Utah’s highly diversified economy is helping it weather the worst impacts of the COVID-19 pandemic better than most states, and as the first doses of the vaccine are disbursed, the state’s robust technology and innovation industries are likely to help drive an already nation-leading recovery.
And that resilience, coupled with Utah’s easy-access outdoor recreation assets and relatively affordable cost of living, could vault the sector to new heights.
Just last year, the true depth and breadth of Utah’s booming high-tech industry was captured in a landmark report that detailed how the sector accounts for 1 in 7 Utah jobs and $30 billion in annual gross domestic product — almost one-fifth of the state’s total economic output. It’s also been a high-output driver of new employment opportunities, growing at twice the rate of other Utah industries and paying compensation that, on average, exceeds the average Utah wage by some 80%.
The analysis from the University of Utah’s Kem C. Gardner Policy Institute found that, “In terms of total employment and wages in the private sector, no state with an economy of Utah’s size had a larger tech industry.”
But Utah’s tech business ecosystem has not been immune to the negative economic impacts of the pandemic and it, like most other industries, saw widespread employment and revenue declines early on in the crisis.
Gardner research economist Joshua Spolsdoff said while Utah high tech took a hit, it is proving to be both resilient and fast-recovering.
“Technology businesses overall have fared well, but they’ve definitely experienced impacts from COVID-19,” Spolsdoff said. “The sector saw a contraction at the very beginning but not as large as some other industries.”
“Tech took a smaller hit and is well positioned for a faster comeback.”
Winners and losers
Levi Pace, Gardner senior economic researcher and primary author of the 2019 Utah Tech Economy report, noted that some tech companies that may have been in less-than-optimum financial straits pre-pandemic have seen business reversals fueled by the unprecedented conditions.
“These circumstances have been transformative for some … tech companies that may have been in a much worse spot before the pandemic, but have been able to completely flip that,” Pace said.
Utah-based online home furnishings retailer Overstock.com has borne out that performance about-face as home-isolated customers with money spent heavily on feathering nests that were seeing a lot more use and scrutiny.
In early March, just before widespread shutdowns and shelter-in-place orders would roll across the country, Overstock stock prices were hovering at just under $6 per share. Now, that stock is trading around $56 per share and the company saw a peak share price north of $120 per share over the summer.
During that run of record-high stock pricing for the company, Overstock CEO Jonathan Johnson told the Deseret News that online shoppers, pre-pandemic, had been slowly increasing their interest in making purchases of furniture and other home goods, lagging behind other, easier-to-ship items. But restrictions wrought by COVID-19 changed all that.
“Over the last decade the home furnishing market has been migrating to online sales at a rate of about 1% to 2% a year,” Johnson said. “At the end of 2019, about 23% of those purchases were online.
“The pandemic has accelerated that and what have been three to five years of growth has happened in months. We’re now looking at about 36% of purchases happening online.”
Mark Vitner, senior economist for financial giant Wells Fargo, said the pandemic has functioned as an economic “trend accelerator” in many cases, with states that were struggling pre-pandemic seeing those challenges amplified amid the crisis and other economically high-performing states like Utah, set to gain even more traction.
“That’s why I think Utah is bouncing back as quickly as it is,” Vitner said. “When you have a large exogenous shock like COVID-19, the tendency is to accelerate trends that were in place before the recession impacts.
“States that were doing well and attracting young, skilled workers will do even better at that and states that were losing will tend to lose even more.”
Vitner said U.S. coastal metros are seeing a talent exodus that could continue even after vaccination efforts help bring the country back to some levels of normalcy.
“One of the things that people have come to appreciate in the pandemic is that it’s nice to have a lot of personal space,” Vitner said. “People are leaving parts of the country where that’s not easily achievable and seeking out places where housing is more affordable … with a higher quality of life and outdoor recreation access.
“And that’s right in Utah’s wheelhouse.”
Vitner said that dynamic will continue to be extremely beneficial to Utah’s tech sector, an industry category in which competition to attract and hire talent is particularly challenging.
A similar assessment was presented at an economic discussion hosted by the University of Utah’s Kem C. Gardner Policy Institute last month.
Two national experts on urban development, Joel Kotkin, presidential fellow in urban futures at Chapman University, and Wendell Cox, senior fellow at the Urban Reform Institute said Utah also noted Utah’s attractive combination of attributes.
They presented data showing residents, on a net basis, have been moving out of U.S. metro areas (designated metropolitan statistical areas by the U.S. Census) with populations of 1 million or more and finding new homes in smaller cities going back to 2012. And in the past several months, restrictions in place across the country aiming to mitigate the spread of COVID-19 have functioned as a booster of that migration volume.
On the flip side of Utah’s geography and affordability as a talent attractor, remote work is expanding the tech sector’s access to talent thanks to its inherent agnosticism when it comes to physical borders.
Anita Grantham, chief people officer for Utah online tech education giant Pluralsight, said the company has expanded its long-running remote work programs during the COVID-19 pandemic and has, as a result, found new levels of success in snagging top talent.
“From a sole recruiting standpoint, the remote work option has been amazing,” Grantham said. “The access we have to talent now is unreal.
“In Europe, it took nine months to hire a German-speaking business development representative. Now, we’ve hired two in Germany in one month because we don’t have to have them come to our Dublin office.”
Like many companies that have conducted internal surveys to gather employee sentiment on remote work assignments forced by pandemic restrictions, Pluralsight has found a mix of opinions. Grantham said about 2⁄3 of employees said they’d prefer a hybrid post-pandemic work schedule, with the flexibility to work a mix of in-office and at-home hours.
Hearing that employees are not yet ready to entirely abandoned the office is music to the ears of Pluralsight leaders, particularly as the company’s enormous new world headquarters sits quietly empty after construction was completed mid-pandemic.
The 700-foot-long, 350,000 square-foot behemoth, situated on a 30-acre campus just east of I-15 in Draper, features massive floor plates that make for great expanses of open work space. Grantham said while some minor space planning adjustments were made in light of the public health crisis, the base design was one that naturally lent itself to the new world of social distancing concerns.
“We got lucky there as we had already planned for a well-spaced work environment,” Grantham said. “Desks were already spaced 6 feet apart or more and our conference space and refresh stations are distributed strategically. We did upgrade our ventilation systems and will have more stringent cleaning regimens when people return to the office.”
When that large-scale return to in-person work settings begins is an open-ended question as most businesses wait to see how fast COVID-19 vaccination programs, under the management of individual states, plays out.
While tech companies are likely to continue to outpace other industries on the path to full recovery, Vitner said he expects to see significant and widespread economic rebounding in 2021, though not before the country navigates another few months of tough challenges as COVID-19 case volumes continue to grow.
“I think we’ll see further economic downturn in December and January but end the first quarter better than we started,” Vitner said. “And the second half of the year will be much stronger.
“The pessimist view is some people won’t get a vaccine, and it will take a year. That doesn’t seem like the right question, which is how long will it take to get enough people vaccinated to reduce the overall threat to public health and I think we’ll be to that point by April or May.”