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Consumer Confidence

The Zions Bank Utah Consumer Attitude Index increased 3.7 points to 102.9 in April. The U.S. Consumer Confidence Index® decreased 1.6 points to 82.3 in the same period.

Housing Market

In March, the CoreLogic® Home Price Index (HPI) for Utah—which measures home price appreciation—showed a year-over-year increase of 9.2%. Nationally, the HPI increased 11.2% during the same period.”

Consumer Prices

The Zions Bank Utah Consumer Price Index increased 0.7% from February to March for a trailing 12-month inflation of 1.4%. In the same period, the U.S. CPI increased 0.6% for a trailing 12-month inflation of 1.5%.

Job Report

Utah’s unemployment rate increased 0.2 percentage points to 4.1% in March, while the national unemployment rate decreased 0.4 percentage points to 6.3% in April.

June 2014

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Randy Shumway, Zions Bank Economic Advisor

Utah Economic Outlook

Randy Shumway, Zions Bank Economic Advisor

Utah’s striking landscape holds a wealth of conventional energy resources, as well as significant potential for renewable energy production. According to the Utah Office of Energy Development, energy production in Utah was valued at $4.7 billion in 2012—creating $587 million in state and local revenues and accounting for roughly 17,000 jobs directly related to energy. Energy production in Utah is at a 24-year high, and is likely to continue growing. In anticipation of future growth, the state’s lawmakers, business community and educational leaders are taking steps to improve and streamline the manner in which energy is both extracted and generated in Utah. These efforts will ensure that Utah meets its future energy demands and creates increased economic impact from energy production, while producing both conventional and unconventional energy in a responsible and environmentally-conscious manner.

In the spring of 2011, Governor Herbert introduced Utah’s 10-Year Strategic Energy Plan. The Energy Plan represents ongoing collaboration between public and private individuals, businesses, and organizations to promote safe and responsible energy development. It prioritizes environmental protection, and facilitates the export of Utah’s energy and energy-related technologies to the national and global marketplace. The Energy Plan also outlines practices designed to build lasting partnerships among the state’s industries, institutions of higher education, government leaders, and local communities to address challenges and opportunities related to energy production.

The Energy Plan has been widely praised, and the state has been the beneficiary of national accolades for its creation. Several of the actions initiated in accordance with the Energy Plan have had a substantial impact on the state’s energy practices. For example, under this plan, state leaders have facilitated cooperation among institutions of higher education, and Utah’s research universities are now interactively developing cutting-edge technologies related to the generation, transportation, and use of energy. Some of these involve environmental emission mitigation strategies—such as oxy-fuel combustion and carbon sequestration—that enable energy generation from conventional resources while lowering emission of harmful pollutants. The Energy Plan was also instrumental in the creation of a new graduate degree at the University of Utah: the Petroleum Engineering Master of Science. This field is expected to grow 17 percent by 2020— since Utah has enormous potential for conventional energy production, demand for experienced petroleum engineers is increasing dramatically. One key challenge that lies ahead for the state involves the development of energy production on federal lands. Because the federal government owns and manages roughly 60 percent of Utah’s land, the Utah Office of Energy Development has worked with the Bureau of Land Management to form the Utah Energy Development Action Team. This entity supports open communication and collaboration between state and federal stakeholders with the goal of responsibly advancing forms of energy development on federally-owned public lands. Highlighting the importance of this effort, a 2012 study conducted by the Western Energy Alliance estimated the economic impact of potential energy production projects on Utah’s federally-controlled public lands to be roughly $12.7 billion, including the creation of over 60,000 jobs.

Utah’s lawmakers have made headway in providing tax incentives for individuals and businesses that pursue responsible energy practices. For instance, the Cleaner Burning Fuels Tax Credit Amendment allows individuals and businesses that use cleaner-burning fuels to pay lower income taxes—a key development considering Utah’s current air quality concerns. In another example, lawmakers have enacted a sales tax exemption for businesses that utilize combustion-free natural gas or biogas generation, like fuel cells. These tax incentives encourage the use of cleaner energy and promote more responsible energy practices within the state.

Utah’s abundant energy resources and forward-looking initiatives for energy use and production will continue to stimulate the state’s economy in the future. Ongoing collaboration among Utah’s concerned stakeholders will promote the right balance between profitability and responsible practices, ensuring the state retains its beauty and high quality of life, while also growing its capacity for significant energy production and subsequent economic impact.

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U.S. Economic Outlook

Short-term U.S. Outlook: Several recently-released economic reports point to a strengthening U.S. economy. While first-quarter data suggests that harsh winter conditions may have temporarily softened the nation’s economic progress, experts are increasingly confident that the second quarter will be characterized by improving economic growth and stability. Specifically, concerns surrounding inconsistency in the housing market are expected to be offset by growth in manufacturing, consumer spending levels and the labor market.

Economists anticipate second-quarter economic growth of 3 percent or more after a less-than-expected 0.1 percent increase in the first three months of the year. These projections are driven, in part, by a jump in manufacturing activity across the nation, which accounts for roughly 12 percent of the economy. According to the Institute for Supply Management, manufacturing activity climbed 0.5 percentage points in March from the month prior, marking the tenth consecutive month of expansion. Of the 18 manufacturing industries, 14 reported growth in March, led by Petroleum and Coal Products and Transportation Equipment. Experts believe the surge in activity is directly related to manufacturers’ anticipation of increased demand from businesses and consumers.

In step with manufacturing increases, the nation’s economic recovery has been bolstered by rising levels of consumer spending. The Commerce Department reports that retail sales increased 1.1 percent in March from the month prior—the strongest gain since September 2012. Growth was driven by purchases at general merchandise stores, where spending reached levels not seen since before the recession. Moreover, retail sales at building materials and garden equipment stores saw the largest gains in 8 months. Spending increases were nearly comprehensive—retailers of furniture, clothing, health and personal care, food and beverage, and sporting goods retailers all saw gains—and this is a positive signal for growth through the rest of 2014.

Higher spending levels have, in part, been facilitated by softer lending standards. The Wall Street Journal reports that mortgage lenders are lifting some of the stifling restrictions enacted after the housing crisis. Historically, lending standards are still relatively tight, but banks have begun to accept smaller down payments and lower credit scores when determining loan eligibility. This development should enable more would-be homeowners to pursue housing purchases, thereby bolstering economic activity in construction and other related sectors. Easing lending standards will likely promote improvement in the nation’s housing market, which continues to push forward inconsistently. While March’s housing data reveals higher home prices and lower sales of new and existing homes, the ability for more consumers to acquire home loans will likely spur activity in the coming months.

The Federal Reserve’s release of its April Beige Book provides more good news related to the U.S. economy. It shows a strengthening transportation sector, rising tourism activity, and increasing consumer and business demand for home, auto and small business loans, which will likely translate to higher levels of economic growth in the coming months. Coupled with continued gains in the labor market, the nation’s short-term outlook is promising.

Long-term U.S. Outlook: The nation’s long-term economic outlook remains highly dependent on global developments. Economic growth in the Euro Zone surprised many experts in the past month. Led by Germany, the largest economy in the EU, gains in the services and manufacturing industries bolstered overall growth. Markit’s flash composite PMI, a measure of business activity in the EU, increased 0.9 points to 54—the highest rating since the spring of 2011. This marks the tenth consecutive month the PMI has been above 50, indicating that the EU’s recovery is gaining momentum. A strong EU promotes domestic growth, as Europe is a main trading partner for the U.S. Given the geopolitical and subsequent economic impact of the ongoing Crimean crisis, world leaders will continue to press for a resolution. Because global economic growth and U.S. prosperity are greatly impacted by this delicate situation, resolution cannot come quickly enough.

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Labor Market

The labor market continues to show signs of vitality, both in the state of Utah and nationally. As indicators of strength in the labor market improve, it is becoming increasingly clear that the somewhat-negative numbers seen in previous months were likely bumps in the road brought on primarily by inclement weather.

The unemployment rate increased slightly in Utah from 3.9 percent in February to 4.1 percent in March, despite the fact that the state’s population grew by 2.8 percent and added 35,800 jobs when compared with March 2013. The month of March was marked by job increases in all ten private sector industries. Because unemployment increased despite job growth, it is possible that some discouraged workers (workers who are not actively looking for jobs and therefore not included in the unemployment rate) may have returned to job searching.

Nationally, unemployment decreased from 6.7 percent to 6.3 percent in April, as 288,000 jobs were added to the economy. This marks the lowest unemployment rate since 2008. This is undoubtedly good news as the labor market beat expectations in both job growth and the unemployment rate. There is one grain of salt in that the labor force participation rate decreased from 63.2 percent to 62.8 percent, which is the lowest rate in decades. Having said that, the state of the national labor force is looking much more positive than it was last month.

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Housing Market

Nationally, the housing market continued on a bumpy road to recovery in the month of March. Housing prices increased 1.4 percent from February to March, according to the CoreLogic Home Price Index, which represents an 11.2 percent increase from March of 2013. In Utah, housing prices increased 1.1 percent over the same period, which represented a 9.2 percent increase from the previous year. These increases don’t indicate particularly fast growth and may represent a slight cool down for the housing market. Home prices remain 16 percent below their pre-recession peak nationally and 13.7 percent below their pre-recession high in Utah.

Utah’s increasing rate for housing prices—up 0.9 percent—slightly outpaced the national market. Since prices have been steadily increasing for a few years now, a number of Utah-based builders are projecting that demand for single-family homes will continue to rise. Others, however, see affordability as a developing issue and anticipate a movement toward apartment rentals. The jury is still out on which option more Utahns will prefer in the future, but as the state’s population continues to expand, there may very well be room for growth in both areas.

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Zions Bank Utah Consumer Attitude Index

The Zions Bank Utah Consumer Attitude Index (CAI) increased 3.7 points to 102.9 from March to April. The CAI has now increased for six consecutive months and has once again reached its highest point ever behind improving business conditions. For comparison, this month’s national Consumer Confidence Index® (CCI) decreased 1.6 points to 82.3.

Utahns’ confidence in current business conditions has also reached a new all-time high, with 43 percent of Utahns expressing that current business conditions are good. This is only the second time since the CAI’s inception in 2011 that more than 40 percent of Utahns have rated current business conditions as good. Only 8 percent of Utahns rate current business conditions as poor, which is an all-time low. Many Utahns expect business conditions to improve six months from now, as well. Thirty-one percent of Utahns think business conditions will be better six months from now, up three percentage points from March.

Utahns attribute at least some credit for this economic optimism to their state government. In fact, 85 percent of Utahns think the state government is doing a good or fair job with its economic policy, up five points from the previous month. Meanwhile, only 39 percent of Utahns think that the federal government is doing a good or fair job managing the economy. Although the approval rating of the federal government is still very low relative to the approval rating of the state government, Utahns’ appraisal of the federal government increased five percentage points this month and currently stands well above its historical average.

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Zions Bank Utah Consumer Price Index

The Zions Bank Wasatch Front Consumer Price Index (CPI) increased 0.7 percent from February to March on a non-seasonally-adjusted basis. Over the last twelve months, prices have increased in Utah by 1.4 percent. The national Consumer Price Index, released by the Bureau of Labor Statistics, increased 0.6 percent from February to March on a non-seasonally-adjusted basis, and has increased 1.5 percent over the past twelve months.

As expected, Utahns paid substantially more for gasoline in March than they did in February, and overall month-over-month transportation costs were 1.5 percent higher. Utahns paid $3.35 per gallon of gasoline in March, up from $3.14 in February and $3.11 in January. This is the highest price for gasoline in the state since October 2013. Utahns should expect gasoline prices to continue to rise. Last year, gasoline prices rose each month from January to June, and most analysts expect similar trends this year due to increased seasonal demand and the switch to more expensive summer blend gasoline.

In addition, consumers in Utah paid more for food at grocery stores in March: food-at-home prices increased 1.0 percent from February to March due to higher costs for produce and meat. Prices for food at home have now risen for four of the past five months. This is primarily due to a spike in produce prices, which have increased about 4 percent each month over the last five months. Produce prices—specifically citrus fruit prices—have risen substantially because of inclement weather across the globe. In fact, in March, consumers may have noticed that for the cost of limes increased substantially. Because of winter crop damage in Southern Mexico, supplies are tight. In Western states that rely heavily on Mexico for limes, the shortage has sent prices soaring to a record $100 per case—up from an average of $14 per case. This added cost hurts produce suppliers, restaurants, and consumers alike.

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Geothermal Energy Production In Utah

According to the Utah Office of Energy Development, roughly 98 percent of the energy produced in Utah comes from conventional resources such as coal, crude oil and natural gas. While renewable sources like hydroelectric, geothermal, wind and solar currently comprise a small percentage of the state’s overall energy mix, new developments are driving growth in renewables. Utah’s investment in renewable energy sources—specifically in geothermal energy production—drives new jobs and economic activity in the energy sector and supporting industries.

The Beehive State is a rising star in terms of its geothermal power potential and development. Currently, Utah has two geothermal electrical generation power plants—one in Roosevelt Hot Springs, and the other in Cove Fort (Enel Green Power), which began operations at the end of 2013. With the opening of the Cove Fort plant, Utah increased its operating geothermal capacity from 48 megawatts to 73 megawatts, ranking it 3rd in the nation in terms of output. Recently, a geothermal resource was discovered in the Black Rock Desert basin south of Delta, and it will likely lead to a significant increase in the state’s geothermal energy production. To overcome the main limitation related to geothermal energy production—lack of transmission lines connecting valuable geothermal hotspots to the energy grid—the state is planning the creation of several new lines. These transmission lines will also increase the state’s capacity to create connections with Wyoming, Nevada, and California.

Growth in geothermal energy production will continue to have a positive impact on Utah’s economy in the future. With 19 geothermal projects in the works, the state has hundreds of jobs directly and indirectly tied to geothermal energy generation. The process of capturing this valuable resource creates jobs in operations and maintenance, construction, manufacturing, and support industries. Geothermal energy generation also carries a small environmental footprint—very little carbon dioxide and no other gases are released during production. According to the U.S. Department of Energy, the amount of electricity generated in the Cove Fort plant, when compared with generating energy from conventional sources, allows the state to avoid 115,000 tons of carbon dioxide emissions annually. The environmental benefits of geothermal cannot be overstated considering the concerns wrought by Utah’s growing air quality issues.

Utah’s past and future investments in geothermal power have, and will continue to have a positive impact on the state’s economy, environment and high quality of life.

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Competitive Market: Short-Term Pain, Long-Term Gain

Over the course of the 20th century, Detroit established itself as the capital of America’s all-important automobile manufacturing industry—a global paragon of modernity, national entrepreneurialism, and labor. In fact, by the middle of the century, the automobile industry employed nearly one in every six working Americans either directly or indirectly. By 1950, Detroit was the 5th largest city in the U.S.

However, between 1948 and 1967, operational restructuring forever altered the auto industry and Detroit lost more than 130,000 jobs in manufacturing. No longer the engine of American capitalism, Detroit started to embody America’s urban crisis in the 1970s. As more efficient and consumer-focused overseas competitors took a bite out of the American auto industry, Detroit was left with an alarming scarcity of jobs and a significant population to support. Over these years, a number of policies were enacted to artificially shelter jobs by counteracting competitive forces—these policies stabilized wages for a time, but resulted in long-term inflated labor costs, inefficient production, and manufacturers’ troubling incapacity to align with customer demands. Rather than reversing course and facing the short-term pain required for the automotive industry and its associated workforce to evolve, leaders in Detroit essentially kicked the can down the road by requesting a federal bailout. In 2013, on the coattails of these near-sighted policies, Detroit went bankrupt.

Policies designed to shield jobs from the prevailing winds of economic and technological change rarely return long-term positive results, socially or economically. Given the founding economic principles that drove our country’s rapid ascent, it is surprising that the term “competition” has often been viewed negatively—even derisively—in recent years. Competition creates constant change and, frankly, change is difficult to endure, even when it is necessary and positive in the long view. But when fair competition is allowed in an open market, products and services almost always improve while prices decline. And in the long run and in the aggregate, the workforce is markedly better off—even when that requires retooling and retraining in the interim.

If history proves the value of evolution and innovation again and again, why are so many of today’s protectionist policies instead shackling critical sectors of our economy? While protectionist policies may be good short-term politics, their capacity to curtail social and economic advancement is real and often stifling. Once again, America’s economy is in flux. Just as we moved from an agriculturally-dominant economy to a manufacturing-dominant economy 100 years ago, we now need to adapt and move to a new economy based on information and technology. Our policies need to thoughtfully engender, not obstruct, this transformation.

New technology simplifies processes and streamlines the amount of labor and expense involved. Consider how, only years ago, Americans treated a long-distance phone call like an open refrigerator—and for good reason. Prior to 1984, the long-distance monopoly ensured limited innovation, inefficient fulfillment, and high rates. Today, thanks to technological evolution and free market competition, we hardly even pay for long-distance calls. If a provider doesn’t meet our needs, we have a plethora of alternatives. Think of how expensive the first home computers were and how little they did—while delivering only a sliver of the capacity of current mobile phones, those old computers cost thousands of dollars. The role of technology in competition is hard to overstate. As technology advances, both in response to and in facilitation of competition, costs associated with functionality decrease.

Competition encourages companies to use cutting-edge technology to produce the best possible product at the lowest cost. Time and time again, economic history shows that although an open market and competition can inflict short-term pain on established industries—such as a loss of manufacturing jobs in Detroit—it will ultimately return long-term economic and social gain. Therefore, rather than neutralizing competition, public policy must thoughtfully focus on enabling competition while simultaneously facilitating the essential retooling of the workforce’s skills and knowledge. As workers periodically stretch and pivot their careers in line with technological advancement, the U.S. workforce will be significantly better off in the long run. We need policies that encourage fair competition and innovation, enabling our nation to produce better products at lower costs, and propelling a higher standard of living for all.

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Consumer Confidence

The U.S. Consumer Confidence Index® decreased 1.6 points to 82.3 in April. The Present Situation Index decreased 4.2 points to 78.3, while the Expectations Index increased 0.1 points to 84.9 in the same period.

Housing Market

In March, the CoreLogic® Home Price Index (HPI) for Idaho—which measures home price appreciation—showed a year-over-year increase of 7.4%. Nationally, the HPI increased 11.2% during the same period.

Inflation

The U.S. Consumer Price Index increased 0.6% from February to March. The index saw a year-over-year increase of 1.5%, which is below the Federal Reserve’s target annual inflation pace of 2–3%.

Job Report

Idaho’s unemployment rate decreased 0.1 percentage points to 5.2% in March, while the national unemployment rate decreased 0.4 percentage points to 6.3% in April.

June 2014

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Randy Shumway, Zions Bank Economic Advisor

Idaho Economic Outlook

Randy Shumway, Zions Bank Economic Advisor

The Gem State boasts an abundance of natural resources, and energy production has a substantial impact on the state economy. According to the Idaho Department of Labor, approximately 6 percent of the state’s total jobs are directly tied to the energy cluster, and these jobs generally pay more than the state’s average wage. While the recession reduced employment in energy-related industries by about 15 percent from 2007 to 2010, energy production has revived in the past few years and this resurgence is expected to continue. In anticipation of future growth, the state’s lawmakers, business community and concerned stakeholders are taking steps to improve and streamline the manner in which energy is both extracted and generated in the state. These efforts will ensure that Idaho not only meets its future energy demands and generates meaningful economic impact in energy production, but also produces energy in a responsible and environmentally-conscious manner.

Idaho is a net-energy importer—roughly 75 percent of the energy used in Idaho comes from outside the state. While Idaho has vast renewable resources, it has a shorter supply of conventional resources such as petroleum and gas. Rising energy prices across the nation make the import of energy a real challenge for Idaho’s concerned stakeholders. In response to this issue, Governor Otter established the Idaho Strategic Energy Alliance, which works to advance energy production, energy efficiency, and development of energy-related business in Idaho. Through the Strategic Alliance, Idaho has created the Industrial Energy Forum. Composed of stakeholders from a wide range of Idaho companies, this entity works to reduce the state’s energy usage footprint by implementing cutting-edge technologies in Idaho businesses.

Idaho’s leaders continue to implement strategies designed to cut energy costs statewide. For example, the K-12 Energy Efficiency Project installed “smart software” in 91 schools. The software tracks energy use and determines areas where schools can cut costs. The initiative also invested $9 million in funding for retrofit upgrades of school HVAC systems—these upgrades are expected to save Idaho school districts up to 10 percent of their current energy budgets. The Idaho National Laboratory (INL), located near Idaho Falls, is a leading research center of nuclear energy. With over 4,000 employees, it is also one of the state’s largest employers. The laboratory has been influential in pioneering strategies utilized by nuclear facilities across the nation. Today, INL scientists are making groundbreaking advancements in nuclear energy—such as creating high-temperature gas reactors that are cooled using helium instead of water—and they have recently created less-expensive modular reactors that can be installed faster and in larger numbers than previous designs could be. INL is a prime example of an organization in the energy cluster that can benefit the state’s economy through employment and tax revenue without actually providing state-used energy output.

Idaho’s lawmakers have made headway in providing tax incentives for individuals and businesses that pursue responsible energy practices. Income tax deductions are extended to those who make approved energy efficiency upgrades—in fact, residents who meet requirements can deduct 100 percent of the cost of installation of insulation or approved energy-efficient windows or weather stripping. A tax deduction is also offered to individuals who install alternative energy systems in residential neighborhoods—up to 40 percent of the cost of solar, wind, geothermal or biomass energy devices used for electricity generation is covered by the deduction. These incentives promote responsible practices and facilitate solutions that decrease energy usage and costs. Moreover, incentivizing energy-related practices bolsters the state economy as more jobs are generated in the energy cluster.

Idaho’s energy resources and forward-looking initiatives for energy use and production will continue to stimulate the state’s economy in the future. Ongoing collaboration among Idaho’s concerned stakeholders will promote responsible practices—ensuring that the state retains its beauty and high quality of life, while also increasing its future energy self-sufficiency.

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U.S. Economic Outlook

Short-term U.S. Outlook: Several recently-released economic reports point to a strengthening U.S. economy. While first-quarter data suggests that harsh winter conditions may have temporarily softened the nation’s economic progress, experts are increasingly confident that the second quarter will be characterized by improving economic growth and stability. Specifically, concerns surrounding inconsistency in the housing market are expected to be offset by growth in manufacturing, consumer spending levels and the labor market.

Economists anticipate second-quarter economic growth of 3 percent or more after a less-than-expected 0.1 percent increase in the first three months of the year. These projections are driven, in part, by a jump in manufacturing activity across the nation, which accounts for roughly 12 percent of the economy. According to the Institute for Supply Management, manufacturing activity climbed 0.5 percentage points in March from the month prior, marking the tenth consecutive month of expansion. Of the 18 manufacturing industries, 14 reported growth in March, led by Petroleum and Coal Products and Transportation Equipment. Experts believe the surge in activity is directly related to manufacturers’ anticipation of increased demand from businesses and consumers.

In step with manufacturing increases, the nation’s economic recovery has been bolstered by rising levels of consumer spending. The Commerce Department reports that retail sales increased 1.1 percent in March from the month prior—the strongest gain since September 2012. Growth was driven by purchases at general merchandise stores, where spending reached levels not seen since before the recession. Moreover, retail sales at building materials and garden equipment stores saw the largest gains in 8 months. Spending increases were nearly comprehensive—retailers of furniture, clothing, health and personal care, food and beverage, and sporting goods retailers all saw gains—and this is a positive signal for growth through the rest of 2014.

Higher spending levels have, in part, been facilitated by softer lending standards. The Wall Street Journal reports that mortgage lenders are lifting some of the stifling restrictions enacted after the housing crisis. Historically, lending standards are still relatively tight, but banks have begun to accept smaller down payments and lower credit scores when determining loan eligibility. This development should enable more would-be homeowners to pursue housing purchases, thereby bolstering economic activity in construction and other related sectors. Easing lending standards will likely promote improvement in the nation’s housing market, which continues to push forward inconsistently. While March’s housing data reveals higher home prices and lower sales of new and existing homes, the ability for more consumers to acquire home loans will likely spur activity in the coming months.

The Federal Reserve’s release of its April Beige Book provides more good news related to the U.S. economy. It shows a strengthening transportation sector, rising tourism activity, and increasing consumer and business demand for home, auto and small business loans, which will likely translate to higher levels of economic growth in the coming months. Coupled with continued gains in the labor market, the nation’s short-term outlook is promising.

Long-term U.S. Outlook: The nation’s long-term economic outlook remains highly dependent on global developments. Economic growth in the Euro Zone surprised many experts in the past month. Led by Germany, the largest economy in the EU, gains in the services and manufacturing industries bolstered overall growth. Markit’s flash composite PMI, a measure of business activity in the EU, increased 0.9 points to 54—the highest rating since the spring of 2011. This marks the tenth consecutive month the PMI has been above 50, indicating that the EU’s recovery is gaining momentum. A strong EU promotes domestic growth, as Europe is a main trading partner for the U.S. Given the geopolitical and subsequent economic impact of the ongoing Crimean crisis, world leaders will continue to press for a resolution. Because global economic growth and U.S. prosperity are greatly impacted by this delicate situation, resolution cannot come quickly enough.

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Labor Market

The labor market continues to show signs of vitality, both in the state of Idaho and nationally. As indicators of strength in the labor market improve, it is becoming increasingly clear that the somewhat-negative numbers seen in previous months were likely bumps in the road brought on primarily by inclement weather.

The unemployment rate decreased slightly in Idaho from 5.3 percent in February to 5.2 percent in March as total employment in the state of Idaho set a record for the seventh straight month. Approximately 11,000 more people were at work than in March 2013. In addition, March marked the eighth straight monthly decline in the unemployment rate in Idaho—a very positive sign that the labor market is steadily moving in the right direction. The largest gains in job growth were in the construction and manufacturing industries, and seven of the ten measured industries posted positive growth in the month of March.

Nationally, unemployment decreased from 6.7 percent to 6.3 percent in April, as 288,000 jobs were added to the economy. This marks the lowest unemployment rate since 2008. This is undoubtedly good news as the labor market beat expectations in both job growth and the unemployment rate. There is one grain of salt in that the labor force participation rate decreased from 63.2 percent to 62.8 percent, which is the lowest rate in decades. Having said that, the state of the national labor force is looking much more positive than it was last month.

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U.S. Consumer Price Index

The national Consumer Price Index (CPI), released by the Bureau of Labor Statistics, increased 0.6 percent from February to March on a non-seasonally-adjusted basis. For the second consecutive month, increasing gasoline prices (with a month-over-month rise of 5.1 percent) and food prices (with a month-over-month rise of 0.3 percent) drove the CPI higher. Over the past twelve months, the CPI has increased 1.5 percent.

Although the Gem State’s gasoline prices have been increasing—prices rose about 12 cents per gallon from April to May—the average price for a gallon of gasoline in Idaho has been below the national average for the past five months, according to AAA. Currently, the average price for a gallon of gasoline in Idaho stands at $3.52, much lower than the current national average of $3.69. Residents should expect prices to continue to inch higher in the coming months before peaking in mid-summer, thanks largely to increased summertime demand.

From February to March, prices for beef and veal increased 1.9 percent, and over the past twelve months, prices are up 7.4 percent. This substantial year-over-year price increase has been caused by two consecutive years of drought conditions in parts of the U.S. These conditions have dramatically reduced the amount of cattle feed available, forcing ranchers to reduce their herds to sizes not seen in over 50 years. According to the U.S. Department of Agriculture (USDA), these supply constraints are causing prices to increase at the fastest rate in more than ten years.

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U.S. Consumer Confidence Index

While consumers remained relatively upbeat about the trajectory of the economy and the labor market, their sentiment around current business conditions and the current state of the labor market stumbled slightly in April. The national Consumer Confidence Index® (CCI) (how consumers feel about the economy) decreased 1.6 points to 82.3. The Present Situation Index (how consumers feel about their current business and employment situation) fell 4.2 points to 78.3, while the Expectations Index (how consumers feel about the economy six months from now) was essentially unchanged, increasing 0.1 points to 84.9.

Consumers characterizing business conditions as good fell to 21.8 percent from 22.6 percent, while those characterizing business conditions as bad rose to 24.4 percent from 23.5 percent. Similarly, consumers who think jobs are plentiful declined to 12.9 percent from 13.8 percent, while those saying jobs are hard to get increased to 32.5 percent from 31.4 percent. Meanwhile, the percentage of consumers who think business conditions will improve over the next 6 months was relatively unchanged at 17.4 percent, and the percentage of consumers who think there will be more jobs 6 months from now increased to 15.0 percent from 14.1 percent.

Although consumers had some mixed feelings regarding the economy in April, consumer confidence is still relatively high. The CCI is up about 14 points year-over-year, and consumer spending is expected to continue to increase concomitant to this increased confidence. According the Commerce Department, retail sales increased 1.1 percent in March from the prior month, which is the best gain in a year and a half. Importantly, the Commerce Department also revised its February retail sales report to show a 0.7 percent gain, which is more than double its previous estimate. This was a critical report, particularly given the decline in spending that followed a strong holiday spending season, and it shows that consumer spending is finally thawing after this year’s harsh winter.

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Housing Market

Nationally, the housing market continued on a bumpy road to recovery in the month of March. Housing prices increased 1.4 percent from February to March, according to the CoreLogic Home Price Index, which represents an 11.2 percent increase from March of 2013. In Idaho, housing prices increased 0.8 percent over the same period, which represented a 7.4 percent increase from the previous year. These increases don’t indicate particularly fast growth, and may represent a slight cool down for the housing market. Home prices remain 16 percent below their pre-recession peak nationally, and 20.3 percent below their pre-recession high in Idaho.

The month of March saw mixed signals from the housing construction industry. U.S. housing starts rose from February, but failed to meet market expectations. Due to delayed construction from the stormy winter months, robust gains were expected—economists predicted an increase of 973,000 units—but actual gains were somewhat more modest at 946,000. Additionally, permits experienced a slight dip in March. These disappointing factors indicate that the market is feeling some strain from rising mortgage rates and swelling home prices. While many homeowners hope to see the value of their homes return to pre-recession levels, such an increase in cost could end up pricing many new buyers out of the market.

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Wind Energy Production In Idaho

While Idaho lacks substantial conventional energy resources such as petroleum or natural gas, the state’s unique landscape harbors abundant renewable resources. Rich hydroelectric, solar, geothermal, and wind resources help enable Idaho to enjoy some of the lowest electricity costs in the nation. Currently, wind power makes up 8 percent of the state’s overall energy production and just over 16 percent of the electricity used in the state, and this resource has tremendous potential for further development. In fact, according to the American Wind Energy Association, wind power is capable of meeting more than 2.2 times the state’s annual electricity needs. Idaho’s use of wind power is increasing—up more than 16 percent in 2013—and this trend is expected to continue in the future.

Idaho’s investment in wind power drives new jobs and economic activity in the energy sector and supporting industries. Because hundreds of Idaho jobs are directly and indirectly tied to wind energy generation—including those in operation and maintenance, construction, manufacturing, and supporting industries—future investments in wind power are likely to create many additional jobs.

Wind power generation also carries a small environmental footprint: the process creates no emissions and uses almost no water. The amount of wind power Idaho generates, when compared to generating electricity via conventional sources, saves the state more than 550 million gallons of water, and avoids the emission of 1.5 million metric tons of carbon dioxide annually.

Both residents and the environment benefit from the use of this relatively clean energy resource. Idaho has an installed wind capacity of 973 megawatts, which ranks 17th nationally in terms of output. Idaho currently has 541 wind turbines in operation, and generates wind energy from 32 separate projects, the majority of which are concentrated in southern Idaho. Compared to other states, Idaho ranks 4th in the percentage of electricity provided by wind energy—roughly 230,000 homes are powered by the electricity generated from wind power.

Idaho’s past and future investments in wind power will continue to have a positive impact on the state’s economy, environment, and high quality of life.

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Competitive Market: Short-Term Pain, Long-Term Gain

Over the course of the 20th century, Detroit established itself as the capital of America’s all-important automobile manufacturing industry—a global paragon of modernity, national entrepreneurialism, and labor. In fact, by the middle of the century, the automobile industry employed nearly one in every six working Americans either directly or indirectly. By 1950, Detroit was the 5th largest city in the U.S.

However, between 1948 and 1967, operational restructuring forever altered the auto industry and Detroit lost more than 130,000 jobs in manufacturing. No longer the engine of American capitalism, Detroit started to embody America’s urban crisis in the 1970s. As more efficient and consumer-focused overseas competitors took a bite out of the American auto industry, Detroit was left with an alarming scarcity of jobs and a significant population to support. Over these years, a number of policies were enacted to artificially shelter jobs by counteracting competitive forces—these policies stabilized wages for a time, but resulted in long-term inflated labor costs, inefficient production, and manufacturers’ troubling incapacity to align with customer demands. Rather than reversing course and facing the short-term pain required for the automotive industry and its associated workforce to evolve, leaders in Detroit essentially kicked the can down the road by requesting a federal bailout. In 2013, on the coattails of these near-sighted policies, Detroit went bankrupt.

Policies designed to shield jobs from the prevailing winds of economic and technological change rarely return long-term positive results, socially or economically. Given the founding economic principles that drove our country’s rapid ascent, it is surprising that the term “competition” has often been viewed negatively—even derisively—in recent years. Competition creates constant change and, frankly, change is difficult to endure, even when it is necessary and positive in the long view. But when fair competition is allowed in an open market, products and services almost always improve while prices decline. And in the long run and in the aggregate, the workforce is markedly better off—even when that requires retooling and retraining in the interim.

If history proves the value of evolution and innovation again and again, why are so many of today’s protectionist policies instead shackling critical sectors of our economy? While protectionist policies may be good short-term politics, their capacity to curtail social and economic advancement is real and often stifling. Once again, America’s economy is in flux. Just as we moved from an agriculturally-dominant economy to a manufacturing-dominant economy 100 years ago, we now need to adapt and move to a new economy based on information and technology. Our policies need to thoughtfully engender, not obstruct, this transformation.

New technology simplifies processes and streamlines the amount of labor and expense involved. Consider how, only years ago, Americans treated a long-distance phone call like an open refrigerator—and for good reason. Prior to 1984, the long-distance monopoly ensured limited innovation, inefficient fulfillment, and high rates. Today, thanks to technological evolution and free market competition, we hardly even pay for long-distance calls. If a provider doesn’t meet our needs, we have a plethora of alternatives. Think of how expensive the first home computers were and how little they did—while delivering only a sliver of the capacity of current mobile phones, those old computers cost thousands of dollars. The role of technology in competition is hard to overstate. As technology advances, both in response to and in facilitation of competition, costs associated with functionality decrease.

Competition encourages companies to use cutting-edge technology to produce the best possible product at the lowest cost. Time and time again, economic history shows that although an open market and competition can inflict short-term pain on established industries—such as a loss of manufacturing jobs in Detroit—it will ultimately return long-term economic and social gain. Therefore, rather than neutralizing competition, public policy must thoughtfully focus on enabling competition while simultaneously facilitating the essential retooling of the workforce’s skills and knowledge. As workers periodically stretch and pivot their careers in line with technological advancement, the U.S. workforce will be significantly better off in the long run. We need policies that encourage fair competition and innovation, enabling our nation to produce better products at lower costs, and propelling a higher standard of living for all.

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This page was last modified on Thu Mar 26 14:28:21 MDT 2015