Idaho shows ‘remarkable strength’

by Brad Carlson, Idaho Business Review
08/28/2006

The quarterly Idaho Economic Forecast covering 2006 through 2009 was released last month. The report says the state’s economic outlook has brightened since the previous forecast.

Mike Ferguson, the chief economist for Gov. Jim Risch, recently answered some questions about conditions in the state.

What is most surprising about Idaho’s economy now?

Its remarkable strength, particularly in real estate and construction-related sectors.

What factors drive the growth Idaho is experiencing in Gross State Product, jobs and income?

Gross State Product is not part of our forecast but the latest data (2005) shows 7.5 percent growth, after 10.1 percent growth in 2004.

Again, construction and real estate-related sectors seem to be the most rapidly growing. Other strength shows up in recreation and lodging-related sectors.

How does Idaho’s economic growth compare to growth in neighboring states and the entire U.S.?

Our GSP growth for 2005 was fourth fastest in the nation. Arizona, Nevada and Florida beat us, so we did better than all but one of our neighboring states.

Why is personal income growing faster in Idaho than in the entire U.S.?

The West in general is a hot part of the nation’s economy. Idaho has established that it is a good place to do business, and we are currently benefiting from relatively lower real estate prices that are attracting people from overheated markets, typically on the coasts (and Arizona). Strong in-migration pushes income growth rates higher.

What is the outlook for continued growth of GSP, jobs and income in Idaho?

In a nutshell, we see the Idaho economy decelerating modestly over the next few years, but not going into reverse. The primary reason behind this expected slowing is the cooling of the real estate and construction sectors.

What employment trends are you seeing in manufacturing, in services and in retail trade?

Manufacturing has been weak for the past five years, services have been quite strong, and retail trade has been weak but rebounded strongly in 2005.

How significant has construction been in Idaho’s recent economic growth?

Very.

What happens if the housing bubble bursts?

Bad things. But that’s not what we’re forecasting.

Why do non-manufacturing jobs continue to account for the most jobs and the most job growth?

Manufacturing is most subject to intense foreign competition, and economies in general are seeing a shift away from goods consumption into services consumption.


Will service and trade industries continue to produce strong employment gains?

Yes.

What is the current condition and outlook in the computer and electronics category?

C&E were hit hard in the 2001 recession, but this sector appears to have stabilized, with a relatively flat outlook.

What about logging and wood products?

Logging and wood products was also hit hard, but the housing and construction boom has helped it achieve modest gains over the past couple years.

The outlook is for further declines, but not as bad as the beginning of the decade.

What do you expect in the Idaho economy for the rest of this year and into early 2007?

Deceleration later this year, with lower (but positive) growth over the next several years. We expect modest declines in construction activity over the forecast horizon.