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

Better Days Ahead
The Idaho economy is expected to complete its transition from a painful recession to modest economic growth during 2010. Such improvement will be consistent with slow but steady improvement in a majority of the nation’s states, including most states in the Western U.S.

Every state has recorded an employment decline during the most recent 12-month period. No surprise: Washington DC has added a modest number of net new jobs as the expansion of government continues. Such declines have ranged from 1.5% or lesser declines in North Dakota, Alaska, and Montana to declines exceeding 6.0% in Nevada, Michigan, and Arizona.

Idaho’s employment decline during the most recent 12-month period is estimated at 5.2%, ranking Idaho in the bottom fifth of the states. The net loss of roughly 34,000 jobs during this period, while exceedingly painful to those impacted, compares favorably to even greater job losses just two months earlier. Such comparisons will continue to “improve” in coming months, with the state likely to record positive year-over-year job gains by late 2010.

Lost Jobs
Idaho job losses have primarily been concentrated in goods production industries of construction and manufacturing, with nearly half of all jobs lost tied to these two sectors. Additional losses have primarily occurred in trade, transportation & utilities, professional & business services, and leisure & hospitality sectors.

The Gem State’s 9.0% average unemployment rate of recent months remains below the 10.0% national average, but also close to its highest level in nearly 30 years. Recent jobless rates are twice that of 18 months ago and three times that during 2007.

First Things First
Two developments must occur before the Idaho economy can begin to grow again. The first of these is a return of U.S. economic growth, which has been underway since the summer of 2009. The second event is a return of global economic growth, a development now seemingly underway.

Economic Development
More concrete signs of renewed economic growth during 2010 will heighten competition between the 50 states to attract jobs. Much of the focus will be on enticing attractive employers from higher-cost states to lower-cost states, with costly incentives a key part of the equation.

Western states will focus on California companies. Smaller states in the Northeast and the Midwest will focus on employers in New York, Massachusetts, Illinois, and Michigan. While any successes in enticing out-of-state employers make for good “front page” news, two other components of economic development too often get the short ends of the stick.

Economic development is a three-part process…1) attraction of outside existing or new employers, 2) retention of existing employers, and 3) expansion by existing employers. What can Idaho’s political and business leaders do to entice outside employers to the state at reasonable costs? What can leaders do to keep Idaho employers in place, even as other states are focusing on Idaho’s most promising companies? And what can Idaho’s leaders do to entice existing employers to expand their Idaho operations?

Time to Refinance
Thousands of Idaho’s struggling homeowners, like those across the nation, can benefit from the most attractive 30-year fixed-rate conventional mortgages in 40 years. National rates have averaged below 5.00% in recent weeks, in part tied to aggressive buying of mortgage-backed securities by the Federal Reserve.

Such attractive mortgage rates may not be available later in the year as the Federal Reserve concludes its purchase program and, sooner rather than later, begins to sell such securities. Severe job losses and home price weakness in Idaho and around the nation have reduced the number of people who can refinance a mortgage or finance a new home. Still, timing is critical to “lock in” such extremely attractive mortgage interest rates.

Idaho…2010
More signs of Idaho and regional economic rebound from the painful recession will be seen as 2010 matures. The Idaho economy will perform better!

Renewed U.S. and global economic growth provides the framework for a resumption of Idaho economic growth later in 2010 and especially during 2011. The state’s longer-term economic potential, tied to the moderate cost of doing business, a young and growing workforce, a business-friendly public sector, and a high quality of life, will continue to rank with the best in the nation.

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