Blog Post

[1]  Even today what drives economic growth, how it’s measured, and what we can expect in the future are still vigorously debated. These debates focus on such topics as innovation and technology, globalization, capital/labor ratio, worker productivity, the measure or mis-measure of Gross Domestic Product, and even changes in life expectancy.  These debates are set in the broad context of the U.S. economy with generally little reference to state economies.  Meanwhile discussions of economic growth at the state level are typically framed narrowly and limited, most often to a single measure – changes in employment.  By this measure, Utah performs very well when compared to other states. From 1960 to 2015, the average annual growth rate for nonfarm employment in Utah was 3.05 percent. Only Nevada, Arizona, Florida, and Alaska have higher rates of long-term job growth (see Figure 1). Utah has also steadily improved its ranking in employment growth since 1960; most notably from 1990 to the present.  Over the past 25 years, the state has consistently ranked in the top five states in rate of job growth (see Table 1).

Figure 1: 1960-2015 Average Annual Nonfarm Employment Growth

Table 1: Utah Nonfarm Employment Growth and Ranking by Selected Period

Why is Utah a high growth state?  I believe there are five important factors underlying Utah’s long history as a high growth state: (1) favorable labor market conditions; labor quality (educational attainment of workers), labor supply, and labor cost, (2) favorable transportation system; I-15 and I-80 provide overnight surface transportation to California and the northwest, the number and frequency of flights through the Salt Lake International Airport due in large part to the Delta Air Lines hub, and advantageous east, west, north, south rail connections, (3) unique demographics; high rates of natural increase (births minus deaths) boost labor supply and consumer demand, (4) favorable business climate; a fiscally sound state government with a friendly regulatory environment and tax structure, and (5) high quality of life fostered by public and higher educational systems, community and cultural amenities, relatively low cost of living, four season climate, and outdoor recreation opportunities.

[1] Robert Solow of MIT awarded the Nobel Prize in economics in 1987 for his contributions to neoclassical economic growth theory.  Robert Lucas Jr. of University of Chicago awarded the Nobel Prize in economics in 1995 partly for his work on endogenous growth theory.

James Wood is the Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute.