jumped to 5.9 percent in February 2003 in the wake of the dot-com collapse and Sept. 11 terrorist attacks.

"But our unemployment rate could rise to 5 percent by the end of 2009 if the economic slowdown continues to worsen, and if we continue to shed existing workers, and not create enough jobs for new workers coming into the workforce," he said. Approximately 48,300 Utahns were considered unemployed in September, compared against 38,400 last September.

While home building remains sluggish (with 13,500 jobs lost in September from last year) and won't likely rebound until home prices find their bottom, Knold says he believes "most of the pain has already been factored in."

"We're already getting into the 13th month of the housing market's slowdown. There will still be job losses, but it will likely be at a slower rate," he said.

Employment in the commercial construction sector, which typically lags behind the housing market by two years, may start to slow down in 2009 because of concerns over financing availability, he said.

"But the good thing is commercial isn't as labor intensive as residential," Knold said. "So even if the commercial sector slows down in 2009, its job losses will only be about half that of the housing sector."

Because of its ties to the housing market, Utah's financial sector, which represents about six percent of overall employment, will continue to shed jobs in the coming months. In September, the financial services sector lost about 1,100 jobs from the same period a year ago as real estate companies, title companies and mortgage lenders all face slowing business.

"Fortunately, Utah doesn't have a large 'Wall Street' type exposure in its financial system, so a Bear Stearns and Lehman Brothers-type mass job loss is minimal in Utah," Knold said. "I'd be more worried about losing Zions or KeyBank because we have more exposure to regional banks in terms of employment."

Ultimately, the strength in consumer spending in Utah and the rest of the country will determine whether the employment slowdown spreads to other sectors.

"Will people be willing to take ski vacations? How much leisure traveling, and even business traveling, can Utah expect to see over the next year? Will Utahns be willing to take on new car purchases? Will people continue to eat out, go to the theater, hop on a plane to visit friends or upgrade the furniture and accoutrements of their homes?" Knold asked.

"These questions and their uncertain answers make the retail trade sector, leisure and hospitality, transportation and manufacturing sectors all vulnerable to possible job losses going forward," he said.