U.S. Economic Outlook
U.S. Markets and data continue to
demonstrate a range of economic indicators with both positive and
negative implications. The positive is that employment figures and
U.S. gross domestic product are rising, showing market strength.
The less diversified a state’s
economy is, the more falling oil prices have a negative impact. For
example, Louisiana loses $12 million for every $1 decline in the
annual average price of a barrel of oil, according to the state’s
chief economist, Greg Albrecht. Fortunately, the oil states’
economies are much more diverse than they were during the 1980s oil
bust, so negative effects are mitigated.
Despite strong economic recovery, the
Federal Reserve remains cautious about raising interest rates for
fear of destabilizing growth. However, the Central Bank is expected
to raise interest rates in mid-2015 upon confirmation that current
growth rates are sustainable and will translate into long-term
hiring.
However, the U.S. is not in a
recession; the U.S. economy is actually doing quite well. Employment
numbers have been growing steadily, showing 12 months of 200,000-plus
gains in nonfarm payrolls. Unemployment consistently decreased
throughout 2014—falling from 6.6 percent in January to 5.6 percent
in December.
Americans are expected to save
approximately $750 on average at the gas pump this year.
Utah Economic Outlook
Virtually every industry benefits from
technology: for instance, agriculture becomes more efficient,
education becomes more interactive, and healthcare becomes more
effective. Utah in particular has experienced tremendous growth in
recent years due to the development and advancement of technology.
In 2014, the Provo-Orem area and the
Salt Lake City-Ogden area ranked as two of the top twenty cities in
the United States for receiving tech start-up funding. Provo-Orem
received $462 million, putting it in eighth place, and Salt Lake
City-Ogden received $275 million, putting it in twelfth place. If
these figures are combined, Utah’s Wasatch Front ranks sixth in the
nation for amount of tech start-up funding secured last year.
Northern Utah County has embraced the moniker of the “Silicon
Slopes” due to its sizeable base of information technology
companies. Information technology jobs typically pay higher than
average wages. In 2012, the average annual IT wage in Utah was
$69,269, compared to Utah’s average annual nonagricultural wage of
$40,646. As competition has increased, so have wages.
Utah’s technology sector will
continue to grow and benefit residents and businesses in the state.
As Utah’s technology expertise increases, many industries within
the state will flourish as well, creating a net positive impact for
the economy.
Housing Outlook
Housing prices continued to remain
mostly flat in December, with a slight decrease both nationally and in Utah. According to
the CoreLogic Home Price Index, home prices decreased 0.3 percent in Utah from November to
December, which represents a 4.3-percent rise compared to December 2013. On the
national scene, home prices also decreased 0.1 percent month over month, which represents a
5.0-percent climb from December 2013 prices. In Utah, home prices are still 11.5 percent
below their September 2007 high, and home prices nationally are still 13.4 percent below their
prerecession high.
Just as oil prices affect every aspect
of the economy—from unemployment to wages to inflation—they also have a
significant impact on home prices. Major cities with high employment in the oil and gas industry,
such as Houston and Oklahoma City, tend to see home prices sway with oil prices, but these
home price drops are usually delayed by a year or two.
The recent boom in drilling in the U.S.
has led to the creation of boom towns across the nation that rely more on oil and gas jobs than
large cities like Houston do. In these areas, a significant drop in oil prices often leads to an
immediate drop in home prices, which helps to partially explain why the growth in home prices
has been so slow across the nation over the past few months.
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