by Mark Knold
Utah is a geographically large state. Based on total area, it
is the 13th largest state, implying there is room to spread out. Despite
all this space, Utah’s population distribution is quite concentrated. According
to the U.S. Census Bureau, Utah is the nation’s 9th most urbanized
state. This dichotomy has shaped a state with two economic profiles — one
urban, one rural. It can be challenging for a state dominated and prospering within
the urban to extend its economic bounty to the betterment of the rural.
What is rural? It depends upon one’s objective behind the
question. Most define rural by a visual scan of the landscape. A lot of open
land and not many people — rural. Yet economically, the view can be different.
An area may look rural, but if the economic vitality of its populace is
strongly integrated with a nearby urban area, then this creates a different
perspective. The latter is a preference of the federal government — an entity
that often makes allocation or distribution decisions based upon economic
factors.
No matter how one technically defines rural, the Governor’s Office
recognizes a recent dichotomy in Utah’s economic prosperity. Since the Great
Recession, Utah has had compelling economic success. Yet, most of this is concentrated
in Utah’s urban centers. Portions of Utah’s rural communities are not seeing
matching levels of success. Utah’s Lt. Governor recently
observed, “Not all of Utah’s communities are full participants in this
economic success. Many counties off the Wasatch Front are experiencing
challenges.”
In response to this economic disparity, the Governor’s Office
has launched the 25k Jobs initiative — an
effort for businesses to create 25,000 new jobs in 25 Utah counties by 2020. With
this spotlight on rural Utah’s economics, let’s take a look at some of these rural
challenges.
To most, jobs deliver their income and means for living
sustenance. Therefore, employment, and peripheral variables associated with
employment, becomes the strongest proxy for measuring the Utah economy’s health.
We will look at Utah’s counties through the lens of employment, unemployment, the
labor force and how the industry structure speaks to the underlying performance
of these variables.
A profile of job growth becomes a starting point. Economic
performance needs to be viewed with a somewhat long lens. The Governor’s 25k
Jobs initiative was not born from a short-term disorder, but instead is recognition
of weak longer-term fundamentals. To illustrate this perspective, one needs to
backdrop the short-term mechanics against the longer-term dynamics.
The County Job Profile chart is an intersection of the short-term trend with the moderate-term. Each county is a bubble, and the bubble size reflects job counts. The chart is divided into four quadrants. The quadrants tell the story of the intersection of the short and moderate-term trends (growth or contraction) and the general health of the county’s economy.
There are two axes of measure. First, the vertical axis
represents the short-term. It is the percentage of county job change between
2015 and 2016. Above the horizontal axis is growth — below is contraction.
Second, the horizontal axis measures the moderate-term. It
is the percentage of job change over the past five years (2011-2016). To the
right of the vertical axis is growth — to the left is contraction. Where a
bubble lies is the intersection of the short and the moderate term.
To illustrate, find Beaver County on the chart. Beaver
aligns with around -4.0 percent on the vertical axis, and 8.0 percent on the
horizontal axis. This says that over the past five years, Beaver County’s job
count has grown by 8.0 percent, but over the past year it has contracted by
around 4.0 percent. This implies that Beaver County’s economy may be slipping a
bit. A one-year view would imply a problem. A longer-term view places this
short-term setback against a broader perspective of overall prosperity.
The quadrant of concern is the Contracting quadrant. These
economies have contracted over both the most recent year and the past five years.
No matter how one wants to define rural as outlined above, all of these contracting
counties identify as rural.
In-county jobs alone are not the complete picture. For
example, a large percentage of Morgan County’s residents commute to Weber or
Davis counties for work. If jobs are not being germinated in Morgan County, the
county and its population can still prosper from its ties with the urban area.
An additional way to look at the economy is through the lens
of the labor force. The labor force consists of those 16-years and older who
are either working or looking for work. It is based upon where people live, not
where they work. A worker living in Morgan County will be represented in Morgan
County on the following chart (County Labor Force Change); yet, if they work in
Weber County, their job is represented in Weber County on the prior chart.
Adding this perspective helps to round out a county’s profile.
The structure of the County Labor Force Change graphic is
the same as the prior chart. The area of vibrancy is the upper-right quadrant
where the labor force is increasing. The quadrant of labor force contraction is
the lower left. A decline in the labor force occurs when people become
discouraged and leave the labor force — yet stay in the county, or when people
leave the county altogether. Either way, a decline in the labor force signals a
fundamental negative in the economic trend.
Depending upon the variables measured, a gain in one and a
decline in another can both be positive. Job growth and an unemployment decline are both positive. To associate the positive with low
unemployment, the quadrant message on the Unemployment Rate chart has been transposed.
Every month an unemployment rate is calculated for Utah and
each of its counties. A county’s unemployment rate can be measured against the
Utah statewide average unemployment rate. In the following graphic, county
rates are mathematically compared against the statewide rate (seasonally
adjusted), recorded and then summed across time.
For example, if a county’s unemployment rate is 5.5 percent
and the statewide rate is 4.0 percent, then that county’s difference for that
month is 1.5. If a county’s rate were to be 3.5 percent against the statewide
rate of 4.0 percent, then the difference is -0.5. These monthly differences are
tallied and summed. A high score speaks to a consistent and persistent
unemployment rate above the statewide average. In other words, these are
counties with a continuous environment of high unemployment.
The horizontal axis is a measure since 2000 and the vertical
axis a measure since the beginning of the Great Recession (2008). The axis
intersection is not at zero to isolate the “concern area” within the upper
right quadrant. The statewide average is consistently close to the Salt Lake
County average, so a sizeable number of counties will have sums slightly above
the statewide average; yet, this doesn’t imply an unemployment problem. But the
non-zero intersection is utilized to emphasize the counties that do have an
outstanding unemployment disparity.
Across these various charts, a common group of rural
counties emerge in the weak quadrant. These include Carbon, Emery, Garfield,
Piute and San Juan counties; with Duchesne and Uintah hanging on the edge.
There is a common theme that surrounds this grouping and it centers upon low
economic diversity.
An economy’s ability to be consistently positive has a
strong foundation in a diverse mix of industrial employment. Think of it in terms
of “not putting all your eggs in one basket.” Economic diversity is spreading
jobs across many baskets. Diversity is desirable because the overall economy is
not dominantly influenced by one or a handful of industries whose poor
performance weighs upon the whole.
A Hachman Index is an evaluation tool measuring to what
degree an economy may or may not have all its eggs in one basket. In the
Hachman Index, a measure of 1.0 means your eggs are well distributed across
many industries. Conversely, numbers approaching zero point to a high
concentration in one or a handful of industries.
Many of the counties that score low on the previous charts are the same ones on the lowest tier of the following Hachman Index chart. This chart represents the placement of economic diversity upon employment change of the past five years. A county will be placed high or low (vertical axis) on the chart depending upon its Hachman Index score. It will align right or left (horizontal axis) depending upon its five-year employment change. Metropolitan counties have higher economic diversity than rural counties — placing them higher on the chart. They are also further to the right on the chart, showing stronger employment growth. There can be individual exceptions, but the general theme is that lack of economic diversity is a foundational impediment to economic viability. Industrial diversity, though difficult to artificially induce, is a desired remedy to counter sluggish economic performance.
Lack of diversity does not mandate a poor economy. A
reproduction of this chart five years ago would have placed Uintah and Duchesne
counties still low on the chart, but their five-year growth rates would have
been off the chart, needing arrows to point out beyond the chosen 40 percent
horizontal axis limit.
Those economies are dominated by energy production. When
energy prices are high, their economies can soar. When energy falters, they often
do likewise. They are striking examples of economic outcome being determined by
a dominant industry.
In summary, there is a dichotomy within the Utah economy
between urban and rural. The urban economies are diverse and, therefore, more
economically balanced; while many rural economies are not. With some rural
counties the economic distinction is not a wide divide; but in the rural
counties where the divide is pronounced, the underlying theme is often a low
level of economic performance.
