Economic times are tough, but Utah's doing relatively well, and 2009 is likely to be better, according to Janet L. Yellen, president and chief executive officer of the Federal Reserve Bank of San Francisco.
She was in Salt Lake City on Thursday, speaking at a luncheon for a board of directors meeting of Federal Reserve Bank branches from Salt Lake City, Seattle and Portland.
"I think Utah has fared better than much of the nation" due to stronger underlying economic growth, Yellen told reporters after her speech.
Granted, Utahns are not spared rising food and energy prices, she said. And they can expect "probably rising foreclosures and probably tighter credit terms," and possibly more foreclosures before the slowdown ends.
"But," she said, "I think Utah is poised to get through this as well or better than any state I can think of in the country."
Utah's economy had been among the fastest growing in the country, with a 2007 gross domestic product growth of 5.25 percent, first among all states, she said. Exports are a strong source of growth here, and housing prices have held up better here than other states.
Yellen's comments came after her speech about the U.S. economic situation and monetary policy challenges.
Many factors intertwine in the national picture: Weakened economic growth abroad, the housing boom and bust, subprime loans ending in foreclosures, falling housing prices affecting families' wealth and ability to borrow, the credit crisis, financial institutions' stock plunges, and a major bank failure.
Slowdowns in housing construction alone subtracted a full percentage point from the national gross domestic product growth in 2006, 2007 and the first six months of this year, Yellen said, and slower economic growth has pushed unemployment to 5.7 percent nationwide.
Yellen anticipates real gross domestic product growth in the second half of the year will come in "below the growth of potential output, which implies that the unemployment rate will rise," she said.
Inflation, however, she expects to moderate, reducing the chance for a wage-price spiral."My assumption is, the next move will be up rather than down," she said.