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!

Otter: “When we come out of this recession, Idaho is going to lead us.”

I know you all watched the primary election coverage on FOX 12, but after I got done telling you everything you needed to know about the election, you had to flip over to KTVB to watch the rest of the results. And if you did, you saw Governor Otter give a very strange speech.

In rallying the party faithful, Otter proclaimed “when we come out of this recession, Idaho is going to lead us” and “We’re gonna show the nation in the next four years how it’s done.” As a former political consultant I can only surmise that his communications staff did not tell him to say such things. Here’s why.

First of all, according to the Bureau of Economic Analysis, that is, the agency that keeps official tabs on the economy, the U.S. came out of the recession as early as July 2009. In fact, we have now had three consecutive quarters of positive GDP growth.

Secondly, Idaho did not lead the U.S. out of the recession. Fact is, Most of Idaho is still in a recession and the economic driver of the Idaho economy, the Boise-Nampa MSA which generates 50% of the state’s GDP is one of the worst performing metro areas in the country. This chart from Brookings Mountain West’s Mountain Monitor tells the story:

As you can almost clearly see, of the largest 100 metros in the U.S., Boise is 95th in the country in employment losing 10.7% of the job base since the peak of employment. Boise’s housing market is also nearly the worst in the country among the large metros - ranked 96th - among the 100 largest cities. Brookings has the whole report posted at their website.

The one thing that we know for sure is that bravado is not going to do a darn thing to help us get out of this funk, neither is ignoring it, or pretending it isn’t there. The fact is, the U.S. is out of the recession, and Idaho aint, and someone’s got to do something about it eventually.

Note to Rural Legislators: All Your Base are Belong to Us

I’ve been singing the “Idaho is Urban” song for many years now, whether it was my “This Urban Idaho” article, or my “Myths of Idaho” presentation at Ignite Boise 1. Then all of a sudden this week we get not one but TWO articles confirming what all of us who don’t serve in the legislature already know: urbanization in Idaho and the U.S. is a continuing trend.

An article in the Statesman discussed what 2009 Census data revealed:

The latest U.S. Census figures released last week estimated that 23 rural Idaho counties had more people moving out than moving in during a 12-month period ending in June 2009. That’s the largest number of counties recording out-migration since 26 of the state’s 44 counties experienced the same trend between mid-2000 and mid-2001, the last major recession.

The figures, released by the Idaho Department of Labor, show more than 3,200 people moved out of those counties. Statewide, the data show the Gem State’s population increased by nearly 19,000, or 1.2 percent, making Idaho 12th strongest nationwide. Of that population increase, 29 percent was in Ada County; 13.6 percent in Canyon County, and 13 percent in Kootenai County.

As we learned from the Brookings Mountain Monitor report last week, this is fairly typical. One of the reasons that the smaller cities in the Intermountain West appear to leading the region out of the recession is because they are “exporting” their unemployment. Thus, when times get tough in rural areas, unemployed workers move to population centers to find work, and the unemployment rate in the rural areas goes down.

But not only are people moving out of the hinterland to the city, within the city they are moving closer to the core. For the second year in a row, the EPA has found that housing starts in urban areas are increasing. You can read the updated report for 2010 at the EPA’s website.

Attention Idaho Legislators: learn it, know it, live it - the few remaining souls in the hinterlands have left, and they are in our cities. Said another way, all your base are belong to us.

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.

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’.

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!)