Randy ShumwayHome prices continue to rise slightly across the nation and in Idaho.

Idaho’s home prices increased 0.8 percent in the first part of the year, and have risen 8.4 percent since January 2015. Nationally, home prices increased 1.3 percent month over month and 6.9 percent year over year. National home prices for single-family homes, including distressed sales, are forecasted to rise by 0.5 percent in February 2016, and by 5.5 percent by January 2017.

Although the annual national increases for home prices are no longer posting double-digits, the U.S. has experienced 47 consecutive months of year-over-year increases, including distressed sales. While the national market has continued to steadily improve, the contours in home prices have shifted throughout the recovery. The shift favors Idaho, as the Rocky Mountain states have seen some of the strongest home price growth in the nation due to particularly high demand and low supply of homes.

Nevertheless, rising home values may begin to taper. With U.S. construction spending surging in January to its highest level since 2007, the housing supply may begin to rebound, thereby slowing price growth. Furthermore, instability in the national economy and a looming federal interest rate hike may put downward pressure on house prices.

Labor Market. Idaho’s unemployment rate remained unchanged the first part of 2016. January marked the third consecutive month Idaho has had the fastest employment growth rate in the nation, at 4.4 percent year-over-year. The strongest employment gains occurred in the leisure and hospitality, education and health services, transportation, and warehousing and utilities sectors. Information, mining and logging were the only sectors that experienced employment declines this month.

The United States’ unemployment rate dropped one-tenth of a percentage point this month from 5.0 to 4.9 percent.

Between January 2014 and January 2015, 26,200 jobs were added to the economy, the largest January to January increase since 2006. Idaho spent most of 2015 close to full employment, with an average unemployment rate of 4.1 percent that changed little throughout the year. Total employment increased 2.8 percent in 2015, beating projections of 1.5 percent annual job growth through 2022. Meanwhile, the total number of unemployed dropped 12.6 percent last year, strongly positioning Idaho’s labor market going into 2016.

U.S. Economic Outlook

Short-Term Outlook. While economic signals are still mixed, the perspectives shared by economists have reflected a shift from a mixed negative outlook to a mixed positive outlook over the last month. Currently, three influences are significantly affecting the short-term U.S. economic outlook: oil prices and production, China’s market, and the Federal Reserve’s rates.

In March, crude oil futures jumped above $40 per barrel for the first time in three months after OPEC producers discussed setting a higher anchor price for oil. Ecuador announced it would hold a meeting with all Latin American crude producers specifically to discuss prices. Global crude oil prices have risen after reaching 12-year lows fewer than two months ago. The rise in prices reflects depreciation of the U.S. dollar and the drop in U.S. shale oil production, which is expected to fall for a sixth consecutive month in April according to the U.S. EIA. Total output is expected to shrink 106,000 barrels per day due to lower output in the Bakken formation, Eagle Ford formation, and Permian Basin. Some analysts feel it is too early to assume that oil prices are now on a steady upward track—the oil glut remains large, and there is no guarantee that a higher anchor price will immediately affect oil supply.

While China played a major role in market volatility earlier this year, it is beginning to stabilize. China set a growth target of 6.5 to 7 percent this year after growing 6.9 percent in 2015, its slowest pace in the past 25 years. Focusing on services rather than investment, China is juggling growth, job creation, and industry restructuring. Instead of repeating past mistakes—like pumping stimulus money into building ghost cities, roads to nowhere, and presently unnecessary airports—China plans to improve the efficiency of government investment with targeted spending. China has promised not to further depreciate the yuan, which should prevent a repeat of the market instability experienced in 2015.

Finally, and perhaps most importantly, the U.S. Federal Reserve is poised to have significant impact on the market. At this point, economic indicators have been positive: the labor market continues to exhibit growth, and GDP growth was higher than originally expected. While economic data overseas remains shaky, the Fed has alluded that their decisions will be made based on domestic data more than foreign data.

Long-Term Outlook. Federal Reserve officials expect the U.S. economy to grow about 2 percent this year, which will continue to push down unemployment and pull up inflation to the target 2 percent rate.

However, tightening of monetary policy may be rolled out more gradually than originally anticipated in order to allow thorough assessment of global developments and their effect on the U.S. economy. The turbulent financial markets send mixed economic signals, which make it difficult to project timing for monetary policy tightening. In general, the U.S. economy is performing well enough, but it is too soon to say whether the trajectory will move upward or downward.

U.S. Consumer Confidence Index. The Conference Board’s U.S. Consumer Confidence Index declined 5.6 points to 92.2 in February. Both the Present Situation and the Expectations Indexes decreased, contributing to the overall decline. The Present Situation Index, which measures sentiment about the current state of the economy, fell from 116.6 in January to 112.1 in February. Similarly, the Expectations Index, which measures confidence in the state of the economy six months out, declined from 85.3 in January to 78.9 in February.

February’s assessment of current conditions was less favorable: the percentage of consumers who felt business conditions were “good” tapered from 27.7 percent in January to 26.0 percent in February. Likewise, more people stated current business conditions were “bad”—up from 18.8 percent in January to 19.8 percent in February. Just 22.2 percent of people thought jobs were plentiful in February compared with 23.0 percent the month before.

The biggest drop occurred in expectations for the next six months. The percentage of consumers who expect business conditions to improve decreased from 15.9 percent in January to 14.6 percent in February. Perspectives about the job market are also cooling—those who anticipate more jobs in the months ahead fell from 13.4 percent to 12.2 percent.

U.S. Consumer Price Index. The national Consumer Price Index (CPI) increased 0.2 percent from December to January on a non-seasonally adjusted basis and has increased 1.4 percent over the last year, which is near the Federal Reserve’s annual inflation target of 2 percent. The overall food index was unchanged this month—increases for the food away from home index offset declines in the food at home index, and five of the six major grocery store food group indexes decreased. The food index has risen 0.8 percent over the last 12 months, while the food at home index has declined 0.5 percent

The energy index fell 2.8 percent as all of its major component indexes dropped, and it has fallen 6.5 percent over the past year. The CPI increased overall since declines in the energy index were insufficient to offset increases in the index for all items less food and energy.

The index for all items less food and energy—a less-volatile measurement of prices—increased 0.3 percent in January, continuing the slight inclines seen every month since September.  The increase was driven by higher prices for shelter, lodging away from home, medical care, apparel, and airline fares. Over the last 12 months, the index for all items less food and energy has increased 2.2 percent.