BLS: 2nd Quarter Estimates Show U.S. Economy Expanding - Kind of

A report this morning by the Bureau of Labor Statistics (BLS) estimates that the U.S. economy grew 2.4% in the second quarter. While that growth shows the nation as a whole is out of the recession, the growth rate was down from the first quarter when real GDP grew 3.7%.

Economists at the BLS gave the following rationale for the slowdown in growth:

The deceleration in real GDP in the second quarter primarily reflected an acceleration in imports and a deceleration in private inventory investment that were partly offset by an upturn in residential fixed investment, an acceleration in nonresidential fixed investment, an upturn in state and local government spending, and an acceleration in federal government spending.

In previous quarters, we had seen that investment by business was driving growth. Now, it appears that the pubic sector is responsible for keeping GDP on the positive side. That is obviously going to be bad news for Idaho, the state that led the nation in reducing state employment, cutting 6.9% of the workforce by the time the fiscal year closed out on June 30.

So if you wonder why your state economy is still floundering as we enter the third quarter, you now have a pretty good idea.

More “Good” News for Idaho’s Economy

The Bureau of Economic Analysis reported today that personal income growth in the State of Idaho was among the highest in the nation, as indicated by the above map. Before we get to giddy and declare that perhaps our policy makers have done something to spur this, it’s helpful to drill down into the tables a little bit to see that Idaho also in the first quarter of 2010 received its largest annual rate of ARRA (federal bailout) money. In some states, such as Mississippi, transfer payments from the Feds represented half the state’s personal income growth. This begs the rhetorical question then, what happens when those funds are cut off? Anyway, thanks Uncle for all your help floating the economy here!

My “Buy Local” interview in the Boise Weekly

First let me welcome and say congratulations to Zach Hagadone who has transitioned from the Idaho Business Review to the Boise Weekly. He kicks off his new gig with a very fine piece on buying local, a piece for which I provided him some background. I am sure you will all be fascinated by my lecture on 16th Century mercantilist economic thought. Go check it out, and again congrats to Zach.

Airport to Get Bonding Power? Some Urban Legislators Balk

Any day now my good friend Dave Frazier will be going ballistic over on the Guardian Blog about HOUSE JOINT RESOLUTION 5, which passed the House 57-12-1, and the Senate 34-1. This resolution which will go to a vote of the people this fall would amend Idaho’s Constitution so that Airports can issue bonds without having to get a vote of the people. This is an idea whose time has come as evidenced by the vote. Good on you Senator Stegner for finally designating some authority to jurisdictions other than the state. With luck, this is the start of a new trend.

But there are those who still don’t see the need to devolve power to local governments and other jursdictions. Idaho’s cities and counties (and airports and public hospitals, etc.) have less authority than do the cities and counties in any state west of the Mississippi (see: D, Krane, Rigos N, and Hill M. Home Rule in America : A Fifty-State Handbook. CQ Press, 2000.). Of the 12 Representatives that voted against this measure, half are from urban areas, the other half rural. Thus, the urban rural divide is still in full effect.

I think it is somewhat amazing that anyone from an urban district would vote against this, thus some of these legislators’ votes deserve special attention. Clifford Bayer (R), Boise casts a vote that puzzles me. His district is part of the economic engine of the Valley. The Boise-Nampa MSA is responsible for 50% of state’s GDP. Voting to hamper the airport is no help to this economy or the citizens in his district.

Representative Hartgen (R), Twin Falls is the other mystery here. His vote is interesting first because his own district struggles with urban problems such as providing public transit - so he should be well aware of the need to start devolving authority to the governmental units that can actually solve his people’s problems. Secondly he is a professional economic development consultant. Voting against the public’s ability to provide infrastructure isn’t in any of the textbooks I had on economic development.

Several of the delegation from the CDA area voted against this measure as well, showing that they too do not yet grasp that their region is an urbanized area and also very much needs to have some flexibility to solve regional issues such as the traffic between CDA and Spokane, and also the border crossing to the north. No longer are CDA and Hayden sleepy little mountain towns on the way to nowhere.

Full details on the bill are available over at the Statesman.

Will Boise Lose Hawks Stadium?

There’s been a lot of hullabaloo surrounding Hawks stadium recently, mostly coming from Meridian. I have to hand it to Mayor DeWeerd and the Meridian Development Corporation: they have a vision, and a mission and they are going after it.

This morning the Boise Hawks unveiled a survey that showed a vast majority (75%+) of the 300 people surveyed, favored construction of a new multi-purpose sports facility somewhere in the Valley. It turns out that a plurality of people also identified MERIDIAN as the favored location for a new sports facility. I am guessing that this will have a few people at the City of Boise upset.

In January 2007, a design charrette for the 30th District Master Plan in Boise, revealed that the 200 people in attendance hoped that a new Hawks stadium would be built in downtown Boise. The photo below appears on page 185 of the 30th Street Master Plan, available on the City’s website.

Hawks Stadium envisioned as part of the 30th Street Neighborhood

So what say you, City of Boise officials? Are you working up a deal to make the stadium a centerpiece of a new 30th Street Neighborhood? The implementation plan for 30th Street says that within 1-3 years Boise City and CCDC will:

Identify where land assembly, land acquisition and/or development partnerships would help implement the development concept for each subdistrict. Initiate conversations with property owners to determine their level of interest in selling property, land assembly and/or development.

Where are we on this project? Granted the plan only went forward in June 2009, but with Meridian breathing down your necks, it might be time to kick this project into high gear - unless you really like the sound of “MERIDIAN HAWKS.”

The truth comes out: Harvard wrecked the economy

In my new favorite blog from Stanford Economist John B. Taylor we get a great dose of reality about the value of ideas. In a great blog post responding to the charge that Chicago School economists wrecked the economy, Professor Taylor shows graphically how that charge simply cannot be true. The graph below shows the number of University of Chicago, Harvard, and MIT economists on the President’s Council of Economic Advisers:

The only question I had after viewing the graph was, “well, yeah, but what about other policy makers?” He answers that too:

The data are robust when you look beyond the CEA to other top posts normally held by PhD economists. All assistant secretaries of Treasury for Economic Policy appointed during the Bush 43 and Obama Administrations had PhDs from Harvard. During the same period, all chief economists appointed to the IMF had PhDs from MIT, and, except for Don Kohn, who was promoted from within and Susan Bies who was appointed as a banker, all PhD economists appointed to the Federal Reserve Board were from Cambridge MA.

So the crash? Blame it on Harvard.

Veritas.

Poverty Rate in Boise Remains Low While West Suffers

A newly released Brookings report spells good news for Boise and its suburbs. While cities in the west, and particularly the suburbs (meant here as cities in an MSA outside the primary city, e.g., Meridian, Eagle, Nampa) saw increasing poverty rates, from 2000-2008, Boise maintained a low poverty rate compared to the other largest metro areas in the country:

2,100 Idaho Jobs Created or Saved from Stimulus? Impossible.

The following is an e-mail I sent to Idaho Statesman reporter Bill Roberts regarding his article in the Sunday paper on page A1. The article states that the $246 million that Idaho has received in federal stimulus money has created or saved 2,100 jobs. Here’s my retort, after doing the math:

Bill:

Interesting article you have on A1 of the Sunday paper. Something isn’t adding up, however. In September I sent the attached file over to Kevin Richert to review. In it, it shows that according to the records of the federal government, as of July 2009, Idaho had received $235 million in stimulus money for transportation projects. If you scroll to the last column of the file, you’ll see that only $671,000 has made it to payroll. That’s not a lot of money.

The figure you show in the paper says Idaho has received $246 million, and that economists estimate 2,100 jobs were created or saved by that infusion. That can’t be possible. Again, in the attached file, the feds are claiming that only 136 jobs have been created by the $235 million. There is just simply no possible way the $11 million dollars difference between our figures created 2,000 jobs. And I think the feds are over estimating that 136 unless they are annualizing those, which they must be.

If only $671,000 has made it to payroll so far, that doesn’t support that many jobs. The ARRA was passed in February 2009. Let’s assume then that at most this file shows the payroll generated by a full quarter - that is probably grossly overstating reality. But rolling with that assumption the findings are not so good.

Payroll of $671,000 per quarter for one year would support these various scenarios:

178 minimum wage ($7.25) jobs.
or
150 “living wage” ($8.63) jobs
or
130 jobs that could support a family of four at poverty level
or
45 jobs that could support a family of four at the “living wage” level

Thus it seems that the case you outline in the paper is probably grossly overstated. For certain there is no theoretical way (i.e., no mathematical way possible) that the money has created/saved 2,100 jobs.

The report I used was from data reported through July. The latest figures reported by the feds run through October 31, 2009. More money is finally hitting payroll - a total of $4.5 million has now made it to people’s pockets (remember though we got over $230 million). Assuming that $4.5 million is about 6 months of wages and the total wages paid out over the course of a year will be twice that - $9 million - here’s what we’re looking at for job creation/saving:

597 jobs at minimum wage
501 jobs at living wage
440 jobs supporting a family of four at poverty level
149 jobs supporting a family of four at living wage level

So we are still nowhere near the 2,100 jobs claimed. You can do the math yourself with the living wage calculator and the feds’ stimulus accountability reports. As poor a job as Idaho is doing spending the stimulus money, at least we didn’t get a nasty letter from the feds like Utah did. Finally, something we’re doing better than Utah.

Kuna Council Candidates: Not Best but WORST Practices

Today’s Idaho Statesman has a feature (at the back of the Sports page???) on the council candidates running throughout the Valley, and something very interesting is emerging: the battle to control Kuna.

While the races in Boise are pure Milquetoast (Bisterfeldt and Jordan are sure to win in a walk; Tibbs will give up his seat to cookie-cutter Thompson), Kuna fielded a slate of 10 candidates! It’s a real ding-dong fight to sort out who will control the resources of 13,000 people.

Anyway, the interesting thing that comes out of all this is that two of the candidates are running on the platform to somehow disallow business owners from serving on Kuna’s City Council. In light of an old construct called the U.S. Constitution, I am not sure how they plan to pull this off, but Corrina Stiles and Douglas Hoiland both oppose business owners sitting on the Council, according to the Idaho Statesman.

I attempted to visit both candidate’s websites to clarify their positions. Corrina Stiles, on her site, says this:

“When council members recuse themselves from decision making because of conflicts of interests, a small body of 4 is now even smaller. Is the answer to close city council membership to business owners, probably not. But we should indeed select council members who will not see a business financial gain or protection from decision making. ”

This raises the question of whether she changed her position when she filled out the Statesman’s questionnaire, or whether the Statesman got the story wrong. Maybe she’ll respond here and let us know.

As for Doug Hoiland, the 56 year old SOFTWARE DEVELOPER has no website so I can’t confirm or refute his position on business owners serving on the Council.

For the sake of argument and this column, let’s just assume that the both of these candidates have decided that because conflict of interests are so rife that it’s just not possible for people that own a business to serve on a city council. Might there be other opinions out there? Yes.

I just finished reading a book published by Harvard University Press, authored by University of Chicago Graduate School of Business Professor Sean Safford, entitled Why the Garden Club Couldn’t Save Youngstown. Hat tip to Idaho Department of Commerce Deputy Director Lane Packwood for the recommend; it’s a great read.

In the book, Safford writes a case study of two rust-belt towns, Youngstown, OH and Allentown, PA, and how they grappled with the changing economic conditions that hammered their industrial based economies beginning in the 1970s. Short story is this: while Youngstown got taken over by the mob and essentially died, Allentown attracted venture capital, grew its population, and is now thriving. Two cities starting with very similar resources end up in very different places. What accounts for the difference? Safford explains it as a matter of social capital.

Youngstown’s business and civic elite were one in the same. By the 1970s, when business began to collapse the third and fourth generation founding families of Youngstown’s economic engine retreated from public life, and civic life collapsed along with the economy. Allentown was a different story.

Allentown’s civic boards, rather than being interlocking directorates as in Youngstown, were opportunities to connect people that would not otherwise be connected. Managers from local economic powerhouses who had a vested interest in the place they lived (how novel) had replaced dilettante family members from Allentown’s big companies. Thus, civic boards remained viable and were ready to address the economic malaise that struck the Rust-belt with blunt force.

At the end of the short but powerful book, Safford arrives at one important conclusion for policy makers, economic developers, and their ilk:

“Incentives might be better directed to weaving company leaders into the local civil society. And in doing so, it makes sense to analyze the structure of that civil society and guide the leaders of key constituencies - economic, religious, social, and political - toward forms of participation that link up otherwise disconnected factions. One way to do this is to pay greater attention to the various advisory boards that mayors, county executives, and legislators control and use those as opportunities to create connections among communities that need to be connected.”

Alright, look. I am not an educational or social elitist by any means. I’m a guy that earned an M.A. from a regular old state school in Idaho, but here’s what we have here. A University of Chicago (one of the world’s top universities) professor argues that cities enduring economic change (like Boise) need to focus on connecting business leaders with civic organizations. Meanwhile, candidates in Kuna, where a whole 14.7% of the population has a college degree (about 10% below the Idaho average) are hauling off and saying just the opposite. I don’t know where Kuna folks get these ideas (see the picture above) but this guy (moi) is confident that they might not have this one right. Just sayin’.

David v. Goliath II: Blanchard v. Nelson on growth along the Snake River Plain

At the NewWest.net planning conference in June of this year, Professor Arthur (Chris) Nelson of the University of Utah raised some eyebrows when he outlined his predictions for the U.S. housing market over the coming decades, and his thoughts on what that meant for Idaho.

USC Professor Richard Green openly disagreed with Nelson’s projections as did BoDo developer Mark Rivers. The Calculated Risk blog also had some critiques, but nothing major.

Nelson’s analysis indicated that Idaho’s population would fill in along the Snake River Plain from it’s western edge in Ontario, OR, over to the eastern side of Idaho ending at Rexburg. For me it’s not how many people will move here, but where they will actually settle. Though Nelson believes growth will fill in along the I-84 corridor, evidence seems to contradict him indicating that growth will instead occur between the Wasatch Front, and move north to Rexburg - skipping the Boise Valley all together. There are good reasons for this.

Wealth is already leaving the Boise Valley for eastern Idaho and the Wasatch Front.

IRS data from 2006 and 2007 show positive migration to Ada County within Idaho. However, those migrating to Ada County from other parts of the state had average adjusted gross incomes of $33,337 annually, while those leaving Ada County for other parts of the state had annual incomes of $40,582. In total, residents worth $139 million moved to Ada County, and residents worth a total of $154 million moved out. That is a loss of $15 million in gross income for Ada County, to other parts of Idaho.

Additionally, in that same period, half of the top ten cities to which Boiseans moved were along the I-15 corridor with Provo, UT ranking first; Salt Lake City (2); Idaho Falls (5); Ogden, UT (7); and Pocatello (8). The more stable economic climate of eastern Idaho and Utah is but one reason why Boiseans are leaving.

There are strong sociocultural linkages between eastern Idaho and Utah.

It used to be said that Idaho had two capitals: Spokane, and Salt Lake City. Indeed, Coeur D’ Alene, ID is part of a two-state metropolitan statistical area (MSA) that includes Spokane and Coeur D’ Alene, and the Logan, UT MSA includes counties in southern Idaho. But physical proximity is not the only connection. The Church of Jesus Christ of Latter Day Saints exudes a strong cultural presence along the Wasatch Front and Eastern Idaho. With the presence of the new Temple in Rexburg and a growing BYU-Idaho campus there as well, the cultural linkages between eastern Idaho and Utah are only getting stronger.

Gaps in the transportation system separate the Boise Valley from eastern Idaho, and eastern Idaho from Utah. The gap between Utah and eastern Idaho, however, is shrinking more quickly.

Traffic patterns along Idaho’s highway system (seen below) show a consistent level of traffic between Ontario, OR and Heyburn, ID. Traffic drops off significantly, though, between Heyburn and American Falls. Traffic flows again pick up significantly between American Falls and Rexburg.

Lower traffic counts also show up on I-84 heading south out of Heyburn, and on I-15 heading south out of Pocatello, much like the reduced counts between Heyburn and American Falls. In this day and age of regional employment exchange will eastern Idaho ultimately align itself along I-84, or I-15?

If America’s foremost planners with the America2050 project have their way, the Pioneer rail line - which runs from Seattle to Chicago by way of Boise and Salt Lake City - will one day run again. But that line also contains another important spur: the link from Salt Lake City to Pocatello. As gas prices rise, airlines will offer fewer flights meaning Boise will inevitably end up with less air service in favor of airlines servicing larger airports such as Salt Lake and Denver. The rail link between Salt Lake and Pocatello, which also mirrors the west coast’s chief north-south land route between Mexico and Canada (CANAMEX) will exert strong pressure on the region to further develop in a north-south manner, and not throughout the Snake River Plain.

With white-collar job growth flat or shrinking in the Boise Valley and the economy in eastern Idaho more stable, strong sociocultural linkages between eastern Idaho and Utah, and a developing transportation network between eastern Idaho and Utah, evidence seems to suggest that the north-south corridor along I-15, rather than the east-west corridor along I-84 seems better poised for long-term economic and population growth. Alas, only time will tell.