CEOutlook 2020-Q3

Q3 2020

Continued on Page 5

CEOutlook

The Salt Lake Chamber's CEOutlook Confidence Index rebounded from 32.3 in 2020-Q2 to 57.3 for 2020-Q3.

80.0 70.0 66.3 60.0 50.0

62.8 62.0 60.6 62.4 62.3 60.9

55.5 53.2

60.1

53.3

-1.6%

-5.8%

61.2 59.4

40.0 30.0

57.3 32.3

20.0 10.0 0.0

Q1

Q2 Q3 2017

Q4

Q1

Q2 Q3 2018

Q4

Q1

Q2 Q3 2019

Q4

Q1

Optimism

3.4% 3.3% 3.4% 3.2% 3.1% 3.4% 4.0% 3.0% 3.1% 2.9% 3.0% 2.6% 2.5% 3.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0%

Concern

Year-Over Job Growth

Utah business leaders are looking to the future with renewed optimism as we approach the final quarter of the year. Amid coronavirus, earthquakes, and political rancor, the second quarter of 2020 saw the biggest decline in positive outlook among Utah CEOs in the history of the CEOutlook survey, but the third quarter showed a remarkable bounce back, with the CEOutlook Index rising to 57.3—only 2.1 points lower than the remarkable Q1 and higher than half of 2019.

Credit belongs to Utah businesses working through the coronavirus pandemic and proactively innovating around workforce, safety, production, and structure of enterprises throughout the state. Entrepreneurs have strategically pivoted, and Utah has led the way in adapting and overcoming unexpected challenges, keeping our economy relatively strong and our unemployment rate among the lowest in the nation. And it looks like these positive trends will continue, as 38% of respondents expect to grow their headcount over the next 12 months—up from 10% last quarter.

While some firms still expect their headcount to decrease, this concern dropped significantly from half expecting to contract last quarter, when the unemployment rate reached its high of 10.4% in March and dropped to 4.1% in August, hitting what is often referred to as nearly “full employment.”

It is clear that COVID-19 remains on the minds of executives, with

Confidence Index and Job Growth

Confidence Index

Derek B. Miller, President and CEO, Salt Lake Chamber

Q2 Q3 2020

The Salt Lake Chamber’s CEOutlook Confidence Index is based on responses to the four standard questions included in each quarter’s survey (Questions 1-4). The Index can range from 0 to 100. A score below 50 indicates executives believe the economy will worsen; a score above 50 indicates a belief among executives that the economy will improve.

Source: Index is produced from the Salt Lake Chamber’s CEOutlook with support from the Kem C. Gardner Policy Institute, including analysis of the Utah Bureau of Labor Statistics.

Natalie Gochnour, Director and Chief Economist, Kem C. Gardner Policy Institute and Salt Lake Chamber The CEOutlook index rose a record 25 points in the third quarter immediately following a record fall in the second. Many cited Utah’s low unemployment rate and strong economic foundation as contributions to this positive impact on the Utah economy. One respondent summarized by saying, “Utah is resilient and innovative and is leading the country in showing how to work through a crisis.” I agree.

As Utah adjusts to these major changes, the majority of Utah leaders are discovering their employees can work effectively from home. Seventy-two percent of respondents have had employees working remotely and 77% of them said their employees’ productivity is about the same or better than when they were in the office. Eighty percent of respondents believe there will be long-term structural changes in remote work practices including more remote work options, smaller office spaces, and increased flexibility for employees. It appears the structural economic change toward remote work will have a lasting impact on the Utah economy.

While many employees work remotely, Utah business leaders are emphasizing connection and increasing communication through virtual retreats, care packages, online or socially distant staff lunches, and zoom call contests. The commitment to their employees shines through.

As the pandemic continues we are learning that the response is not a sprint, but a marathon. It’s a test of our endurance. With continued vigilance and a spirit of comradery, I am confident Utah will emerge stronger.

Third Quarter

I 2020

A Look Back and to The Future

— How would you describe the current economic conditions in Utah compared to six months ago?

— What is your expectation for economic conditions in Utah six months from now?

80.0 70.0 Confidence IndexConfidence Index

60.0 50.0 80.0 40.0 70.0 30.0 60.0 20.0 50.0 10.0 40.0 0.0 30.0

67.0

65.9

65.0

66.1

61.7

59.2 67.0

65.9

65.0

66.1

61.7

59.2

Q1

Q2

Q3

64.4 58.8

64.4 58.8

Q4

64.2 61.4

64.2 61.4

Q1

65.0 61.4

55.5

65.0

61.7

61.4

55.5

Q2

2017

20.0

61.7

Q3

55.6 50.0

55.6 50.0 Q4

58.8 50.0

54.8

59.0 57.7

56.3 48.2

45.6 58.8 50.0

54.8

59.0 57.7

56.3 48.2

45.6 Q1

Q2

2018

Q3

Q4

62.8

56.6 52.6

62.8

56.6 52.6

48.8 4.2

Q1

WORSE 2020 Q3

Q1

Q2

2020

Q3

Q4

Q2

Q3

15%

Q4

Q1

Q2

2018

Q3

32%

Confidence IndexConfidence Index

58.1

30.0 60.0

64.3 59.9

20.0 50.0

57.8

68.5 61.7 59.7

61.3 58.1

62.5 61.4

63.6 59.3

57.8

10.0 40.0 0.0 30.0

Q1

Q2

20.0

Q3

Q4

Q1

2017

54%

38%

68.5 —70.0What67.9is your66.4N=47 expectation for your own63.6 industry six 63.3 months now? 61.9 64.1from 66.0 61.7 61.3 62.5 64.3 60.0 — What are your expectations for61.4 your firm's profits in the next 12 months?

59.3 59.9 59.7 59.4 66.4

Q3

Q2 2020

51%

15%

Industry vs.BETTER Firm Expectations 80.0

67.9

Q1

11%

N=47 SAME

50.0 80.0 40.0 70.0

Q4

2019 38% 32%

BETTER WORSE 2020 Q3

54% 4.2

11% Q1

2017

SAME

46.3

Q3

Q2

2019

10.0 0.0

46.3

48.8

Q2

Q3

53.1 63.3

53.1 64.1

48.2

66.0

53.1

Q4

Q1

61.2 58.3 69.7

59.0

55.9 72.3

46.6 61.2 29.8

58.3

59.0

55.9 46.6

48.2 Q2

2018

72.3

61.9

59.4 53.1

51% 69.7

Q3

Q4

Q1

Q2 29.8 2020

2019

Q3

10.0

2020 Q3

0.0

17%

WORSE Q1 Q2

Q3 2017

SAME

2020 Q3

BETTER WORSE N=47 SAME BETTER

Q4

Q1

Q2

19% 2018

17%

Q3

Q4 26%

Q1 32%

Q2

Q3

Q4

Q1

Q2

2019 51%

19%

26%

Q3

2020

55%

32% 51%

55%

N=47

2020

I Third Quarter

CEOutlook

TIMELY TOPICS REMOTE WORK Do you anticipate long-term structural changes in remote work practices?

Do you, or did you, have employees working remotely that worked in an office setting pre-pandemic?

Yes, 72%

No, 28%

How would you rate their productivity during the pandemic compared to before?

80%, Yes

13%, No 7%, Unsure

Much more productive Somewhat more productive

3% 15% 59%

About the same Somewhat less productive Much less productive

21% 3%

The following sections feature selected comments that illustrate general themes to open-ended questions.

What indicators are you looking for before reestablishing in-person work?

We will follow the suggestions of local officials in determining how and when to return employees to the office.

We are on 2 work teams now to protect the business if someone becomes infected...we need to be under 3% infection rate and under 200 new cases a day to merge our teams.

Transmission rates of COVID-19.

The number one indicator we are using is comfort of the employees to re-engage in- person. As each employee is comfortable, we are providing the way.

Lower and stable case counts and transmission rates.

Significant and sustained reduction in infection and transmission rates. We are in no rush to return to our offices because we’ve developed ways of working that are effective and efficient.

Salt Lake County in green.

Safety for the employee, their family and our customers are the most important aspect of our business.

A vaccine is widely available.

Childcare options are widely available.

Ability to easily test and to manage the illness - vaccine.

What long term structural changes in remote work do you anticipate?

We will offer more flexible work options in the future including a focus on providing employment opportunities for the disabled and home-bound. Prior to the pandemic, we would not have considered these groups.

We anticipate that we may no longer have assigned offices or cubicles. Employees may work in the office on certain days and work from home other days reducing the need for commercial office space.

We will hire more people outside of our Utah HQ.

More flexible working environments from home or branches nearby their homes, as opposed to commuting and working downtown SLC.

We will be right-sizing office space in our home office building and financially supporting our employees with appropriate subsidies who build remote work environment.

I think there are many jobs especially with companies that have multiple offices in many states that employees may never again go into the office or attend conferences.

I believe that about 30% of our workforce will want to remain remote the majority of the time. I think another 15-20% will want to have at least 1-2 days a week working remotely.

We are in the middle of renewing our lease for the building we are in, and are working with the owners to adjust the terms and the space we are using as we don›t see needing the same amount of space going forward.

CEOutlook

We will allow more employees to work from home more frequently if they would like. Previously, we have been a highly structured work environment focused on having a large work force on site at all times. We have learned that we can operate with some flexibility.

Less paperwork, fewer needless meetings and less need for overhead expenses.

I believe organizations will recognize they fared OK with employees working from home and to save on costs, will downsize their office space.

Third Quarter

I 2020

What emerging trends, risk and other factors do you think may have a postitive or negative impact on Utah’s economy in the next 12 months?

Buying a new outfit, new shoes, buying the latest gadget, getting a makeover or pampering one’s self with a massage is no longer a need or requirement for happiness.

Growing NIMBY voices in communities, people opposing growth in their communities and making it more difficult to bring housing to the market.

COVID-19 control and how much can businesses remain open and customers feel safe.

Unemployment and the uncertainty caused in the market caused by the 2020 election.

A resurgence of COVID-19 (COVID-20?) that continues to limit economic activity. So many businesses and industries are impacted by the inability to gather in large groups. If we are not able to return to large group gatherings I believe many sectors of the UT economy will continue to struggle.

Vaccine and willingness of people to exercise good infection control for themselves - distancing, masking when sick or when distancing cannot occur, getting the vaccine - assuming one is available, staying home when ill.

The COVID-19 health and economic crisis has created substantial economic hardship for Utah businesses. What is the most important economic lesson you’ve learned?

We can be productive and impactful with remote working.

Trust. We have never trusted our employees more than we do today.

Even the most well meaning employees and customers still have a hard time with 6’ social distancing.

State and local governments need an appropriate response that provides safety but allows businesses to stay open.

Employees and business sectors that cannot go remote are significantly disadvantaged and many of these sectors are “low tech” such as restaurants and shops. Also, family situations (high risk family members, day care and public education) must be taken into consideration when considering an employee for in-person job assignments.

Small and large businesses benefit from federal programs but medium sized businesses generally miss out.

Prudence and the primary objective of securing assets for unpredictable times.

It’s important to project financial scenarios and share them with your leadership so that they understand and can contribute to managing through the economic hardship.

Humans are incredibly resilient — and optimistic. It is hardwired into our species.

Diversification of income streams is helpful.

How quickly an economic shock can happen. Great lesson to keep substantial savings or reserves for the rainy days.

Economy can shift suddenly and dramatically , and rapid and flexible responses and early preparation are critical to continued economic sustainability.

Don’t panic, use data and advice from known experts to make decisions.

Blessed are the flexible for they shall not break.

Crisis management is not very common nor a big enough focus in leadership.

What creative ideas have you deployed to inspire employees?

We sent out care packages to all of our employees and held a virtual retreat to go over our new strategic plan and upcoming company goals.

Our communication has come so far and we understand each other on a far better personal level due to working from our homes.

We have utilized the slowdown to do more employee training.

We created a Learning contest and encouraged our team to use all the resources we provided for self-improvement. Personal responsibility and accountability to make good use of our time and to come out of quarantine a better more complete person and employee was stressed.

We have shared employees with other companies in order to not lose valuable employees.

Stay connected even if it’s only virtual. Make an extra effort to make sure no one feels isolated by not having any office contact.

Sent a box with party games to each employee to use at home - instead of our summer employee party.

Demonstrating trust, empathy, and compassion elicited great work from our employees. They continue to impress with their grit and resilience.

2020

I Third Quarter

CEOutlook

Derek Miller, Continued from Page 1 many expecting a vaccine to emerge that will reduce risk to employees and customers. We can expect that the ebb and flow of this virus will continue to bring volatility to labor markets and work arrangements as full implications are unknown. However, the most recent

CEOutlook engenders confidence that in Utah business and government leaders will continue to collaborate with the workforce and consumers to meet the challenges ahead. One respondent noted, “Blessed are the flexible for they shall not break”.

This attitude reflects Utah’s rich heritage—one of hard work and preparing for what may come. I am grateful for all of those who will continue to adjust and bend as needed, but never break.

About the Salt Lake Chamber’s CEOutlook

Methodology

Respondent Industry Make-Up

The Salt Lake Chamber partners with the Kem C. Gardner Policy Institute at the University of Utah to design, tabulate and assist in analyzing the survey. Sixty business executives from Utah’s fourteen major industries are asked to respond to 6-8 questions, depending on their responses, about their company and Utah’s economic performance. Respondents are selected by each industry’s contribution to the Utah economy. Panelists come from a range of firm sizes and locations within Utah.

• Arts, entertainment, recreation, accommodation, and food services • Construction • Educational services, health care, and social assistance • Finance, insurance, real estate, rental, and leasing • Information • Manufacturing • Mining • Other services, except government • Professional and business services • Retail Trade • Utilities • Wholesale Trade

The Salt Lake Chamber’s CEOutlook is a statewide economic survey of Utah business executives. Modeled after other national business sentiment surveys, it provides a forward-looking view of the Utah economy.

The survey results are intended to help business and community leaders make informed decisions about likely future economic conditions.

The survey will continue to be evaluated through 2020 to assess its predictive value.

All past CEOutlook reports can be found here: https://slchamber.com/ceoutlook/

The Salt Lake Chamber is Utah’s largest and longest-standing business association. A statewide chamber of commerce with members in all 29 Utah counties, the Chamber represents the broad interests of the state’s 63,000-plus employers, which employ more than 1.4 million Utahns. This includes thousands of members and their employees.

The Kem C. Gardner Policy Institute at the University of Utah develops and shares economic, demographic and public policy data and research that help individuals and the community make informed decisions. Housed in the David Eccles School of Business, the Institute seeks to be a vital gathering place and center for independent economic, demographic and public policy thought leadership that helps the Utah economy to prosper. The Institute is a strategic partner with the Salt Lake Chamber in serving Utah.

CEOutlook

For More Information Heidi Walker COO, Salt Lake Chamber 801-328-5081, hwalker@slchamber.com Natalie Gochnour Director and Chief Economist, Kem C. Gardner Policy Institute and Salt Lake Chamber 801-585-5618, natalie.gochnour@eccles.utah.edu Marin Christensen Research Associate, Kem C. Gardner Policy Institute 801-581-6521, marin.christensen@utah.edu

Third Quarter

I 2020