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

Stabilizing
One of Idaho’s most serious economic recessions since the Great Depression appears close to establishing a bottom, with prospects improving that a return to modest, but positive, monthly Idaho job creation should be clear by mid-2010. Even as the economy stabilizes, however, more solid economic growth seems perhaps 12-18 months down the road.

The Gem State’s painful economic contraction since early 2008 has been shared by nearly all states, with 49 of 50 in recession. Many Western states have experienced similar declines in employment and much higher jobless rates than 1-2 years ago, comparable to Idaho.

The six states sharing a border with Idaho currently have an average unemployment rate of 9.0% (versus 8.8% in Idaho), while the three West Coast states have an average jobless rate of 11.2%. Idaho’s painful 5.4% decline in total employment during the past year exceeds the average 4.1% rate of decline among the six bordering states.

Outside Influence
Serious and prolonged Idaho economic pain of the past 18 months is a direct result of the severe economic and financial volatility experienced across the U.S. and around the world during the past two years. Threats to domestic and global economies were the most dire since the 1930s.

A return of Idaho economic growth must largely follow two developments. These include a return of both U.S. and global economic growth. Such preconditions now seem underway.

Better news also finds increasing economic and financial market stabilization, in part tied to unprecedented fiscal and monetary stimulus around the globe. Confidence levels of individuals and corporate leaders globally have risen noticeably, but remain fragile. Steps to “exit” such costly strategies in coming quarters will be critical to longer-term economic improvement without governmental “life support.”

Job Losses
As is true across the nation, a majority of Idaho’s lost jobs during the past 18 months have occurred in construction and manufacturing. Many of these jobs will never return, falling victim to presumed less aggressive residential and commercial real estate developments in coming years. Lesser manufacturing employment could also result, tied to strong productivity enhancements and jobs that have left the state.

Substantial Idaho employment weakness has also occurred in trade, transportation & utilities and professional & business services. Fewer jobs have been lost in leisure & hospitality; information; financial activities; and government sectors. Only education & health services added jobs during the most recent 12-month period.

Responding to Incentives
The plunge in new home building across Idaho and the nation in recent years should give way to modest, but continual, improvement in coming years. However, the excess building period during 2004-2006 is unlikely to be matched any time soon.

Greater housing “affordability” tied to home price declines across the nation and very attractive mortgage rates currently available will induce greater home buying interest. Federal financial incentives for first-time homebuyers have proven beneficial in clearing excess housing inventories.

Winter Sports
The state’s ski and winter sports industry is anticipating better performance during the coming season than recorded during the disappointing 2008-2009 season. Ski magazine recently ranked Sun Valley among the Top 10 resorts in North America.

Costs of…
A major reason that new companies and workers have been drawn to the Gem State in recent years is the very affordable cost of doing business, as well as a more affordable cost of living than found in many areas across the nation. The August 2009 Idaho “cost of doing business” estimate of Moody’s Economy.com was 89% of the U.S. average. A similar cost estimate for Boise was a very competitive 78% of the U.S. average.

The “cost of living” estimate of Moody’s Economy.com for Boise was 96% of the U.S. average. The most recent data from the ACCRA cost of living index registered 95.8 for Boise-Nampa, with Idaho Falls at 88.1 and Twin Falls at 92.8.

Idaho Outlook
The troubled Idaho economy should show more signs of life throughout 2010, in part tied to a return of U.S. and global economic growth. The state’s longer-term economic performance, tied to strong population growth, attractive business and living costs, and world-class recreational opportunities for its residents and visitors, will rank with the best in the country.

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