Income for Idaho workers has grown between 25 percent and 32 percent since 2015, but housing prices have soared more than 150 percent in the same time period, the Idaho Department of Labor reported to state lawmakers on Thursday.
“It’s certainly not keeping up with the increase in housing,” Craig Shaul, research analyst supervisor for the Idaho Department of Labor, told the joint Economic Outlook & Revenue Assessment Committee.
Idaho’s housing price increase from 2015 to today was “almost five times more than what the nation’s increased on the average,” Shaul said. And while Idaho’s economy is booming, Shaul said wage increases are expected to taper off over the next two years, raising questions about how Idaho will house its future workers.
With Idaho currently facing a labor shortage, the price and supply of housing “seems to be more and more of a problem,” Shaul said. “I would say it’s not necessarily preventing people from moving here yet,” he told lawmakers. “It’s something to keep track of.”
From the first quarter of 2015 to the third quarter of 2021, while Idaho’s housing price index rose 150.2 percent, annualized personal income per capita rose by just 25.8 percent, and annualized wages and salaries per employed person rose by 32.3 percent, Shaul reported.
The Labor Department presentation was part of two days of briefings on the economy to a joint committee of lawmakers preparing for the legislative session that opens Monday. The panel will use the information, which includes reports on various sectors of Idaho’s economy, to estimate how much tax revenue Idaho is likely to collect next year, a key factor underlying how the Legislature will set the state budget.
A recurring theme among Thursday’s presentations was the state’s labor crunch.
“It’s a job-seeker’s market,” Shaul said. Workers are “churning in and out of jobs and industries, and a lot of them are getting pay raises doing that,” he said. Plus, the growth of remote work has meant that “the competition for workers isn’t just for the business across the street or another industry across town. It’s for someone in another industry or another business in another state. So that’s something that will probably be a continued challenge going forward.”
Meanwhile, Idaho’s labor force participation has dropped to a new low, at 62.3 percent. That’s still above the national average of 61.8 percent, Shaul said, but it’s concerning, in part because a major factor is retirements. “We’re not going to get those workers back,” he said.
Meanwhile, he said, “We’re at record-level job postings. … There aren’t enough people in Idaho to fill these positions that employers are trying to fill. We expect it to continue for the next two years.”
With Idaho’s economy booming, unemployment rates among the five lowest in the nation, and Idaho being one of only four states whose job numbers are now exceeding pre-pandemic levels, Shaul said labor force supply limitations will be “a long-term challenge.”
The largest job increases in Idaho in the next two years are expected to be in the leisure and hospitality and health care sectors, he said.
Sen. Jeff Agenbroad, R-Nampa, asked, “How are we going to attract these people, and where are they going to come from?”
Shaul noted that Idaho “still seems to be a location that people want to travel to and move to.”
The state’s population growth, at 2.9 percent over the past year, is the highest in the nation, and has been for five straight years.
“There may be some factors that may interrupt with that, like with the housing prices, those types of things, I’m a little concerned with. You might see some resistance there and provide some sort of drag on that factor,” he said. “But right now, it seems to be that people are moving here in large numbers, large enough for Idaho to continue to have one of the strongest economies.”
Other presentations on Thursday covered how state tax revenues continue to exceed projections by unprecedented amounts.
The state’s cash balances and budget reserves now come to approximately $2 billion, which is 46.5 percent of the total general fund budget for the state for this year, fiscal year 2022. That compares to a cash cushion of 23 percent of the general fund budget that Idaho had in 2008 as it headed into the Great Recession, which it navigated by parceling out those funds over several years.
Several members of the legislative panel pondered how much of Idaho’s huge surplus is one-time and how much is ongoing, particularly as lawmakers consider additional tax cuts. As far as the state general fund revenue surplus, it doesn’t count federal stimulus or aid funds.
“I think there is no doubt that there are federal funds that are contributing to our record revenues, but then there’s also economic indicators in the state that would suggest that it’s not just federal funds,” legislative revenue analyst Erin Phipps told the committee in response to a question from Rep. John Vander Woude, R-Nampa. “We have record low unemployment, we have very high population growth in the state.” Pinpointing the multiplier impact of federal aid is difficult, she noted, but the state also clearly is growing. “I also see those healthy economic indicators continuing to trend upward.”
Legislative budget director Keith Bybee said, “Even with the historic tax cut that was passed last year, to date, withholding taxes are significantly outpacing where we were compared to last year. … So it’s pretty remarkable what’s going on in the economic side.”
State Economist Greg Piepmeyer noted, “Your employer doesn’t withhold if you’re not earning money.”
He said part of why Idaho is doing so well economically is from strength in manufacturing and construction, even through the pandemic. “As a state, we did not shut those down,” he said.
Gov. Brad Little will release his tax revenue estimate for next year on Monday, when he also will present his State of the State and budget address to lawmakers, opening the 2022 legislative session.