Bright spots for Idaho in overall economic forecast, regional economist says

REXBURG — Zions Bank Senior Economist and Public Policy Officer Robert Spendlove emphasized Idaho’s overall strong economic position in a presentation Wednesday to the Rexburg Area Chamber of Commerce.

He hit on a variety of topics, including inflation’s impact on interest rates, mortgages and the Consumer Price Index.

He said Idaho has achieved the strongest employment growth in the nation in the last year, at 3.7% – compared to a national average of 1.9%.

“The (3.3%) unemployment rate in Idaho is one of the lowest in the country, and in that (the) eastern Idaho region is the lowest in the state,” Spendlove said.

According to the Idaho Department of Labor, Teton County has an unemployment rate of 2.4%, Madison County has 2.5%, Fremont County has 2.7%, Jefferson County has 2.8% and Bonneville County 2.9% as of March.

In total, eastern Idaho has a civilian labor force of 131,030 people with only 2.8% of those being unemployed. He said the labor market remains tight, with professional, scientific and technical services as the industry with the most online job postings followed by retail trade, health care and social assistance, manufacturing and education services.

However, all is not rosy on the economic front.

“The big issue is inflation. People have been hit hard by inflation. The inflation is coming down. It’s not as high as it was a couple of years ago (in 2022) when it topped 9%,” he said. “But it’s difficult adjusting to what is essentially permanently higher prices. Prices have gone up by about 20% in the last four years, and they’re never going back down again.”

While many people have been hoping to wait out the economic volatility, Spendlove said we have entered into “a new normal.”

“You’re never going to see car prices go back to where they were or home prices go back to where they were,” he said.

In March, inflation was 3.5% – still higher than the Federal Reserve’s preferred rate of 2%. However, “just in the last three months, we’ve started to see signs of this inflation reheating,” he said. “Car insurance has gone up 20% in the last year.”

Home insurance and health care rates are increasing, and housing values haven’t declined as expected. Interest rates are also not going to go back down significantly again, he said.

“Part of this is just these kinds of historic distortions. So for 40 years from the 1980s until 2020 really, or maybe even 2022, we had a long-term trend of mortgage rates going down,” Spendlove said. “So for literally two generations, we’ve been trained that mortgage rates will be lower tomorrow than they are today. And now we’re in a new paradigm where we should not expect rates to be lower tomorrow than they are today.”

For the last few years, the Federal Reserve has been working to “slow down the economy” in response to widespread inflation. However, spending by consumers continued to drive the cycle while consumer debt also increased, he said.

In an informal poll at the start of his presentation, Spendlove asked Chamber members and guests about their views on the economy. Sixty-nine percent of the 32 respondents described the economy as not so good or poor, while 28% described it as good and 3% as excellent. That mirrors a recent Wall Street Journal poll that found 64% of voters characterized the economy as not so good/poor.

“That’s one of the big reasons that people are stressed, is, you know, what they’ve always understood about the economy and about inflation and interest rates is no longer true,” he said.

Currently 68% of Idaho homeowners “have an interest rate at or below 4%, one of the highest in the country,” he said. “So it’s great for all those people with a low rate mortgage, but they’re never going to move.”

This has driven up home prices to an “unattainable level,” he said. Ordinarily, the ratio of home prices to median income is 3:1, but in Idaho that ratio has reached 6.5 to 1.

Idahoan’s wages are increasing also, but not fast enough to keep up with rising housing and consumer goods costs.

According to the Idaho Statesman, Idahoan’s average wages increased 10% last year. “The average wage is $26.75/hour, while the median is $21.27/hour. Median wages increased a total of 10.4% last year or $2.01/hour.

“The highest median wages are in the southwestern region ($21.69/hour), while the lowest median wages are in the southeastern region ($19.80/hour),” he presented.