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Idaho high-tech ready for rebound

Idaho´s beleaguered high-tech industry is ready for a comeback while the state´s booming construction industry is forecast to take a break, a report from the state´s top economist indicates.

The Idaho Statesman

The report´s forecast of better times in the tech industry is good news to local tech companies and the workers who have been laid off in recent months because of the faltering economy.

State economist Michael Ferguson said the state is “not in a solid recovery mode yet” and that even modest growth in the economy and the tech industry won´t come until next year.

“It´s out there a little ways,” Ferguson said. “And I don´t think we´re going to see the spectacular growth that we saw in the early 1990s.”

The upturn is unlikely to come soon enough for David Skinner, although he is heartened by the news of an impending recovery.

Skinner, who was laid off from his job as an electron microscope operator at PixTech in August 2001, said he is on the verge of having to sell his house to make ends meet.

“I´ve had to make my last two house payments with credit card cash advances,” Skinner said. “I´m just getting deeper into debt.”

Ferguson´s report, released Thursday, is the Kempthorne administration´s mid-year examination of state economic conditions.

It is used to help gauge Idaho economic conditions and will play a prominent role later this month when the governor´s office re-calculates how much the state will collect in taxes during the current budget year.

In January, Ferguson predicted tax collections would grow 4.1 percent. If Ferguson´s prediction holds, the state would have a slim projected budget surplus of about $5 million on June 30.

For each percentage point Ferguson lowers his estimate, the state would lose about $18 million. But even if the forecast drops, the state has $85 million in relief that the federal government is sending as part of a tax-break package passed by Congress this year.

Ferguson said this new report shows conditions are better than they were in April, but not as good as they were in January.

According to the report:

• The high-tech industry, brutalized by layoffs, low computer-chip prices and lack of corporate technology spending, is set for rebound — but not expected to perform like it did before the high-tech bubble imploded.

• The construction industry is expected to shed some jobs. Housing starts also are expected to drop, starting next year.

• The logging industry, once a staple of the state´s economy, will continue to flounder and employment in that category will continue to shrink.

• Mining and chemical industry jobs will remain flat for the near term. The mining sector, however, is expected to once again post declines in 2004, while some growth in the chemical sector is expected in 2005.

• The ever-expanding service-producing segment of the economy should continue to grow at healthy intervals over the next few years.

Personal income is expected to rise 3.5 percent this year and 5.2 percent the next. That´s lower than the Kempthorne administration expected when it released its last economic forecast report in April.

Non-farm employment, the labor benchmark most used by economists to measure economic health, is expected to rise 0.4 percent during 2003, 1.2 percent in 2004, and 1.6 percent in 2005 and 2006.

In the technology sector, Ferguson´s report said increased corporate interest in making capital purchases of technology “is beginning to show life.”

That interest can be expected to translate into an average of 10 percent annual growth for the industry between now and 2006.

“While this is well below the 1990s pace, it is a welcome change from its showing earlier this decade,” Ferguson said in his report.

Adding to the positive outlook was the recent decision by the U.S. Department of Commerce to charge Hynix, Micron´s Korea-based competitor, a 57.37 percent tariff on computer chips it sells in the U.S. — a development that could mean “the demise of Hynix,” the report said.

“The loss of this company in a field crowded with competitors could ease supply, which in turn would boost prices” to Micron´s benefit, Ferguson said in the report.

Dave Parker, spokesman for Micron Technology, had little to say about the report or its meaning to the company. Rather, Parker said Micron is continuing to focus on improvement of efficiency and lowering the cost of its product.

“This puts us in the best possible position for when overall market conditions do turn more favorable,” Parker said.

Jefferson Jewell, managing director of Blackfin, a Boise technology consulting company, said he hopes the expected upturn will be used to help the local technology economy diversify.

Jewell said Micron´s vulnerability to the ups and downs of the volatile computer chip commodity markets leaves the local economy vulnerable as well. The area needs more technology services companies like his, he said.

“If things do improve, I think Idaho has a second chance to diversify away from just technology manufacturing,” Jewell said.

While agreeing with the positive tone of Ferguson´s report, Kelly Matthews, the chief economist in Wells Fargo´s Salt Lake City office, said there are still pitfalls lurking in Idaho´s economic future.

Ferguson´s expectation that Idaho´s construction industry may begin to deteriorate after several years of mortgage-rate driven activity is particularly troubling to Matthews.

“We´re beginning to see interest rates rise and construction activity drop off, but there´s no indication that job growth is on its way,” Matthews said.

But increasing health in the technology industry would be a big step toward creating those needed jobs, Matthews said.

“We may still be a bit further away from those companies borrowing money for expansion and then moving on to hiring more people,” he said.

http://www.idahostatesman.com/Business/story.asp?ID=45695

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