Labor Market. Idaho’s unemployment rate is holding steady at 3.9 percent.
December marked the third consecutive month Idaho has had the fastest year-over-year employment growth rate in the nation: 4.4 percent. The strongest employment gains occurred in construction, manufacturing, and real estate. Between December 2014 and December 2015, 29,100 jobs were added to the economy. The United States’ unemployment rate remains unchanged at 5.0 percent.
Real estate and construction jobs are on the rise as an influx of buyers continues to drive sales of newly-constructed homes. The Boise/Treasure Valley housing market was propped up with 889 new home starts—up 30 percent from last year. Similarly, 2,814 new homes were started in Ada County, a 30-percent year-over-year increase, and this number is continuing to grow. With this trajectory, the housing market is well positioned to sustain the surging employment rates in the construction and real estate sectors.
Housing Market. Home prices continue to rise slightly across the nation and in Idaho. Idaho’s home prices increased 0.2 percent from November to December, and have risen 8.6 percent since December 2014. Nationally, home prices increased 0.8 percent month over month and 6.3 percent year over year. National home prices for single-family homes, including distressed sales, are forecasted to rise by 0.2 percent in January 2016, and by 5.4 percent by December 2016.
While home prices remain 7.6 percent below their peak values in April 2006, home prices have enjoyed a long period of sustained increase. This marks the 46th consecutive month of year-over-year increases in home prices across the U.S. These gains stem from a growing population of millennial homebuyers, as well as the boomerang buyers—those who lost homes during the Great Recession but are again capable of buying homes with well-positioned mortgages. The 950,000 formerly-distressed homeowners who are now looking to buy are likely to push housing prices upward. No longer recording double-digit increases, rising home prices are forecasted to start to level off over the course of the coming years.
U.S. Economic Outlook
Short-Term Outlook. The short-term outlook for the U.S. remains positive but uncertain: U.S. GDP grew a mere 0.7 percent in the fourth quarter of 2015, making total annual growth just 2.4 percent. Slowing growth is primarily attributable to plummeting oil prices, which have led to contraction in manufacturing and energy sector investment. Compared with weak manufacturing growth, consumer spending is strong; however, economists are beginning to express concern about the consumer’s ability to counteract manufacturing contraction.
Americans are generally earning more money, saving on cheap gasoline, and finding more jobs, but they aren’t spending their extra savings. Incomes rose in December, but overall spending fell. Certain areas saw increased spending, however: in 2015, Americans purchased a record number of cars, and invested in home-improvement items like countertops, dishwashers, and roofs.
The labor market is in a comfortable situation, with a low 5-percent national unemployment rate. An even more telling statistic is that of employment among recent college graduates. Unemployment for young college grads ages 22 to 27 fell to 4.9 percent by September, which is below the national average of 5 percent. Their median incomes have risen in the past year from $40,000 to $43,000. In comparison, young people ages 22 to 27 who only have a high school diploma make roughly $25,000 a year. While the type of degree plays a major role in how much someone earns, rising median income is promising.
In spite of a range of many positive economic signs, it remains concerning that GDP only grew 0.7 percent from October to December 2015, with the manufacturing sector in contraction. One explanation for slackening growth is that Americans are simply saving more. According to the Commerce Department, Americans collectively saved $753 billion in December 2015 compared to $653 billion in December 2014. Personal spending in 2015 grew at a rate of 1.3 percent, which is lower than 2014’s 1.5-percent rate. Because spending eased up at the end of 2015, growth at the beginning of 2016 is likely to be weaker as well. Slow first-quarter growth isn’t unexpected, though—first-quarter growth has averaged 0.2 percent over the past 10 years, with contractions in 4 of those 10 years, and growth over 2 percent has occurred only twice: in 2006 and 2012.
Long-Term Outlook. Weak global growth remains likely to have an impact on the U.S. economy. Reduced demand for American products is partly why manufacturing and energy are both down. At the end of January 2016, the dollar’s value and orders for U.S. durable goods both fell. While the declining dollar value may boost the manufacturing sector, the Eurozone economy is still contracting in tandem with China’s struggling economy. Even if American goods become more affordable, U.S. trade partners’ internal economic struggles will continue to subdue demand, thereby hindering U.S. growth. At this point, global concerns appear to be likely to create significant hurdles for the United States economy in the weeks and months ahead.