Editor’s Note: The Selective Echo has invited Mark Knold, senior economist for the Utah Department of Workforce Services, to provide a perspective for the state’s economy in 2008. Frequently quoted in the local and state media, Knold has extensively monitored Utah’s economy during his 14 years with the state government and local, regional and state public officials seek him out frequently for his assessment of economic conditions and forecasts. A Pennsylvania native who fell in love with Utah’s spectacular skiing conditions, Knold holds bachelor’s and master’s degrees from the University of Utah.

SE: What is the expected overall economic growth rate for Utah in 2008? And, what will be the impact of factors such as rising gas prices, concerns about inflation, and interest rates?

MK: I anticipate that Utah will have another good economic year in 2008. The growth rate might slow down a bit. I’m pegging it at around 3.8%. But even so, it will feel just like this year. Unemployment will probably remain below 3%, and that means a tight labor market and rising wages. Gas prices will give people grief, but so far it has always turned out to be more talk than action. Forget inflation, won’t be a problem. Interest rates themselves aren’t the factor. Instead, the factor is the negative psychology surrounding mortgage lending and that lenders will go from being too lax to being too tight. This will slow the housing market. Already has.

SE: Can investment in commercial building construction cushion the impact of downturns in the residential investment market?

MK: I believe it can, at least for 2008. There is a lot of nonresidential construction going on, and many more projects in the works. The downtown stuff has just barely gotten started. Nonresidential building usually lags residential activity by about two years. Residential permits peaked in 2006. Does this mean that nonresidential activity will peak in 2008? Probably. But that is just tracking the permitting of the projects. They still have to be built after that. I’m also counting on residential activity to not remain in a funk for long. There is a huge wave of 20-to-30 year old Utah-born people hitting the labor force this decade. They were the reason for the recent housing spike (and the reason for our powerful and sustained employment growth). There are still more of these kids in the get-married-form-a-family-have-kids pipeline who will need a house.

SE: What is the anticipated job growth rate for the state in 2008 and what concerns remain about the state’s ability to fill expanding job opportunities in the economy?

MK: As mentioned, I’m looking for a slightly lower growth rate of 3.8%. With unemployment remaining below 3% (heck, even below 4%), there is always the concern about running out of labor. As mentioned, we still have a lot of kids coming out of the education pipeline and into the labor market (particularly at the college age), so that helps. But even with all of them, we still need a large amount of in-migration to give us labor. In that vein, the best thing that could happen to Utah would be a continued weak (or even weaker) U.S. economy to produce excess labor that might find its way here.

SE: In terms of industry mix, what are the anticipated highlights of industry development and expansion for the state in 2008?

MK: We’ll probably continue to see all sectors grow their employment base. Construction will finally relinquish its three-year lead and hand it to the trade sector. Some of that building we have done over the past few years was to build new businesses, and stocking those businesses with workers means new jobs and expanding industries. It shows in the employment numbers. Trade gets the highest burst in this wave, since there are so many new consumers of 20-to-30 years of age hitting the Utah market. Trade is the primary industry that takes the consumer’s money.

SE: What occupations are anticipated to drive further economic growth in the state?

MK: The big ones are the ones that no one wants to hear about: retail sales clerks and cashiers. They are the bottom of the wage food chain; so economic watchers often avoid mentioning them. This isn’t a Utah-only thing though; you’ll find this everywhere. Anyplace you can find a consumer who wants to pull a dollar out of their pocket and spend it, you’ll find the need for a sales clerk and a cashier. It’s a fact of economic life that can’t be avoided.

But Utah is adding many new jobs in occupations across the board. You name it; we’re adding it (except maybe typewriter repairpersons or textile workers). The most positive aspect is that there is good growth in the high-education, high-skill, high-paying professional occupations. These include, but aren’t limited to, architects, engineers, accounts, lawyers, consultants, computer pros, etc. Even the state is getting involved with the Governor’s Office of Economic Development advertising Utah to engineers in other states.

SE: In terms of wage growth, what can employed Utahns expect to see in 2008?

MK: More good wage growth. Our simple calculation that produces average wage growth shows a gain of 5.4% in 2006, probably close to that in 2007, and maybe just slightly less in 2008. If so, that would be the best three-year run that I’ve ever seen here. The key is the hyper-low unemployment rate. If it remains this low, wage bidding will remain aggressive, translating to more wage gains.

SE: What are the caution flags that Utahns should be aware of as they look toward the economy in 2008 and beyond?

I don’t think there are many. For the last two years, I would have said that there aren’t any, so the fact that there might be some in and of itself is a change. The subprime mortgage psychology and its negative impact upon housing I see as the only significant caution flag right now. It’s yet to be seen how deep this goes nationwide, as it still won’t reach its peak until late 2008. Even if a recession comes, I don’t think Utah will participate in it. I actually think it might help by continuing to feed our labor need. This subprime mortgage thing needs to be watched though. I have been told that Utah is below the national average in terms of those who used this mortgage vehicle. So far, I haven’t read anything about Utah having a problem. Our foreclosures have actually been going down. But I’m wondering if we might not have been late to this game, and if so, then our time is yet ahead. Will we start to see it in 2008? Will it even be that significant? Maybe by then lenders will have eased up a bit, and Utahns will make a smoother transition. Our strong wage gains certainly help. I’m still housing bullish over the long term, considering how many young kids have yet to marry and start a family home.

SE: How well is Utah poised to take advantage of opportunities in the high-tech industry sector?

High-tech is a bit of a nebulous term; as no one can really quantify, or even, qualify it. Therefore, I’ll speak in generalities. We are well poised to capture the low to mid-level activities that high-tech businesses do. We’ve got plenty of it now. But the high-end research and development stuff doesn’t get much traction here. Not that it couldn’t because it could if that aspect of the business came here. But those things tend to grow where the seeds have already been planted (i.e., Silicon Valley, Research Triangle, Austin, TX, etc.), and those seeds were sown years ago. The economic gods did not place one of those research clusters in Utah. There is nothing fundamental that says it can’t happen here, and the state is looking to do all it can to foster this type of genre. But with all other states aggressively hoping to do the same thing, that makes it quite competitive and therefore, very difficult. The best chance is to establish a niche, and then hope it blossoms. Unique genetic and DNA-mapping relating to genealogy interest seems to be a potential area.