Idaho’s labor market showed no signs of slowing in the spring as the unemployment rate dropped another tenth of one percent to 3.8 percent in March.
In fact, in the largest one-month increase in employment in Idaho’s history, 5,400 workers found jobs. Total employment also reached a record high, passing 757,000 for the first time. Over the last year, Idaho employers have added nearly 20,000 workers, and the unemployment rate has fallen by 1.1 percentage points. The positive effects of Idaho’s employment situation are fairly well distributed, with none of Idaho’s 44 counties posting a double-digit unemployment rate. Just a year ago, three counties—Clearwater, Adams, and Shoshone—all posted double-digit unemployment rates.
Looking at the national labor market, it seems to be common wisdom that manufacturing jobs are fleeing the U.S. for China and other East Asian countries. The numbers, however, paint a different picture: the U.S. is actually adding manufacturing jobs. According to a study from the Reshoring Initiative, 60,000 manufacturing jobs were added in the U.S. in 2014, and only 50,000 were offshored, creating a net gain of 10,000 jobs. This was the first net increase in at least 20 years. While the future of the U.S. economy is still likely to depend more and more on service sector jobs, the bounce in manufacturing jobs is evidence that manufacturing will always have a place in the U.S. economy.
Short-Term U.S. Economic Outlook
Slow economic growth in the first quarter of 2015 feels a bit like déjà vu from last year’s first quarter—months of harsh winter weather seem to have deterred shoppers. The Commerce Department’s initial estimate of first quarter GDP growth came in at a seasonally-adjusted annual rate of 0.2 percent, down from 2.2 percent in the fourth quarter of 2014. Economists had expected first quarter growth to be 1 percent, so the initial estimate is disappointing.
Harsh weather can’t take all of the blame for slower than expected economic growth, however. Overall, the economy is experiencing low demand, which is a problem Federal Reserve Chair Janet Yellen can’t fix. Consumer spending makes up more than two-thirds of U.S. economic activity, and it grew only 1.9 percent in the first quarter compared to 4.4 percent in the fourth quarter of 2014. Despite slow growth and sluggish economic indicators, the U.S. dollar is still strong compared to weak European and Asian currencies. Unfortunately, a strong dollar cramps demand for U.S. products by making them more expensive for foreigners. Exports dropped 7.2 percent as manufacturers lost sales to other countries with more favorable currency exchange rates.
U.S. energy investment has declined amid the plunge in oil prices. Investment in non-residential structures dropped 23.1 percent in the first quarter as energy companies sharply reduced the number of oil drilling rigs. Many economists expect consumers to start spending the money they saved from lower gasoline prices now that the weather is better. If consumers rise to the expectations, GDP could grow at an annual rate of 3 percent this year, which would be the economy’s best GDP growth in nearly 6 years. Although consumer spending was down in early 2015, retail sales rose in March for the first time in four months, indicating that increased spending is a real possibility.
The Federal Open Market Committee, which is the Federal Reserve Committee that discusses monetary policy and interest rate increases, met at the end of April and did not decide on a date to raise interest rates. Speculation on the timing of interest rate rises continues on both sides of the issue—many economists expect rate hikes in September, while others are skeptical of changes anytime soon.
Jobless claims dropped significantly in the last weeks of April, and the employment-cost index, a broad measure of wage and benefit expenses, rose a seasonally-adjusted 0.7 percent in the first quarter, up from its 0.5-percent gain in the fourth quarter 2014. Private-industry wages and salaries increased to 2.8 percent annual growth from 2.2 percent the previous quarter, which is their strongest annual growth since the third quarter of 2008. Wages still have a way to go, but they appear to be increasing slightly.
Long-Term U.S. Economic Outlook
The long-term outlook of the U.S. economy depends in large part on the nation’s external trade partners. The U.S. economy is doing well overall despite lower than optimal figures for several economic indicators. Beyond the issues raised by a strong dollar, decreased external demand is hampering the U.S. economy as China experiences a slowdown, Europe faces financial instability in Greece, and Japan begins its economic recovery. Current performance is divergent, so the coming months will likely give greater indication of what lies ahead for the U.S. economy.