Idaho economic forecast grim-Officials: Recovery to begin later than anticipated

Idaho´s economic health got a new prognosis Thursday, and the news wasn´t good.

A new forecast from the Idaho Division of Financial Management said Idaho´s economic recovery will start later than expected and improve at a slower rate.

Mike Maharry
The Idaho Statesman

The forecast anticipates declining housing starts and further loss of comparatively high-paying manufacturing and construction jobs into 2006 as well as relatively anemic expansion of employment in the service sector in the same period.

It is a much more dismal view of the next four years than the one issued in January, which prompted lawmakers to agree with Gov. Dirk Kempthorne on higher taxes while trimming what the governor had already called a bare-bones state budget.

The two top legislative budget writers said they were not surprised by the report.

House Appropriations Chairwoman Maxine Bell of Jerome said she expected it would take from three to five years to get out of the economic slump.

What does the new forecast mean for the state budget?

“We´ll have to continue to trim. Sadly, there will be services that will have to be trimmed,” Bell said.

Senate Finance Chairman Dean Cameron of Rupert said, “There have been signs this could be longer than originally thought.”

Lawmakers will have to be frugal, he said, and perhaps the continued financial crisis will force the Legislature to finally begin a complete evaluation of state government services.

“That´s something that will have to take place and ought to take place,” he said.

Idaho´s economy is compared to a train in the forecast prepared under the direction of Mike Ferguson, the state´s chief economist, and Derek Santos.

“Specifically,” the new forecast said, “Idaho´s economy is expected to leave the station for the recovery tracks later than in the previous forecast, and it will travel slower once it gets there.”

The reasons:

• Earlier estimates of the number of people working in Idaho were too high.

• Layoffs made after the last forecast, particularly the 1,100 pink slips given out at Micron in February, made the state´s jobless picture even worse.

• Earlier estimates of national growth have been cut, meaning Idaho businesses will get less help from a general economic recovery.

But Nancy Vannorsdel, president and CEO of the Boise Metro Chamber of Commerce, said she´s been seeing positive signs of business growth at the chamber.

She said new memberships are up, particularly from small- and medium-size companies, and so are sponsorships of chamber events.

“We´ve had one of our best months in five years,” she said. “My sense is that now that the war is over, a lot of people are just ready to get back to business.”

Vannorsdel added, however, that the rest of Idaho is probably feeling the effects of the poor economy more than the Treasure Valley.

And Boise, too, may see more hardship when the 1,100 laid-off Micron workers exhaust what are generally regarded to be generous severance benefits, she said.

The new forecast released Thursday said economic indicators in Idaho deteriorated to such an extent in the past five months that projected job growth through 2006 was slashed by more than 20,000.

Instead of 615,000 non-farm jobs throughout the state in 2006, the government now expects there will be fewer than 595,000.

Idaho´s situation was aggravated when more than twice as many people as analysts expected moved into Idaho last year from other states.

The influx put even more pressure on the dwindling job opportunities in Idaho.

Ferguson and Santos said the state lost 4,200 non-farm jobs in 2002, more than twice the number they expected when the year ended, and this year they expect only minimal job growth — possibly only several hundred jobs.

Those extra lost jobs in 2002 stripped $250 million in personal income out of the state economy, and the projected failure to grow at even a modest rate this year will deny the economy another $300 million, according to Ferguson and Santos.

Through 2006, employment will expand at or below 2 percent a year — a dramatic departure from the 1990s when jobs increased at an annual average of 4 percent.

The scaled-back employment growth means a cumulative loss of $2 billion in personal income during the next three years.

Workers in the goods-producing sector took the brunt of the decline.

More than 7,500 last year lost their jobs in timber, electronics, construction and other manufacturing, and the new forecast anticipates another 3,900 will be on the unemployment line by the end of this year.

Goods producers will shed another 1,500 in the following three years before beginning to stabilize, the report said.

At the same time, service sector jobs, which account for about 80 percent of total non-farm employment in the state, will grow at yearly rates of 2.2 percent or less after a decade of expansion in the 4 percent to 5 percent range.

To offer story ideas or comments, contact Mike Maharry
[email protected] or 377-6433

http://www.idahostatesman.com/Business/story.asp?ID=40358