Moody’s: Idaho one of first five states to emerge from recession
Moody’ s Economy.com and MSNBC today released a very sophisticated report prophesying that Idaho will be among the first five states in the nation to recover from the economic downturn. I certainly hope this is the truth, but like other national surveys released, this one too rests on largely faulty assumptions.
Here is how Moody’s explains how it came to these conclusions:
“States that have a high concentration in tech-related industries are well positioned to take advantage of this trend, which is particularly true of Colorado, Idaho, Oregon and Washington and to a lesser extent Texas,” said economist Andrew Gledhill of Moody’s Economy.com.
As we all know, however, Idaho’s tech economy is largely based upon two firms Micron, which still has more layoffs coming, and HP, which has been shrinking its workforce here for a number of years. And as I noted in my Ignite presentation, government employment is twice what the high tech economy is in the state. The moral of the story is - throw out the outliers in the statistical analysis, and this report looks A LOT different.
The second point that Moody’s makes that needs clarification is this:
“One factor that the five early job recovery states all have in common is less erosion in household credit conditions, with the worst of the group being Idaho,” Gledhill said. “As a result, once it seems apparent that recovery is setting in, households in these states will be more able to turn and inject money back into their local economies. There is less de-leveraging of household balance sheets in these states. This will in turn prompt a more favorable trend in certain types of service industries.”
To translate, even though Idaho has the second highest non-mortgage related household debt in the United States, Moody’s still gave the state a favorable outlook based on the strength of the high technology sector. But because Idahoans currently pay 40.6% of their household income to non-mortgage debt, they won’t have the cash to spend on services as Moody’s predicts.
To sum it up - It would be fantastic if Idaho is one of the first states to recover. But if Idaho does recover first, it won’t have anything to do with the high-tech employment levels which are still dropping. Combine that with massive amounts of household debt, and I think Moody’s just got this plain wrong.
(Hat tip to Andy Petersen for sending me the article!)
Economy, Myths of Idaho, Recession | admin June 2, 2009
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By Sue Dahlgren, June 3, 2009 @ 7:43 am
Chris- Thoughtful response. Even with our debt and employment issues, we need to be incredibly thankful that we live in such a great place. We will emerge from this recession eventually - bruised perhaps, but still living in one of the most wonderful cities on the planet.
By Chris Blanchard (@LGM1), June 11, 2009 @ 3:26 pm
Just an update: The Idaho Business Review posted a nice article based on this post on June 8th. Thanks, Zach!