Economist: Recovery ongoing in short term

BOISE – Idaho families should feel an average economic boost of about 1 percent in the coming year as personal income slightly outpaces inflation, an economist told a panel of lawmakers on Wednesday.

But twin troubles that are beyond the control of state lawmakers – higher interest rates and a ballooning federal deficit – could sap the energy from the region’s mild recovery.

Economist John Church presented his overview to the Economic Outlook and Revenue Assessment Committee, which is meeting Wednesday and today at the Statehouse.

The panel typically meets just before the start of the legislative session, which begins next week, to view a snapshot of the state’s financial picture.

Generally, Church’s message was positive.

“Remarkably, we’ve done rather well,” Church said of the past year’s progress.

Personal income is expected to rise an average of 4.5 percent in Idaho this year, Church said, while inflation is being checked at about 2.5 to 3 percent.

“That’s about 1 percent real gain,” Church said.

The service sector – often blamed as a poor replacement for better paying jobs in manufacturing and industry — has kept Idaho’s economy from being completely upended, Church said.

Health care and social assistance are expected to add nearly 6,000 jobs to the state’s employment rolls in the next two years.

And since the terrorist attacks of 2001, leisure and hospitality has shown a 2 percent job growth; and many more dining, hotel and entertainment establishments are either announced or under development.

Service sector jobs are predicted to grow 2.3 percent this year and 3.4 percent in 2006-2007.

Meanwhile, traditional Idaho industries continue to decline.

Farming, food processing, wood and lumber, and chemical processing are all expected to show a net job loss over the next two years.

For those reasons, the growth within Idaho is expected to be more vigorous around established population centers.

“I think five or six counties will capture 80 percent of the growth. The other counties? They’ll be pretty quiet,” Church said.

Some of Church’s comments were met with skepticism by committee members.

Sen. Brad Little of Emmett said he was surprised Church said the timber industry’s bottom line was rebounding because the foreign currencies have gained value over the dollar by as much as 30 percent.

“You’re pretty pessimistic in this year’s and next year’s outlook, considering we’ve got that 30 percent back,” Little said.

Church said the state may see revenue from taxes on timber company profits, but he doubted the industry is recovering enough to enter a hiring phase.

“I don’t know that you’re going to see anyone open up any new mills,” Church said.

On Friday, the panel is scheduled to hear from other industry and government experts from retail, housing, insurance, labor and government groups.

Lawmakers officially kick off their session on Monday, when Gov. Dirk Kempthorne will deliver his annual State of the State address.

The session is expected to last about three months.