Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank

Top Notch
Idaho economic performance continues to rank with the best in the nation. In addition, most signs suggest solid growth will remain on track in the New Year. Strong Idaho economic growth is a major departure from the economic weakness that was the Idaho story in 2002 and 2003.

Idaho's impressive economic performance is in line with similar solid growth within the Rocky Mountain region. Idaho and its neighbors rank as the top four state economies as measured by employment gains over the most recent 12-month period. Nevada (as usual) ranks #1, with Arizona ranking #2. Idaho and Utah battled it out last year for #3 and #4. Idaho has also solidly outperformed its Pacific Northwest neighbors of Oregon and Washington.

Perhaps it's no surprise that the top four job creation states also rank among the top states in population growth. Nevada has led the nation in population growth for 19 straight years. That state saw a 3.5% rise in the 12-month period ending in mid-2005.

Arizona ranked second (up 3.4%), while Idaho ranked third (up 2.4% to 1.43 million residents). Florida (up 2.3%) and Utah (up 2.0%) completed the top five. By comparison, the U.S. population rose 0.9% to 296.4 million. The total should reach 300 million in 2007.

Buddy, Can You Spare A…Worker?
Strong Idaho economic growth has led to a major tightening of the Idaho labor market. The state's unemployment rate averaged 3.6% during the past five months. These rates rank as the lowest in the state's history.

By comparison, the Idaho jobless rate averaged 4.7% in 2004, 5.1% between 2000 and 2003, and 5.6% during the 1990s. The low jobless rate suggests Idaho companies of all shapes and sizes will face greater challenges to remain fully staffed than perhaps ever before.

The Idaho economy added roughly 22,500 net new jobs during the most recent 12-month period, a growth rate of 3.6%. Such job gains rank as the strongest since the state added 24,400 net new jobs in 1994. The state has continued to add jobs in all major employment sectors, led by strong gains in construction, professional & business services, and retail trade.

Revenue Growth
Solid U.S. economic performance of the past 30 months has contributed to large surpluses in a majority of states. State and local revenue rose 7.2% in the first nine months of 2005, the largest jump in 15 years (USA TODAY). With a majority of states now enjoying surpluses, the call for tax cuts is widespread.

A similar story is found in the Gem State. Impressive Idaho economic growth of the past 24 months has boosted state revenues. A substantial surplus has accumulated, providing new funding for departments and programs that saw limited spending increases in recent years.

A solid increase in spending on vital services is now underway. At the same time, it is incumbent on Idaho's political leaders to not lock the state into future spending increases that will be problematic when the local economy again slows. A return of some excess funds to Idaho taxpayers also needs to draw serious attention.

Higher & Higher
Strong Idaho economic growth now finds the state's housing market enjoying appreciation more in line with national trends. The two primary sources of estimated home values, the National Association of Realtors and the Office of Federal Housing Enterprise Oversight, recently reported U.S. gains of 14.7% and 12.02%, respectively, for the 12 months ended September 30, 2005.

The NAR report noted the median Boise home value rose 8.0%. The OFHEO report noted an average Idaho appreciation of 15.08% (12th of the 50 states), with Boise homes up 14.29%. Home prices in Idaho Falls rose 9.27%, while homes in Pocatello rose 8.00%. Homes in Lewiston rose 13.58%, while homes in Coeur d'Alene jumped 29.88%.

The Idaho View
Solid growth is expected in Idaho during 2006, with some slowing in employment gains. Employers will face major challenges in finding and retaining solid workers.

Idaho's tax revenues are healthy, providing more funding for critical programs. Idaho home price appreciation in 2006 should remain strong. Solid Idaho performance is expected to continue.

The Big Chair

Score one for our beleaguered President. The October announcement by President Bush of his selection of Ben Bernanke as the next Chairman of the Federal Reserve System was an extremely positive development.

Strong Credibility
Over the past four years Bernanke quickly gained the trust and respect of Wall Street and the global financial community. Prior to 2001, he was largely unknown in global financial circles and served as head of the economics department at Princeton.

He served as a member of the Federal Reserve Board from August 2002 to June 2005. He rapidly became the second most influential person on that seven-member board. In June 2005, he was selected by the President to serve as the Chair of the President's Council of Economic Advisors.

Bernanke was the number one choice of economists in various surveys. While holding the position of Chair of the Federal Reserve may seem like some honorary title, it is one of enormous power.

Strong Influence
Many of us in the crystal-ball-gazing community would argue that no other person in the American economy, including the President, has more day-to-day impact on our lives, i.e. the impact on inflation and interest rates. As noted before, the position of Fed Chair is "ranked" by many as the second most powerful position on the planet, behind the American President.

The "Maestro"
Alan Greenspan will enter the financial history books as one of the most highly-regarded Fed Chiefs. His reign of just under 19 years is the second longest ever.

Greenspan took bold steps during his tenure to remove much of the Fed's operating mystique. His push toward greater openness and "transparency" was very favorable.

Bernanke is likely to continue in that mold, with some modifications. He has expressed support of "inflation targeting"…i.e. announcing a targeted range for inflation pressures (say 1.2%-2.2%) and then modifying monetary policy as needed to stay within the range. This practice is closely followed by the European Central Bank.

Greenspan opposed inflation targeting, preferring the flexibility to modify monetary policy to meet his whims and those of the financial community. One policy is not necessarily better than the other.

Cheers to Alan Greenspan for a job well done. Best wishes to Ben Bernanke as he fills the Big Chair on January 31.

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