Labor Market. Idaho’s unemployment rate is remaining low at 3.9 percent.
February marked Idaho’s largest increase in seasonally adjusted nonfarm jobs since 2006, which grew by 4.0 percent year over year, or 26,400 total jobs. The strongest employment gains occurred in the leisure and hospitality, transportation, warehousing and utilities, construction, and other services. Mining and logging was the only sector that experienced an employment decline this month. The United States’ unemployment rate remained unchanged this month at 4.9 percent.
In the decade spanning 2012–2022, Idaho payroll jobs have been projected to grow 16.3 percent. Idaho’s labor market is not only outpacing the national economy, but is also outperforming these already-ambitious projections. Furthermore, 12 industries in Idaho have posted higher-than-expected growth rates since that time, indicating a robust recovery from the Great Recession. Idaho’s economy is on pace to continue recovering in a way that will benefit broad segments of its resident population.
Housing Market. Home prices continue to rise slightly across the nation and in Idaho. Idaho’s home prices increased 0.8 percent from January to February, and have risen 8.4 percent since February 2015. Nationally, home prices increased 1.1 percent month over month and 6.8 percent year over year. National home prices for single-family homes, including distressed sales, are forecasted to rise by 0.6 percent in March 2016, and by 5.2 percent by February 2017.
Although home prices remain 6.5 percent below peak values recorded in April 2006, the U.S. has experienced 48 consecutive months of year-over-year increases, including distressed sales, indicating progress toward a full recovery. A new peak level in home prices is expected to be reached in May 2017. Low fixed-rate mortgage rates and strong trends in employment growth fuel expectations for the Idaho housing market, wherein home prices are forecasted to increase 0.2 percent this month and 3.7 percent in the next year.
U.S. Economic Outlook
Short-Term Outlook. U.S. GDP growth in the fourth quarter of 2015 was revised upward to 1.4 percent at the end of March. While fourth-quarter growth slowed in comparison to third-quarter growth, the decline was not as sharp as the previous estimate of 1.0 percent. The annual GDP growth rate for 2015 averaged 2.4 percent for the year. Consumer spending rose 2.4 percent in the fourth quarter—up from the previous estimate of 2 percent due to higher consumption of services. Some economists attribute the uptick in spending to the improving labor market, which is steadily, although slowly, lifting wages. Home prices are rising, and gasoline prices remain low, thereby elevating household discretionary spending.
On the downside, inventory investment for the fourth quarter was revised lower, but still remains high relative to domestic demand. Corporate profits fell for a second straight quarter because multi-national companies saw lower earnings as a result of a strong dollar and cheap oil. Additionally, profits after tax and profits from current production fell. Manufacturing profits alone dropped $139.2 billion in the fourth quarter. Overall, profits dropped 5.1 percent in 2015, which represents the largest decline since 2008. First-quarter GDP growth is expected to be around 1.5 percent.
The value of the U.S. dollar continues to increase against a basket of currencies. In 2015, the dollar gained 10.5 percent against the U.S.’s major trading partners. While a rising dollar speaks to the relative strength of the economy, it can have negative repercussions. For instance, multi-national companies and large export-driven companies see lower volumes of goods ordered due to the relatively higher price for customers. Falling oil prices further contribute to manufacturing profit losses.
The Federal Reserve did not raise interest rates again in March, but continues to plan to gradually raise rates over time, as indicated during the first rate hike last December. The uncertainty of the global economic outlook played a role in the Federal Reserve’s monetary policy actions. In fact, the risk of a global economic slowdown was a key factor in the decision to not raise interest rates in March. As the Federal Open Market Committee considers when to raise rates next, it will be closely monitoring inflation, personal consumption expenditures, and other economic data.
Long-Term Outlook. The outlook for the global economy remains somewhat uncertain. IMF head Christine Lagarde announced that the recovery is slow and fragile, urging governments to take action to preserve the recovery. Since sluggish growth can lengthen economic stagnation, it can in turn promote protectionist policies that further hurt the economy. China’s slowing growth and increased integration into the global economy introduces a measure of potential volatility into markets worldwide. However, there are no imminent warning signs that the global economy is necessarily suffering or headed for a downturn.
U.S. Consumer Confidence Index. The Conference Board’s U.S. Consumer Confidence Index increased 2.2 points to 96.2 in March. Although the Present Situation Index, which measures sentiment about the current state of the economy, declined slightly from 115.0 to 113.5, the Expectations Index increased from 79.9 to 84.7—indicating strong confidence in the state of the economy six months out and leading to the overall increase in consumer confidence.
Consumers’ assessment of current conditions was less favorable as the percentage of consumers who felt business conditions were “good” tapered from 26.5 percent in February to 24.9 percent in March. However, fewer people stated current business conditions were “bad”—down to 18.8 percent in March from 19.0 percent in February. Opinions of the labor market were also mixed: the percentage of consumers who claimed that jobs are “plentiful” increased from 22.8 percent to 25.4 percent, whereas the percentage who claimed jobs are “hard to get” also rose from 23.6 percent to 26.6 percent.
Meanwhile, consumers are more optimistic about the future: the percentage of consumers who expect business conditions to improve increased from 14.5 percent in February to 15.0 percent in March. Perspectives about the job market are also optimistic—those who anticipate more jobs in the months ahead increased from 12.2 percent to 12.9 percent.
U.S. Consumer Price Index. The national Consumer Price Index (CPI) declined 0.2 percent from January to February on a non-seasonally adjusted basis. The national CPI has increased 1.0 percent over the last year, which is near the Federal Reserve’s annual inflation target of 2 percent.
The overall decrease in CPI was driven by declines in the energy index that more than offset increases in the indexes for food and for all items less food and energy. The gasoline index declined 13.0 percent, and the indexes for fuel oil and electricity also decreased 2.9 percent and 0.2 percent, respectively. This month marks the third consecutive month of declines for the energy index.
Meanwhile, the food index increased 0.2 percent in February, as the food at home index increased for the first time since September. The index for all items less food and energy—a less-volatile measurement of prices—increased 0.3 percent in February, continuing the slight inclines seen every month since September. The increase was driven by higher prices for shelter, apparel, and medical care, though all major components increased in February. Over the last 12 months, the index for all items less food and energy has increased 2.3 percent.