City of Boise

An Economic Outlook: 2003 - 2007

By: John Church

February 11, 2003

Boise has enjoyed an unprecedented period of economic growth. Prior to 2002, it had been twenty years since the city experienced a year in which its total employment had not posted an overall gain from prior year levels. That string of remarkable growth started rather modestly with annual employment gains averaging 2.4% per year, only marginally faster than the nation as a whole, during the years 1983 through 1987. However, the pace of growth quickened in the next seven years, 1988 to 1994, with annual average employment gains of 6.8% per year, -- nearly 3.5 times the national rate.

Since 1994 job growth in the City continued to outpace the nation and Idaho with annual employment gains that averaged 4.5% per year through the year 2000. At times the total employment gains in the City and its major area of direct impact, the Boise MSA (Ada and Canyon counties), accounted for nearly all of the employment growth in the state of Idaho.

However, in 2001 it became obvious that this period of economic prosperity was in danger of stalling. As it did. Furthermore, the momentum for this economic slowdown was firmly in place prior to the terrorist attacks of 9/11, as can be seen below.  

In 2001 nonagricultural employment growth in Ada and Canyon Counties slowed to the lowest level experienced since 1987 � 1.5% and 1.4%, respectively. The state fared slightly better in 2001 with an annual average increase of 1.8% in non-ag jobs.

The employment situation locally, and in Idaho, did not improve in 2002. With year-end 2002 employment figures now available indications are that Idaho will post an overall loss in non-ag employment of 0.5% for the year � about 2,700 jobs. And what had been the state�s engine of growth, the Boise MSA, seems to have fared worse than the state as a whole, with an overall non-ag employment loss of 1.5%, 3,300 jobs, in 2002. In addition, of those 3,300 jobs lost in the Boise MSA, nearly 80% were within Ada County.

Early in 2002 indications were that the US economy was on a path to economic recovery. Real GDP increased by 2.8% in the fourth quarter of 2001 to be followed by a robust 5.0% gain in the first quarter of 2002. But, US GDP growth has exhibited a high degree of volatility since that time with estimates of GDP in the second quarter of 2002 slowing to a 1.4% pace before rebounding to a 4.0% rate in the third quarter. Nevertheless, the volatility remains to be of concern. Current consensus estimates are that real GDP in the US will only increase by 1.4% in the fourth quarter of 2002.

Today there seem to be no easy answers about the economic recovery. Strong action on the part of the Federal Reserve Bank kept interest rates low and fueled  waves of consumer spending and new home building. However, these policies may have run out of fuel, at least as far as consumer spending and home building are concerned, at this point in the recovery. Importantly, for an economic recovery in Boise, these policies have not spurred on new rounds of business investment spending which has been sorely lacking throughout the past two years.

The growth of Boise�s manufacturing industries during the past twenty years has been the envy of many other communities. From nearly 8,500 jobs in 1980 manufacturing employment in Ada County increased at an annual average rate of 5.7% over the next twenty years to reach nearly 25,500 jobs in 2000. In that twenty year period 95% of the state�s overall growth in manufacturing employment was posted in the Boise MSA. And the high-tech industries of non-electrical machinery and electrical and electronic equipment account for 77% of those manufacturing job gains. While we may all agree that these �high-tech� job gains were welcome, they have contributed to the current economic slowdown in the Boise area economy.

The severe downturn of the technology sectors, the implosion of the .com and telecommunications industries, plus a slowing of overall economic activity due to the national recession, forced the Boise area into its first recession in twenty years.

The Idaho, Boise, MSA, and Boise City Economy: 2003 � 2007

The US economy will enter a full-fledged economic recovery in 2003. However, most economists agree that it will most likely get into full swing in the last two quarters of 2003. And, most economists hold the view that the economic recovery will not be driven by a surge in the high-tech industries. 

Idaho�s economy will also experience an economic recovery in 2003. However, it may be late in the year. Nonagricultural employment in Idaho is expected to increase by 1.4% in 2003 to be followed by 1.8% and 2.0% increases in 2004 and 2005, respectively. Nevertheless, these employment gains, while positive, would be the slowest period of employment growth that the state has experienced since 1991.

Manufacturing employment in the state is not expected to rebound in 2003. A further loss, of 0.6% (about 450 jobs) in manufacturing industries is expected in 2003 before the industry makes a turnaround in 2004 and 2005 posting employment gains of nearly 350 and 1,300, respectively. The �high-tech� manufacturing sectors are expected to be the areas of employment losses in 21003 and the main creator of the manufacturing employment gains in 2004 and 2005. However, I believe that the majority of the near term losses in �high-tech� manufacturing employment will be in the Boise MSA.

While manufacturing job gains in the Boise area may be weak in 2003, the service and trade industries will regain some momentum and cause overall non-ag employment growth in the Boise MSA to near 1.9% in 2003. Nonagricultural employment is expected to increase by 2.3% and 2.5% in the years 2004 and 2005, respectively. Nevertheless, it should be pointed out that these rates of employment growth are very slow when compared to the recent historic norms -- 4.2% per year from 1995 to 2000.

Ada County is expected to capture the majority of the job gains within the Boise MSA over the five hear forecast period. This seems to be a continuation of recent past trends where Boise City captures the lions share of the employment gains in the Boise MSA.

Population Growth:

It is estimated that population in the Boise MSA increased by nearly 90,000 from 1995 to 2002, an annual average increase of 3.1% per year. That is early 70% faster than the overall rate of population growth in Idaho -- 1.8% per year -- during the same period and near three times the national rate of population growth.

Population is determined by place of residence. Employment is allocated by place of work.

However, the population growth dynamic has changed in the Boise MSA. Canyon County has captured an increasing share of the MSA�s population additions over the last seven years. In 1990 Canyon County accounted for nearly 20% of the housing unit additions in the Boise MSA. In 2002, Canyon County posted nearly 50% of the housing unit additions in the Boise MSA.

Boise City has steadily lost its share of new housing unit additions (single and multi-family units) over the last twelve years. In 1990 nearly 55% of the housing additions in Ada County were within the Boise City limits. In 2002 Boise capturing less than 20% of the housing unit additions in the county. This is a trend that is expected to continue in the future.

In the 2003 to 2007 period I expect Boise to capture 2,639 multi-family housing units, nearly 77.5% of the total multi-family additions in the Boise MSA during the period. In addition, Boise will capture nearly 4,250 single-family housing units in the 2003 to 2007 period. This represents nearly 24.2% of the total single-family housing additions expected in the Boise MSA during the 2003 to 2007 period.

This will have implications for Boise City�s overall population growth in the future. In the 2003 to 2007 forecast period, population in Boise City is expected to increase at an annual average rate of 1.1% per year for an absolute gain of about 16,300. The remainder of Ada County is expected to increase at the faster rate of 1.6% per year during the 2003 to 2007 period adding nearly 22,200 to the population rolls. In addition Canyon County is expected to increase at a 1.4% annual pace � also faster than the Boise City pace � adding 15,400 in population by the year 2007.

These outcomes have implications for the city. Expectations are that the employment gains in the Boise MSA will largely by concentrated inside the Boise City limits. On the other hand the population and residences of these workers will increasingly be outside of the Boise City limits and outside of Ada County.

This phenomenon has continued over the last two years of slow economic growth. It will most likely accelerate when the local economy regains momentum.