USU: Tempering the Fiscal Fevers of Recession

Cache Valley is famous for its coolness, even during periods of economic meltdowns. Utah State University’s tempering effect on fiscal fevers is crucial to this stability.

The slump that defines recession meets a formidable opponent in college communities because the opportunities created through higher education defy recession, said USU President Stan L. Albrecht.

 

“This recession is different from any since the Great Depression because it has impacted all of us to some degree or another,” Albrecht said. “Nevertheless, our local economy remains relatively healthy in large part, I believe, because USU remains strong and vibrant.”

 

USU economist Craig Petersen said the connection between the university and the local economy is incontestable.

 

“USU is directly or indirectly responsible for 20 to 25 percent of all the income and the jobs in the valley,” Petersen said. In real dollars, that high percentage closes in on nearly $1 billion of expenditures that directly or indirectly is tied to USU.

 

 “That is a conservative estimate,” he said. “We probably account for more than that when you consider the spin-off companies from the university.”

 

The university’s presence helps to maintain jobs, incomes and overall economic health, even during the worst recession in 26 years. In February when the nation’s unemployment rate climbed to 7.2 percent, Logan’s unemployment rate was at 2.8 percent. That was about the time that NBC Nightly News began to take note and started calling. The news organization was interested in sending a television crew to USU for a day to unearth some of the recession-resistant secrets of Cache Valley. Producer Barbara Bass said they were particularly interested in a developing trend that shows college towns faring better than other communities around the country.

 

In Logan, with its current unemployment rate of 4.4 percent, compared to the national average of nearly 9 percent, that trend continues to bear this out, despite the increase since the start of the year. Logan remains in the Top 10 of the nation’s lowest unemployment rates. Even home prices in this college town defy the odds. Prices have increased slightly in Logan while home values elsewhere around the nation have plunged during the past year. These stunning statistics underscore the degree in which Cache Valley has been able to buck the trend and still remain relatively recession resistant.

 

Petersen said that even though he thinks unemployment in the valley will continue to rise, it should remain well below the national average through the remainder of this current recession. He said that if the nation’s financial markets are able to hang together, the valley’s unemployment numbers could begin to decrease by as early as the first quarter of 2010.

 

Logan and other college towns around the country do better because higher education is generally countercyclical. While companies in sour economies often experience employment downturns, universities commonly see an uptick in enrollment as students leave the difficult job market and seek to upgrade their skills. More students mean more tuition revenues.

 

Petersen said bold measures by the federal government to stimulate the economy also bode well for higher education. Research institutions, such as USU and the University of Utah, could see an increase in federal dollars in the form of economic stimulus funding. That is because research universities are seen as seeds of commerce and good investments in the future since their innovations often spin off new industries and jobs.

 

For example, USU’s seven Cache Valley spinoff companies now employ hundreds of people, bringing millions of dollars to the valley and the state. USU’s partnership with the Utah Technology and Science Initiative (USTAR) also positively positions Cache Valley. This year alone, the legislature voted to provide $33 million in one-time funding of the state’s share of stimulus dollars for USTAR initiatives. For USU, that means a significant boost in annual research expenditures.

 

So despite the university’s record 9 percent budget reduction during the past seven months, countercyclical effects of increased student enrollment and federal stimulus dollars should continue to help dampen the overall impact of the economic meltdown, both on the university and the local economy. It is a positive trend that Petersen said should continue through the remainder of the year.

 

The university’s Innovation Campus, created to encourage small business development, is also a factor. At present, Innovation Campus houses 40 businesses and employs some 2,000 people. The Space Dynamics Laboratory (SDL), the anchor facility of Innovation Campus, is celebrating its 50th year as a partnering institution with the university. The SDL portion alone employs more than 440 people — 28 percent of them students.

 

A highly educated work force helps give the Logan area its strong appeal, which, in turn, attracts high technology businesses to the valley. It is a spiral that is going in the right direction, and those students who choose to stay in the valley after graduation contribute to this positive momentum, Petersen said.

 

Bryan Hansen is one of those students. He is a 23-year-old senior graduating from USU in May with a bachelor’s of science degree in computer science, a digital systems emphasis and a minor in Portuguese. He landed a full-time job as a software engineer with SDL where he has been working part time as a student. He starts full time within days of receiving his diploma.

 

“A big part of the decision to stay was Cache Valley,” Hansen said. “My wife, Alison, and I love it here. But it also had to do with the type of work. The SDL position offers research-oriented work in cutting- edge technology.”

 

The shift from student employee to full-time engineer provides a seamless transition that is invaluable for a company. The time that employees are in actual production rather than in training adds up and pays dividends. It is just the sort of perk that attracts high-tech industries near hubs of learning that higher education provides, Petersen said.

 

But the successful businesses, and the students that follow them, are not all housed on university grounds. Highly successful companies that started through heavy university connections such as Campbell Scientific Incorporated, Thermo Fisher Scientific, Wescor Incorporated, and Icon Health & Fitness have been employment mainstays over many decades in Cache Valley. For example, Campbell Scientific alone employs more than 250 people – a large percentage of which are USU graduates.

 

Smaller companies, founded by USU graduates, have also taken root and are beginning to flourish. JJ Cole Collections, a high-end clothing and merchandise company, sells its product line, specific to the baby industry, to more than 2,500 retailers around the country, all under its own label.

 

It was started in 1998 by Jeremy White while he was still a senior at USU. Since then, the company has expanded to become a multi-million business, including an office in Amsterdam with accounts throughout Europe and into China. The home office in Logan currently employs 26 – 10 of whom are USU graduates and 11 more who are currently USU students.

 

“This would be a different company without Utah State University,” White said. “It is such a huge asset to our business and to the valley.”

 

As the company has expanded, it considered whether there might be advantages to moving closer to Salt Lake City. But by any measure of metropolitan standards, Cache Valley, with its close proximity to USU, holds its own, White said.

 

“There is such an enormous talent pool as a result of the school in Logan,” he said. “A good percentage of our full-time employees worked with us while they were in school, and they have stayed. They have come to know our system and our work culture and are having a great experience.”

 

He draws from a talent pool that is also a fountain of youth. The young and driven graduates he recruits from USU bring with them new ideas that help keep his company’s product line fresh and innovative.

 

It is exactly this type of work environment that attracted Angella Arakaki, a graduating senior in graphic design. “Students are a good source to tap,” she said. “It helps to keep things fresh, young and hip.”

 

It also helps to stay close.

 

“The fact that there is such a great company that I can work for just a few minutes away from school has been perfect for me,” she said. “Transition-wise, it’s made things very easy to be able to stay in the same town from where I’m graduating.”

 

And while JJ Cole Collections may not employ as many as Icon, another Cache Valley success story started by USU students in the late 1970s, White said Cache Valley’s growth and prosperity is a result of a combination of small and large companies that establish themselves in the valley and often with close ties to the university.

 

Albrecht said the heart and soul of USU as a land-grant university is defined by its connections between commerce and knowledge. USU’s mission of providing access and opportunity for all students desiring an education is just as applicable in the career world. Access to education brings opportunities for learning. Knowledge, in turn, provides students with access to good jobs and opportunities to improve their lives and the lives of others.

 

In a larger sense, access and opportunity also applies to the community that houses the university, he said. A strong state university provides access to innovation and a well-educated work force. This inevitably leads to greater opportunities for local success and prosperity and is most likely the reason why communities that lie in the shadow of such institutions enjoy a greater degree of protection from the full exposure of economic recessions.

 

“When times are difficult, you more fully appreciate what you may otherwise take for granted,” Albrecht said. “The simple act of learning may be one such thing. As fundamental as it is, education not only changes lives, it possesses the power to improve and transform entire communities.”

 

Writer: John DeVilbiss, 435-797-1358; john.devilbiss@usu.edu
Contact: Dr. Craig Petersen, 435-797-0004; craig.petersen@usu.edu