Buddy, Can You Spare a Worker?
Idaho economic performance has slowed modestly in recent months, tied to the tightest labor availability ever experienced in the state. Even as it has slowed, Idaho ranks with the best when considering the broadest measures of overall economic growth, home price appreciation, and job gains.

Idaho’s most recent unemployment rate was estimated at a record low of 2.3% in May, sharply below the prior record of 2.8% recorded during each of the three prior months. Idaho’s extremely limited access to available workers is in line with similar challenges in neighboring Montana, Utah, and Wyoming.

Intense competition for available workers has been particularly challenging for smaller employers who may not have the means to match aggressive salary and benefit packages offered by larger employers with deeper pockets. Higher levels of net in-migration of the past three years have helped meet the need for workers of all types.

Idaho #1
The Idaho economy led the nation in 2006 when measuring growth in overall state economic output (gross state product). The Idaho economy generated an estimated $49.9 billion of economic activity in 2006, a rise of 7.4% in real terms (after inflation) from the prior year (U.S. Department of Commerce). Utah’s 7.2% real growth ranked second, while Arizona’s 6.8% growth ranked third.

Idaho’s pace of employment gains has slowed in recent months, with the estimated rise of just under 16,000 net new jobs during the most recent 12-month period (up 2.4%) ranking 8th in the nation. In contrast, the Idaho economy added 28,300 jobs during 2006.

A Minimum
Recent passage of the Fair Minimum Wage Act of 2007 will lead the nation’s minimum wage higher in three steps over the next two years. The minimum wage, stuck at $5.15 hourly since September 1, 1997, will rise to $5.85 hourly on July 24, 2007. The wage then jumps again to $6.55 per hour 12 months later, with a final boost to $7.25 hourly on July 24, 2009.

The change will have only a modest impact in Idaho, where extremely tight labor availability had already pushed beginning wage levels higher during the past few years. Some workers will see a beneficial rise in their wages. However, the greater impact will be to moderately boost incomes of those workers whose wages were only slightly above a company’s beginning wage.

Housing Rise
Strong Idaho economic growth and greater net in-migration of recent years has fueled a powerful rise in local home values. The latest data from the Office of Federal Housing Enterprise Oversight (OFHEO) noted that the average Idaho home value rose 12.27% during the 12-month period ending March 31, 2007, ranking second in the nation. Neighbors Utah, Montana, and Wyoming ranked first, third, and fourth with increases ranging from 17.01% to 11.67%.

Boise-Nampa’s 14.54% average home price rise ranked eighth of 375 communities measured nationwide. The average Idaho Falls home value rose 13.56%, while the average Pocatello home value rose 9.26%. Coeur d’Alene recorded a more modest 7.00% home value rise, after much greater gains in 2004 and 2005.

The average American home value rose 4.25% during the same 12-month period, with dozens of markets (primarily on both coasts and in the Southwest) seeing prices decline. The average Idaho home value rose 64.25% over the past five years, versus 53.53% in the U.S., suggesting more modest Gem State home price gains are likely in 2007 and 2008.

Trading Places
Strong global economic growth of the past four years has helped boost demand for goods produced in Idaho. The state’s merchandise exports rose 14.1% in 2006 to $3.72 billion, versus the $3.26 billion total during 2005. Shipments in 2006 were also 89% greater than in 2002, ranking Idaho’s growth pace seventh of the 50 states.

More than 1,000 Idaho companies exported goods last year to nearly 150 countries. Idaho’s largest export markets are in China, Canada, Singapore, and Japan. Computers and electronic equipment are by far Idaho’s largest export, accounting for 69% of Idaho’s 2006 total, followed by processed foods, chemicals, other agricultural products, and paper.

Idaho Outlook
The state’s economy is likely to grow at a more subdued pace over the next 12-18 months, tied to extremely limited labor availability. Home price gains are likely to moderate. Even so, Idaho’s economy should continue to rank with the best in the nation.

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