The drought plaguing much of the United States has had little impact on the West's economy, which should continue growing at a healthy rate even though employment growth for the rest of the year likely won't match its performance in the first quarter.

That's the upbeat assessment this week of the Federal Reserve Bank of San Francisco, parent bank of the Salt Lake City Federal Reserve Branch, in a report that also depicts growing economic strength in Utah as a particularly bright spot in the West's overall continued expansion.According to Fed/San Francisco economist Carolyn Sherwood-Call, export growth should spur manufacturing and trade in the West, and the drought should have little effect on the West's agricultural production this year.

But capacity problems in some manufacturing industries could limit the rate of expansion, the bank said in its quarterly analysis of economic conditions in the 12th Federal Reserve District, which includes Utah.

According to the Fed report, employment growth slowed to 2 percent in the second quarter, 1.3 percentage points below that of the nation.

In contrast with conditions in the Midwest, the drought is not an important factor in explaining the West's slower rate of growth, they said.

The report says most Western farmers are experiencing little or no damage from the drought because their reservoirs contain adequate water for this summer's growing season. Some may even benefit from higher prices due to reduced agricultural production in other regions.

However, high feed costs and low beef prices are making it difficult for some cattle ranchers to turn a profit, the report notes.

Strong manufacturing and services activity spurred employment growth in California and Washington, at rates of 2.4 percent and 3.5 percent, respectively. In Oregon, seasonal factors reduced the quarter's growth rate to 0.9 percent despite a fundamentally strong economy.

New strength in Utah was welcomed as the bright spot in the second quarter, according to the report, where business services showed particularly strong growth, with a 10 percent gain in employment over last year.

In Alaska, a slowdown in manufacturing appears to have picked up in June as seafood processing plants added workers for the salmon season.

But Arizona reversed its previously strong growth by losing jobs at a 1.6 percent rate. The blame was placed on persistent weakness in construction activity which spread to other sectors of the state's economy.

Weakness in Nevada's service sector and in Hawaii's manufacturing activity caused employment growth to slow sharply in those states.

Expanding export activity should allow the West to maintain a healthy rate of growth, says the report. "However, emerging capacity constraints could moderate the pace of growth and another dry winter would cause widespread problems for Western farmers."