Heading into 2010, there are signs that the Salt Lake City economy is starting to expand.

According to the most recent (Q3/09) Brookings Metro Monitor, output in the Salt Lake City metro area grew in the third quarter for the first time since the second quarter of 2008.

Moreover, despite a sustained decline in employment over the past year, Salt Lake City’s housing market is ranked eighth in the country by Hanley Wood Market Intelligence.

The relative strength of housing demand is reflected by the fact that over the past year housing prices in the metro area have fallen by 4.9%, compared to an 11.2% drop for the country as a whole.

It is worth noting that despite the fact that total employment in Salt Lake City has declined by almost 30,000 jobs (-4.6%) over the past year, unemployment in the metro area (6.6%) is the second lowest among the country’s 50 largest cities. 

Looking ahead, while there are signs that economic activity in Salt Lake City is gaining momentum, a full recovery will take time.

This tentative pattern of recovery is reflected by the most recent Manpower Employment Outlook Survey. It indicated that net hiring plans in the first quarter of 2010 are only slightly positive (+3) compared to neutral (0) in the third quarter. They remain marginally below year-ago levels.

We expect that this weak employment outlook will slow household formation and, together with a recent surge in supply of new rental units, probably cause apartment construction to stall in 2010 and pick up only gradually through 2011.

According to Property & Portfolio Research, the outlook for office construction is similar to that of rental construction.

Weak demand stemming from a precipitous drop in office-based employment, plus a steady increase in new supply through 2009, will probably cause office vacancy rates to escalate sharply in 2010, causing new office construction to remain in the doldrums well into 2011.