Economic forecast 2002.

• Author: White, Mark H.
• Position: Cover Story - Statistical Data Included

no one can argue that the nation's economic pendulum has swung from irrational exuberance to somewhere between "flat" and "recession." All major market indices are well off their historic highs, corporations across the country are downsizing and consolidating, and the high-tech bubble has burst.

Throughout the 1990s, Utah like its neighboring Western states, was riding high in the saddle. Everything seemed to be going our way. Our economic base was diverse, our citizens hard working, and the exalted quality of life drew an influx of migrants from all over. How could we not be optimistic? After all, in 2002, the state would play host to the world's largest party

Like an Olympic skater coming down from an impressive and dangerously high jump, our economy has just landed. And it seems to be on the verge of a spectacular crash -- or possibly a remarkable recovery. We are collectively holding our breath, anxiously anticipating the next critical moments. Can Utah buck national and global trends during the coming year? What redeeming impact, if any, will our fledgling high-tech industry offer? Will our decades-long efforts to attract the Olympic Winter Games bring us gold or disappointment? Either way, 2002 promises to be an exciting year.

It's difficult to predict the future with any degree of certainty but analysts generally believe the economy is sound, and that the slowdown will be rather short-lived. And although it's impossible to find an economic model that takes into account unprecedented recent occurrences, many Utah analysts feel the positive outweigh the negative indicators.

uncertainty

On the national level, the economy was teetering on the brink of a recession when two hijacked airliners crashed into the epicenter of the American financial district. Nearly 700 Internet companies have failed in the past 18 months, and for the first time in the past 15 years, computer sales in 2002 are projected to be lower than the previous year. Consumer spending has been largely responsible for fueling the decade-long expansion, accounting for about two-thirds of the nation's $10 trillion economy. Through 2001, Federal Reserve Bank Chairman Alan Greenspan has warned that the biggest threat of outright recession would be a lack of consumer confidence due to rising unemployment. Daily news of corporate layoffs, combined with the terrorist attacks and resulting stock market gyrations, seem to have realized Greenspan's concerns.

"We are in a period of great uncertainty," states Thayne Robson, executive director of the Bureau of Economic & Business Research at the University of Utah. "Utah's diverse economy has helped to some degree and will likely continue to do so, but no state is completely immune from national trends." Indeed, many large, high-profile corporations that are based in Utah or have sizable operations here have undergone significant downsizing, including Novell, Evans & Sutherland, 3Com, Intel and Albertson's. Gateway, the nation's number four maker of personal computers, closed their Salt Lake operation and laid off nearly 700 workers, and Utah's homegrown Iomega is packing its bags for San Diego.

"I'm very concerned about the number of information technology and construction jobs that we re losing," says Larry Mankin, president and CEO of the Salt Lake Chamber of Commerce. "It will take several years for the IT industry to rebound, and I can't help but think Utah will see further consolidation and layoffs." The high-tech industry employs approximately 10 percent of the state's work force and it's estimated that somewhere between 1,500 and 5,000 Utahns have lost their jobs this year.

The economic and psychological impact of...