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IERAL RESERVE RANK ' SAN FRANCISCO OFFICE OF THE PRESIDENT A PERSPECTIVE ON THE ECONOMIC OUTLOOK ROBERT T. PARRY PRESIDENT FEDERAL RESERVE BANK OF SAN FRANCISCO JO IN T M EETING OF TH E SALT LAKE CITY ROTARY CLUB AND TH E SALT LAKE AREA CHAM BER O F C O M M ERCE SALT LAKE CITY, UTAH DECEMBER 9, 1986 1 - Go o d m o r n i n g ladies and - gentlemen , It certainly is a P L E A S U R E TO BE A B L E TO S H A R E S O M E T H O U G H T S W I T H Y O U O N THE O U T L O O K FOR TH E E C O N O M Y , BUT I A L S O W A N T TO M E N T I O N A F E W U N C E R T A I N T I E S T H A T A R E C L O U D I N G THE C R Y S T A L BALL , FINALLY/ I'D L I K E TO M E N T I O N V E R Y B R I E F L Y S O M E OF THE C H A L L E N G E S TO M O N E T A R Y P O L I C Y P R E S E N T E D B Y THE E C O N O M I C O U T L O O K A N D B Y THOSE TROUBLING UNCERTAINTIES. A S I'M S U R E M O S T OF Y O U KNO W/ Un i t e d S t a t e s has slowed recently ECONOMIC GROWTH , raising concern IN THE in many Q U A R T E R S THAT THE C U R R E N T E X P A N S I O N IS C O M I N G TO AN END. After unspectacular growing at an PERCENT RATE DURING acceptable , but 1985, G R O W T H , 3 IN TH E E C O N O M Y ' S O U T P U T H A S S L O W E D TO A 2 . 4 P E R C E N T A N N U A L R A T E SO FAR T H I S YEAR. O v e r the p a s t y e a r a n d a - h a l f , the U.S. unemployment R A T E HA S B E E N S T U C K B E T W E E N 6 3 / 4 A N D 7 1/4 P E R C E N T " S O M E W H A T h i g h e r t h a n th e 6 TO 6 1/2 P E R C E N T T H A T A P P E A R S TO REPRESENT "FULL" EMPLOYMENT IN THE U.S. ECONOMY. - Mo r e o v e r , c a p a c i t y utilization HAS DE C L I N E D RATHER Despite STATISTICS, these 2 - in manufacturing SUBSTANTIALLY, relatively lackluster I BELIEVE THAT A PICK~UP IN TH E O F F I N G . actually O V E R TH E N E X T Y E A R , national IN T HE U.S. ECONOMY I T H I N K T H A T THE U.S. E C O N O M Y W I L L G R O W AT A R O U N D A 3 P E R C E N T R A T E , AND THAT SOME P R O G R E S S W I L L BE M A D E T O W A R D S A C H I E V I N G A F U L L E R EMPLOYMENT OF B O T H L A B O R A N D C A P I T A L . T h e o u t l o o k for the N U M B E R OF M A J O R And just as U.S. economy UNCERTAINTIES, these uncertainties is s u b j e c t to a PE RHAPS MORE THAN USUAL. create difficulties for T H O S E OF Y O U M A K I N G B U S I N E S S P L A N S FOR TH E C O M I N G Y E A R , T H E Y A L S O M A K E T H E F e d ' s JOB OF F O R E C A S T I N G ECONOMIC D E V E L O P M E N T S A N D OF D E S I G N I N G M O N E T A R Y P O L I C Y M O R E DIFFICULT. The Fundamentals ' There are two fundamental IS factors that lead me to my 3 - - F A I R L Y O P T I M I S T I C O U T L O O K FOR THE E C O N O M Y N E X T YEA R, F irst, the international value of the dollar has D R O P P E D S U B S T A N T I A L L Y W I T H R E S P E C T TO M A J O R C U R R E N C I E S since F e b r u a r y of last year , This drop E X P O R T E R S TO C O M P E T E M O R E E F F E C T I V E L Y WHILE FOREIGN PRODUCERS FIND THEIR GOODS AND SERVICES TRADE DEFICIT U.S. enables IN M A R K E T S A B R O A D , IT M O R E D I F F I C U L T TO S E L L IN OUR M A R K E T S , IS B E G I N N I N G TO I B E L I E V E OUR IMPROVE AND THAT IT S H O U L D C O N T R I B U T E S I G N I F I C A N T L Y TO E C O N O M I C G R O W T H N E X T YE AR , Second, interest rates in the Un i t e d S t a t e s have FALLEN SHARPLY THIS YEAR, CONTINUING A TREND THAT BEGAN THE L A T T E R H A L F OF LOWER S U P P O R T TO TH E 1984, INTEREST RATES PROVIDE I N T E R E S T - S E N S I T I V E S E C T O R S OF THE E C O N O M Y , I N C L U D I N G S P E N D I N G FOR P L A N T A N D E Q U I P M E N T , DURABLES, IN AND RESIDENTIAL STRUCTURES, CONSUMER THIS DECLINE IN I N T E R E S T R A T E S H A S B E E N F A C I L I T A T E D A N D E N C O U R A G E D BY Federal Reserve monetary policy , Four times this year , the n - - D I S C O U N T R A T E H A S B E E N CUT/ PERCENTAGE POINTS, LOWER FOR A T O T A L R E D U C T I O N OF 2 I N T E R E S T R A T E S H A V E B E E N AN IMPORTANT FACTOR IN K E E P I N G THE E C O N O M I C E X P A N S I O N G O I N G INTO W H A T ITS F O U R T H Y EA R. IS N O W Mo r t g a g e RATES/ rates have been a part of PRODUCING SIGNIFICANT EXPANSION W ith the support of SINGLE-FAMILY HOUSES lower interest IN T HE U.S. the general fall in IN H O M E B U I L D I N G , rates , c o n s t r u c t i o n of S H O U L D C O N T I N U E AT A H E A L T H Y RA TE T H R O U G H TH E E N D OF N E X T YE A R . HOWEVER, P A S S A G E OF THE T A X R E F O R M B I L L A L R E A D Y HAS B E G U N TO D I S C OUR AG E NEW M U L T I - F A M I L Y C ONS TR UC TI ON , A N D I W O U L D NOT BE S U R P R I S E D TO SEE M U L T I - F A M I L Y S T A R T S D O W N S U B S T A N T I A L L Y IN 19 8 7 C O M P A R E D W I T H T H I S YEAR. The DECLINE IN L O N G - T E R M I N T E R E S T R A T E S HAS NOT Y E T S T I M U L A T E D B U S I N E S S S P E N D I N G FO R C O N S T R U C T I O N A N D EQUIPMENT. CAPACITY, This PROBABLY DISLOCATIONS IS A R E S U L T OF L A R G E U N U S E D IN THE O I L A N D GAS INDUSTRIES/ AND 5 - HIGH OFFICE V A C A N C Y RATES. - HOWEVER/ I EXPECT MORE ACTIVITY OF T H I S T Y P E T H R O U G H O U T T H E C O U N T R Y AS TH E E C O N O M Y B E G I N S TO E X P A N D M O R E R A P I D L Y A N D S A L E S P R O S P E C T S GENERALLY I'M O P T I M I S T I C . IM P R O V E , BUT MY O P T I M I S M So, IS T E M P E R E D BY S E V E R A L A R E A S OF U N C E R T A I N T Y . Ar e a s o f Un c e r t a i n t y ONE MAJOR UNCERTAINTY IS H O W M U C H OF AN I M P R O V E M E N T OUR T R A D E D E F I C I T A C T U A L L Y W I L L R E S U L T F R O M TH E D E C L I N E TH E D O L L A R . D A T A T H R O U G H TH E S E C O N D Q U A R T E R IN IN DIDN'T GIVE A N Y S I G N S T H A T THE T R A D E D E F I C I T H A D B E G U N TO IMPROVE/ EVEN T H O U G H T H E D O L L A R H A D B E E N D E P R E C I A T I N G FOR M O R E T H A N A YEAR . Recently released statistics P R O V I D E M O R E R O O M FOR O P T I M I S M . for the third A L T H O U G H TH E quarter INCREASE IN E X P O R T S OF G O O D S A N D S E R V I C E S C O N T I N U E D TO F A L L S H O R T OF T HE OIL. INCREASE IN I M P O R T S , A G O O D P A R T OF OUR IMPORTS WERE If W E E X C L U D E O I L I M P O R T S , W H I C H A R E P R I C E D IN - 6 - D O L L A R S A N D T H U S A R E N O T V E R Y R E S P O N S I V E TO E X C H A N G E R A T E S / OU R F O R E I G N B A L A N C E A C T U A L L Y This is encouraging TRADE DEFICIT STILL THE H U G E D R O P , but we I M P R O V E D IN TH E T H I R D Q U A R T E R , should not forget that our IS FAR L A R G E R T H A N WE E X P E C T E D , GIVEN IN THE D O L L A R . O n e R E A S O N FOR A D E L A Y E D I M P R O V E M E N T IN THE T R A D E B A L A N C E A P P E A R S TO BE T H A T E X C H A N G E R A T E C H A N G E S A R E N ' T B E I N G P A S S E D T H R O U G H TO I M P O R T P R I C E S AS Q U I C K L Y AS T H E Y U S E D TO BE, T H E P R I C E OF I M P O R T E D G O O D S O T H E R THAN P E T R O L E U M D I D N ' T P I C K UP S I G N I F I C A N T L Y R E L A T I V E TO D O M E S T I C P R I C E S U N T I L THE S E C O N D Q U A R T E R OF A F T E R TH E D O L L A R B E G A N 1986, M O R E T H A N A Y E A R ITS S H A R P D E P R E C I A T I O N , A S E C O N D R E A S O N FOR T H I S D E L A Y E D IMPROVEMENT IS T H A T THE D O L L A R HAS D R O P P E D A L O T L E S S A G A I N S T TH E C U R R E N C I E S OF S O M E OF OUR T R A D I N G P A R T N E R S T H A N OTHER PARTNERS, COUNTRIES. IT HA S A G A I N S T T H O S E OF S U C H AS J A P A N A N D THE M A J O R E U R O P E A N IN S O M E C A S E S THE D O L L A R H A S A C T U A L L Y R I S E N - 7 - A G A I N S T THE C U R R E N C I E S OF S O M E T R A D I N G P A R T N E R S — A N D A F E W OF T H E S O - C A L L E D N E W L Y OR NICS FOR SHO R T , INDUSTRIALIZED COUNTRIES/ THE LARGE DROP HAVE REA D ABOUT PROBABLY CANADA IN THE D O L L A R WE AL L IS S O M E W H A T O V E R S T A T E D / BECAUSE M O S T OF THE C O M M O N L Y C I T E D E X C H A N G E - R A T E S T A T I S T I C S E X C L U D E NICs. T r a d e w i t h t h e s e c o u n t r i e s has b e c o m e v e r y SIGNIFICANT, THE SIX MOST IMPORTANT Ho n g K o n g , S i n g a p o r e / T a i w a n , M e x i c o FOR F U L L Y 36 D E F I C I T OF NICs Br a z i l and B I L L I O N D O L L A R S OF TH E T O T A L 149 BILLION DOLLARS IN 1985. “ SOUTH KOREA/ U.S. T R A D E D E F I C I T S W I T H T H E M M A Y N OT TRADE A N D SINCE EXCHANGE RATES WITH THESE COUNTRIES HAVEN'T CHANGED MUCH YEARS, — accounted IN R E C E N T IMPROVE MUCH IN THE YE A R A H E A D . F i s c a l Po l i c y Another major FISCAL POLICY. source of uncertainty in the outlook T H E E X T E N T TO W H I C H T HE G R A M M - R U D M A N is - 8 - D E F I C I T - R E D U C T I O N L E G I S L A T I O N A C T U A L L Y W I L L L E A D TO L O W E R F E D E R A L S P E N D I N G H A S B E E N A S O U R C E OF S P E C U L A T I O N E C O N O M I C O U T L O O K FOR S O M E TIME. O V E R S H O T TH E DEFICIT O n PAPER/ TH E C O N G R E S S 144 B I L L I O N D O L L A R G R A M M - R U D M A N T A R G E T FOR THE IN F I S C A L Y E A R 19 8 7 B Y TH E TEN B I L L I O N D O L L A R S T H A T T HE L E G I S L A T I O N A L L O W E D . HOWEVER, B E C A U S E OF THE B U D G E T A R I T H M E T I C P E R M I T T E D B Y THE L E G I S L A T I O N , D E F I C I T FOR IN THE 1987, L I K E L Y TO R E A C H I N S T E A D OF B E I N G PECULIAR THE A C T U A L 154 B I L L I O N D O L L A R S , 180 B I L L I O N D O L L A R S . STILL, IS T H A T W O U L D BE A S U B S T A N T I A L R E D U C T I O N F R O M AN E S T I M A T E D D E F I C I T OF 221 B I L L I O N D O L L A R S FOR F I S C A L 1986. A REDUCTION IN T HE D E F I C I T OF T H I S M A G N I T U D E W O U L D G R E A T L Y S L O W TH E F E D E R A L G O V E R N M E N T ' S C O N T R I B U T I O N TO E C O N O M I C G R O W T H N E X T Y E A R , O F F S E T T I N G A L A R G E P A R T OF THE E X P A N S I O N A R Y E F F E C T OF TODAY'S WEAKER DOLLAR AND LOWER So m e SLOWDOWN industries could be INTEREST RATES. particularly IN G O V E R N M E N T S P E N D I N G . FO R affected EXAMPLE, by DEFENSE the - 9 - C U T B A C K S W I L L L I K E L Y C U T G R O W T H P R O S P E C T S FOR THE A R E O S P A C E INDUSTRY, ALT H O U G H THE I M P A C T C O U L D BE D E L A Y E D U N T I L OR L A T E R B E C A U S E OF D E F E N S E O R D E R S A L R E A D Y Bu t , as w i t h the trade balance , we face a 1988 IN TH E P I P E L I N E . good measure of U N C E R T A I N T Y A B O U T H O W M U C H THE B U D G E T D E F I C I T R E A L L Y W I L L DECLINE, I D O N ' T T H I N K W E ' L L H A V E A G O O D FI X O N T H A T U N T I L A B O U T THE T I M E W E F I N D O U T THE W I N N E R OF T H E 19 87 W O R L D S e r i e s - - a B I T L A T E FOR F O R E C A S T I N G P U R P O S E S . ON TH E R E V E N U E S I D E OF THE B U D G E T , THE TA X R E F O R M B I L L A L S O R A I S E S U N C E R T A I N T I E S A B O U T TH E F U T U R E P E R F O R M A N C E OF THE E C O N O M Y . A S I D E F R O M Q U E S T I O N S C O N C E R N I N G TH E E F F E C T OF THE T A X C H A N G E O N T H E E C O N O M Y ' S L O N G - R U N G R O W T H R A T E , A RE M O R E YE AR. IMMEDIATE QUESTIONS CONCERNING ITS I M P A C T O N N E X T T H E C O S T OF C A P I T A L FOR B U S I N E S S W I L L BE R A I S E D S I G N I F I C A N T L Y B Y T H E E L I M I N A T I O N OF THE CREDIT, I N V E S T M E N T TAX T H E L E N G T H E N I N G OF S E R V I C E L I V E S FOR D E P R E C I A T I O N , A N D THE E L I M I N A T I O N OF THE TAX A D V A N T A G E S T O L I M I T E D THERE - BUSINESS PARTNERSHIPS, 10 - A L T H O U G H THE R E D U C T I O N C O R P O R A T E TAX RA TE WI LL PROV IDE SOME OFFSET/ STILL IN THE T H E NE T E F F E C T IS L I K E L Y TO BE U N F A V O R A B L E FOR B U S I N E S S INVESTMENT IN 1987. Ev e n t u a l l y , t h i s negative effect on TO BE O F F S E T B Y H I G H E R H O U S E H O L D S P E N D I N G LOWER P E RSONAL INCOME TAXES. THE TAX R E F O R M S FOR HOWEVER, growth will tend IN R E S P O N S E TO B E C A U S E OF THE W A Y I N D I V I D U A L S AR E P H A S E D - I N O V E R TIME/ THE M A J O R S T I M U L U S TO P E R S O N A L C O N S U M P T I O N P R O B A B L Y W O N ' T come until NEGATIVE 1988. I M P A C T ON 1/2 P E R C E N T . Thus GNP, tax reform should have a L O W E R I N G R E A L G R O W T H BY Bu t , O N C E A G A I N / net C L O S E TO it's V E R Y D I F F I C U L T TO BE O N S OL I D G R O U N D P R E D I C T I N G THE EXACT IM PAC T, G I V E N T HE T R E M E N D O U S N U M B E R OF TA X C H A N G E S B E I N G M A D E S I M U L T A N E O U S L Y , O il Pr i c e s A F I N A L M A J O R S O U R C E OF U N C E R T A I N T Y A B O U T F U T U R E - ECONOMIC GROWTH IN T H E O I L this year 11 - IS TH E E X T E N T A N D D U R A T I O N OF D I S L O C A T I O N I N D U S T R Y C A U S E D BY T H E D R O P , Pr o s p e c t s for some WERE E N H A N C E D WHEN THE NEW improvement OPEC RANGE, C O M P A R E D WITH JUST OVER If LEVEL/ in this TO 16 D O L L A R PER B A R R E L 11 D O L L A R S PER B A R R E L t he p r i c e of o i l s t a y s at a r o u n d THE MAJOR D I S L O C A T I O N S area PRODUCTION QUOTAS CAUSED TH E P R I C E OF O I L TO J U M P TO TH E H l a t e Jul y, IN T H E P R I C E OF O I L IN its p r e s e n t IN THE O I L A N D G A S INDUSTRIES P R O B A B L Y A R E B E H I N D US/ A N D WE S H O U L D SEE S O M E R E C O V E R Y IN EMPLOYMENT AND CAPITAL SPENDING LATER THIS YEAR AND T H R O U G H O U T N E X T YE AR, OF C O U R S E / THIS ASSESSMENT COULD T U R N O U T TO B E O V E R L Y O P T I M I S T I C FOR T H E S E SINCE THE OPEC INDUSTRIES/ A G R E E M E N T TO L I M I T P R O D U C T I O N IS V E R Y FRAGILE. Un c e r t a i n t y a question about T he d r a m a t i c drop about what in the future price will happen to oil prices this of oil also raises inflation next year year caused both . - CONSUMER 12 - A N D P R O D U C E R P R I C E S A C T U A L L Y TO F A L L FOR THE F I R S T F O U R M O N T H S OF T H I S Y E A R , A N D S H O U L D H E L P TO K E E P TO A R O U N D 2 1/2 P E R C E N T FOR A L L OF L O W E S T R A T E OF INFLATION, R E G I S T E R E D SINCE 1967. 1986. INFLATION T H I S W O U L D BE THE AS M E A S U R E D B Y TH E G NP D E F L A T O R , ALTHOUGH THIS IS V E R Y E N C O U R A G I N G WE S H O U L D N O T F O R G E T T H A T , W I T H TH E O I L - P R I C E " S H O C K " , I N F L A T I O N T H I S Y E A R P R O B A B L Y HAS B E E N B E L O W ITS L O N G - R U N , OR U N D E R L Y I N G R A T E . N e x t y e a r , if t h e LEVEL, PRICES, price of oil at its present A N D T H U S D O E S N O T P R O V I D E A N O T H E R D O W N W A R D T H R U S T TO THE WEAK E R H I G H E R C O S T S OF PRICE MOVEMENTS. DOLLAR FEEDING THROUGH IN T H E F O R M OF I M P O R T S W I L L BE THE D O M I N A N T In T H I S C A S E , I N C R E A S E T H I S YE AR. HOWEVER, AGREEMENT AND CONSEQUENT FALL I N F L U E N C E ON I N F L A T I O N C O U L D R I S E BY AS M U C H AS A F U L L P E R C E N T A G E P O I N T O V E R stays ITS E X P E C T E D R A T E OF A C O L L A P S E OF THE R E C E N T IN O I L P R I C E S A G A I N C O U L D OPEC - 13 PUSH INFLATION BELOW ITS U N D E R L Y I N G R A T E N E X T YEA R, So, A L O N G W I T H A L O T OF OI L , O P E C S U P P L I E S US W I T H A L O T OF " i F S " FOR OUR INFLATION FORECAST. Ch a l l e n g e s Mo n e t a r y These BALANCE, to Po l i c y uncertainties FISCAL POLICY, in the outlook -- t h e AND OIL PRICES ” PROVIDE F O R M I D A B L E C H A L L E N G E S FOR M O N E T A R Y P O L I C Y , F A I L U R E TO S H O W C L E A R MAKES trade S I G N S OF S U S T A I N E D , IT T E M P T I N G TO A R G U E THA T, THE ECONOMY'S HEALTHY GROWTH, FOR S A F E T Y ' S SAK E, MONETARY POLICY SHOULD LEAN FURTHER TOWARD BOOSTING PRODUCTION. Cu r r e n t guide . It statistics takes time , h o w e v e r , can for the effects W O R K T H E I R W A Y T H R O U G H TH E E C O N O M Y . EVEN FURTHER, THERE ARE LAGS W H A T A C T U A L L Y H A S H A P P E N E D TO a misleading of monetary policy to COMPLICATING MATTERS IN R E C E I V I N G R E L I A B L E D A T A ON IMPORTANT R E A L G N P A N D THE B A L A N C E OF T R A D E . be I N D I C A T O R S S U C H AS S O M E T I M E S WE D O N ' T - 14 - REALLY KNOW WHERE WE'VE BEEN UNTIL WE'RE ALREADY SOMEWHERE else . G iven these LOWERING difficulties , a p o l i c y of INTEREST RATES UNTIL THERE continually IS U N A M B I G U O U S E V I D E N C E OF AN I M P A C T O N T H E E C O N O M Y R U N S A R E A L R I S K ~ POLICY A RISK THAT I NA D V E R T E N T L Y WILL BECOME TOO ST IMU LATIVE, R A I S I N G TH E S P E C T E R OF R E E M E R G I N G B y MY C A L C U L A T I O N S , INFLATIONARY PRESSURES. THE E A S I N G OF M O N E T A R Y P O L I C Y OV ER T H E P A S T Y E A R S H O U L D BE C O N S I S T E N T W I T H TH E E C O N O M Y G R O W I N G AT A H E A L T H Y , THIS OUTLOOK S U S T A I N A B L E P A C E N E X T YEA R. BUT ALTHOUGH IS A P P E A L I N G , W E M U S T R E C O G N I Z E T H A T W I T H TH E E C O N O M Y P O I S E D TO M O V E T O W A R D A F U L L E R U T I L I Z A T I O N OF RESOURCES, This INFLATIONARY PRESSURES COULD RE"EMERGE. inflationary risk is heightened in my T HE R E C E N T B E H A V I O R OF TH E M O N E T A R Y A G G R E G A T E S , T HE F e d U S E AS I N D I C A T O R S OF THE F U T U R E policy . ITS The broader monetary aggregates mind by W H I C H WE AT I M P A C T OF M O N E T A R Y , M2 and M3, both A R E N E A R THE U P P E R B O U N D A R I E S OF T H E I R T A R G E T R A N G E S T H I S 15 - - YE A R , Thus, although Federal Reserve Po l i c y a c t i o n s must R E F L E C T C O N C E R N A B O U T THE C U R R E N T S L U G G I S H N E S S OF THE E C O N O M Y , W E M U S T B A L A N C E T H I S C O N C E R N A G A I N S T TH E R I S K T H A T TO O M U C H E A S E M I G H T L E A D TO P R O B L E M S W I T H Y E A R S TO COME, BALANCING THESE CONCERNS THE F e d C A N DO OUR JOB B E S T " ECONOMIC GROWTH, IN THE IS THE W A Y WE AT PROMOTING SUSTAINABLE WHILE ENSURING THAT C ONTINUED PROGRESS MADE TOWARD PRICE STABILITY, INFLATION IS - 16 Ov e r v i e w of the Utah Ec o n o m y U t a h 's e c o n o m y , l i k e the nation 's h a s experienced W E A K E N I N G E C O N O M I C A C T I V I T Y D U R I N G THE P A S T FEW M O N T H S , Civilian employment Oc t o b e r between growth Ut a h in 198 5 a n d O c t o b e r registered 1986, w h i c h 3,2 p e r c e n t was slower THE Y E A R - O V E R - Y E A R G R O W T H R A T E OF 4 .8 P E R C E N T R E G I S T E R E D Ja n u a r y but still faster RA T E OF 2 , 2 P E R C E N T , in Ut a h have been weak than U.S. employment THE MINING AND MANUFACTURING for the STAGNATING CONSUMER SPENDING THE Y E A R ' S S L O W D O W N , the past few years than IN growth SECTORS , but IN U T A H A L S O H A S C O N T R I B U T E D TO SOME EVIDENCE SUGGESTS THAT M A N U F A C T U R I N G A N D M I N I N G A C T I V I T Y M A Y S T R E N G T H E N D U R I N G THE COMING MONTHS. PERSONAL As A R E S U L T , GROWTH I N CO ME S H O U L D BE A L I T T L E IN E M P L O Y M E N T A N D STRONGER NEXT YEAR THAN IT W A S T H I S YEA R, AS HA S B E E N T R U E N A T I O N A L L Y , TRADE AND SERVICE A C T I V I T Y HAS B E E N S T R O N G E R T H A N HAS THE E C O N O M Y AS A W H O L E . - 17 But in Utah a n o t i c e a b l e year . While registered employment 5.8 p e r c e n t weakening growth between in has taken trade and Ja n u a r y place this services 1985 a n d Ja n u a r y 1986/ T H A T P A C E H A D F A L L E N TO 3 P E R C E N T BY O C T O B E R . A S U R V E Y C O N D U C T E D BY THE U N I V E R S I T Y OF U T A H S U R V E Y R E S E A R C H Bu r e a u suggests that the slowdown C O N T I N U E D U R I N G THE C O M I N G M O N T H S . in consumer spending may A C C O R D I N G TO TH E S U R V E Y / CONSUMER CONFIDENCE AMONG UTAH RESIDENTS FELL 9 PERCENTAGE POINTS BETWEEN JANUARY AND SEPTEMBER. NEVERTHELESS, I M P O R T A N T TO NO T E T H A T THE U T A H C O N S U M E R C O N F I D E N C E STILL HIGHER THAN IT W A S A Y E A R AG O A N D A L S O T H A N THE L E V E L S R E G I S T E R E D D U R I N G THE L A T E 1980s. IT IS IN DEX IS M U C H H I G H E R 1970s AND EARLY T H U S , W H I L E THE C U R R E N T S T A T I S T I C R E P R E S E N T S A DECLINE SINCE JANUARY/ ITS C U R R E N T L E V E L R E M A I N S H I G H BY HISTORICAL STANDARDS. The WEAKNESS C O N S T R U C T I O N S E C T O R L I K E W I S E HA S S U F F E R E D F R O M IN R E C E N T M O N T H S / IS AS THE 8 .5 P E R C E N T D E C L I N E IN - 18 C O N S T R U C T I O N E M P L O Y M E N T D U R I N G THE O N E - Y E A R P E R I O D F R O M Oc t o b e r 19 8 5 t o O c t o b e r E X P E C T E D TO C O N T I N U E 1986 i n d i c a t e s , We a k n e s s is IN THE N O N R E S I D E N T IAL A N D M U L T I F A M I L Y S E G M E N T S OF TH E M A R K E T , BUT , AS FAMILY BUILDING SHOULD GROW IS T R U E N A T I O N A L L Y , SINGLE IF I N T E R E S T R A T E S R E M A I N LOW. T h e M A N U F A C T U R I N G AND MIN IN G SECTORS HAVE BEEN W E A K E N I N G U T A H ' S E C O N O M Y , L I K E THE N A T I O N ' S , FEW YEARS, SOME P R E L I M I N A R Y SIGNALS SUGG E S T THAT THESE S E C T O R S M A Y BE IN FOR A T U R N A R O U N D D E C L I N I N G V A L U E OF TH E D O L L A R MANUFACTURERS' Pr e l i m i n a r y trade ANECDOTAL EVIDENCE data suggest TH E IS E X P E C T E D TO I M P R O V E U.S. that the long IN THE P I P E L I N E AT LAST. -a w a i t e d In A D D I T I O N , S U G G E S T S T H A T O R D E R S FOR SOME U . S . - M A D E INCREASING FROM EUROPE, R E S P O N S E TO THE L O W E R D O L L A R , JAPAN, AND TAIWAN, IN AS W E L L AS B E C A U S E OF A T T E M P T S TO D E T E R P R O T E C T I O N I S T M E A S U R E S . IN THE M O N T H S A H E A D . C O M P E T I T I V E P O S I T I O N S ON W O R L D M A R K E T S . I M P R O V E M E N T S M A Y BE P R O D U C T S AR E FOR THE P A S T - 19 Ma n y o b s e r v e r s expect that A R O U N D D U R I N G THE C O M I N G YEAR . mining activity will turn THE S H A K E O U T OF C O P P E R P R O D U C E R S T H A T HAS T A K E N P L A C E O V E R THE P A S T S E V E R A L Y E A R S HA S L E F T AN I N D U S T R Y W I T H M U C H L O W E R C O S T S T H A N H A D E X I S T E D PREVIOUSLY/ AS A R E S U L T OF W A G E C O N C E S S I O N S A N D IN C A P I T A L E Q U I P M E N T . IMPROVEMENTS In A D D I T I O N , THE R A P I D E X P A N S I O N IN W O R L D W I D E P R O D U C T I O N C A P A C I T Y A P P E A R S TO H A V E H A L T E D , R E M O V I N G A M A J O R D O W N W A R D F O R C E ON P R I C E S . IS C O U N T I N G O N S U C H AN its Ut a h o p e r a t i o n s , 80 0 w o r k e r s and plans IMPROVEMENT, WITH The c o p p e r to hire producer about KENNECOTT COPPER ITS P L A N S TO R E O P E N already 13 0 0 m o r e next has hired year .
@FedFRASER