2003 economic forecast: with market uncertainty, how soon will the skies clear?

• Author: White, Mark H.
• Position: On the Cover - Related article: 2003: What the Experts Predict

UTAH'S ECONOMY EXPERIENCED the biggest single boost it may ever receive in the form of the 2002 Olympic Winter Games. After all the medals were hung, the champagne guzzled and the snow melted, Utah and its citizens were proud recipients of some $4 to 5 billion in infrastructure improvements. Expanded freeways, a new light rail system, new and renovated hotels, state-of-the-art athletic venues and extensive resort improvements were all left behind to benefit the Games' capable hosts.

The improved 1-15 and 1-80 freeways are of great benefit, particularly to the region's shipping and transportation companies. The travel and tourism industry benefits from the renovated roadways as well, but even more so from the new hotels, restaurants, Olympic venues and resort improvements. The Utah Ski Association predicts the 2002-03 season will be the most profitable ever, and the Salt Lake Convention & Visitors Bureau indicates the number of major conventions in 2003 will closely rival record years.

Millions read about or caught glimpses of this scenic destination and its friendly hard-working inhabitants, and some Utahns envisioned businesses standing in line to set up shop here. But so far, it has not come to pass. As successful as the Games were, they could not insulate Utah from the insidious global recession that had begun a year earlier. The party is definitely over, so where do we go from here? What do Utah's top prognosticators foresee for the Beehive State in 2003?

Kelly Matthews, vice president & chief economist of Wells Fargo Bank, believes the local and national economies are showing signs of recovery but indicates the immediate future is not particularly bright. "I see no easy way out of this recession," says Matthews. "It will most likely be a slow, grinding recovery."

"Our financial team is forecasting a slow recovery in the first two quarters of 2003, both nationally and internationally," says Jon Huntsman Sr., chairman of Huntsman Corporation. "If Utah follows the global trend, it will be late 2003 or early 2004 before any substantial recovery to the economy transpires. Obviously, terrorism and other international events will temper this forecast, and other events could actually delay it."

Although many sources, including the Federal Reserve Bank, claim the economy emerged from the recession in early 2002, the evidence remains scant. Utah's unemployment rate was far below the national average prior to the Games. Now, it's about one-half of one percent below the national level of 5.5 percent. Nearly 20,000 jobs have been lost within the state in the past 12 months. This year, the number of Utah households declaring bankruptcy is expected to surpass the record level set last year. Drought, crickets and an early frost turned 2002 into one of the worst years ever for the state's agriculture industry. The Utah Department of Agriculture and Food reports losses of over $200 million.

The puncture of the high-tech bubble and an ongoing series of corporate scandals have had a withering effect upon the stock market. Many CEOs were lavishly rewarded with initial public offerings that could be sold for a quick profit. What the general public didn't know was the amount of outright theft taking place. As the revelations came to light, the stock market pendulum swung from "irrational exuberance" into a depressing decline that most investors could never have imagined. The Dow Jones Industrial Average hit a five-year low in mid-October -- off nearly 50 percent from its record high. It was the worst stock market performance since the Great Depression. At the October low, approximately $8 trillion in value had...