SALT LAKE CITY — Utah has the best state economy in the U.S., according to a report published Monday by WalletHub, a national financial research and consulting organization.
Financially, it falls between Illinois, now in its second year without a state budget, and California, whose gross domestic product is seventh-largest in the world, comparable with Brazil's 2014 GDP of $2.2 trillion. Utah's state government surplus ranked 27th in the country, showing that Utah isn't the state with the most money.
But when it comes to performance and overall economic health, Utah outranks most other states in metrics such as GDP growth, the percentage of fastest-growing firms, business startup activity and jobs in high-tech industries, the report states.
It's good news, but it comes as little surprise to many Utahns seeing the benefits of investments that were made more than a decade ago, as well as current policies that make for a business-friendly economy.
"It's in our DNA as a people — we're a very entrepreneurial state," said Natalie Gochnour, associate dean of the David Eccles School of Business and director of the Kem C. Gardner Policy Institute at the University of Utah.
Utah earned the top overall score in the report on state economies, as well as second place for "economic activity" and "economic health," and fourth place for "innovation potential."
Utah ranked highest in its percentage of fast-growing firms and its growth in nonfarm payrolls; third place in business startup activity; fourth place in educational attainment of immigrant workers; seventh in GDP growth and the percentage of jobs in high-tech industries; and ninth in its unemployment rate.
"The business environment (in Utah) is flourishing, with companies growing faster than anywhere else in the country," WalletHub analyst Jill Gonzalez said in a prepared statement. "In terms of its economical health, the state is certainly setting the bar, having reached full employment by all accounts with an unemployment rate of just 3.5 percent."
Utah's median annual household income of $60,000, which ranked 14th on the report, and its foreclosure rate of 0.4 percent, which was second-lowest, are also signs of financial health among Utah families, Gonzalez said.
Building a future
Utah's economic success has been decades in the making, according to Gochnour.
Part of it is thanks to improvements to transportation infrastructure on the Wasatch Front leading up to the 2002 Olympic Winter Games, such as the reconstruction of I-15 in Salt Lake County, she said. The addition of light rail lines has also helped add convenience and lower transportation costs.
Investment in human capital has played out through other efforts, including an initiative launched by former Gov. Mike Leavitt in 2000 to double the number of engineers graduating from Utah colleges and universities.
At the University of Utah, for example, engineering research expenditures, largely funded from state dollars, increased from $25 million in 2002 to $81.5 million in 2012. Thanks to that funding, the university went from awarding 368 engineering degrees in 1999 to 777 engineering degrees in 2013, Gochnour said.
"That is just bedrock to Utah's software companies, biomed companies, computer and semiconductor companies, and aerospace manufacturing. And, of course, with that, we need more," she said. "It was certainly a wise investment for our state."
Those investments also helped Utah recover from the Great Recession, especially for construction industries that took a hit with the housing bust. The I-15 reconstruction peaked at 1,600 workers, and equally helpful was construction of City Creek Center, which topped out at 1,700 jobs, Gochnour said.
More recently, a statewide initiative to further education in STEM — science, technology, engineering and math — is seeking to address demand that continues to grow for qualified experts in those fields.
Utah's higher education system is also facilitating more graduates in business fields. The University of Utah last fall ranked 17th for entrepreneurship programs by Princeton Review, a ranking that comes in conjunction with expanded offerings at the university through the Lassonde Studios opening this year. Utah State University also recently opened additional facilities in its Jon M. Huntsman School of Business.
"That shows the type of commitment this community has to entrepreneurship," Gochnour said.
It's laid a foundation for companies such as Cotopaxi, a Utah startup launched in 2014 that designs outdoor gear, with a unique mission of providing funding for education, health and employment initiatives in poverty-stricken countries.
Originally, Utah's outdoor landscape set the state apart from other business hubs and investor locations, such as the Pacific Northwest and the East Coast. And a consumer base active in the outdoors appealed to the budding company, according to Cotopaxi founder and chief operating officer Stephan Jacob.
Operating costs on the Wasatch Front are also a fraction of what they would be in other areas. Had the company settled in San Fransisco, for example, it would be spending 30 percent to 50 percent more in rent, warehousing and other expenses, Jacob said.
"In hindsight, we found all of those to be true and more," Jacob said. "Besides that, the talent aspect has absolutely materialized, not only in terms of outdoor-related talent, but marketing talent, developer talent, literally across the board of our value chain."
Cotopaxi currently has 24 full-time employees and will likely employ 30 people by the end of the year, according to Jacob. The company is also planning to relocate its headquarters from Cottonwood Heights to downtown Salt Lake City, where it will also open a retail store in the next eight weeks by City Creek.
"Everything is going in the right direction, and I think it's just a matter of time before the ecosystem and activity level will get to an even better place than it is today," Jacob said.
Still, the billboards on I-15 pleading for more candidates with business and tech talent are evidence of a real dilemma in satisfying talent demand in Utah. Business growth on its silicon slopes has contributed to a shift in demographics, making the Salt Lake-Utah County border as the epicenter of population growth in the state, according to recent census estimates.
It's where larger companies, such as IM Flash, have made their homes.
IM Flash has been in Utah since 2005, formed in a joint venture by Intel and Micron to create a semiconductor fabrication facility that builds flash memory, technology found in all mobile electronic devices.
It's an industry pushed to double the power of its product at half the cost every 18 to 24 months, according to IM Flash spokesman Stan Lockhart.
But economic conditions in the state, particularly the push for more engineers and STEM-educated workers, has helped in building a workforce of 1,800 employees and 1,000 outside contractors at the company to meet that need, Lockhart said.
"We've had a very positive experience in Utah," Lockhart said. "We just have some of the best workforce in the world."
Lockhart, who is also a member of the Utah State Board of Education, said beyond the workforce, commitment by state and local leaders to building a business-friendly environment also makes Utah an appealing place to be.
"I give a lot of credit to legislators and the governor, but it goes beyond that. It goes down to the county level and the city level and the school district level," he said. "There's kind of this attitude of all for one and one for all. I feel like I'm going to people who truly want to help us succeed when I approach our government leaders here in Utah."