Analysis: How well has Idaho recovered from COVID-19? Really?

Much has been claimed about Idaho’s recovery from the COVID-19 downturn, including “Idaho’s booming economy blows past projections,” and that “Idaho’s economy is catapulting ahead of other states right now,” to quote Gov. Brad Little just a few weeks ago.

This analysis looks at employment, inflation and productivity statistics to gain a quantitative look at Idaho’s economic recovery. The results suggest that the rebound is real but not anything to write home about. Idaho lost workers on a per capita basis, had average inflation compared with other states and experienced a decline in work productivity during 2020 while all other states gained.

Employment in Idaho’s recovering economy

A robust labor market is one of the signs of a sound economy. More paychecks mean more consumers with money to spend, and that keeps an economy chugging along happily. Idaho had a seasonally-adjusted unemployment rate of 2.6% in February 2020, just before COVID-19 arrived in the state. Unemployment rates under 4% are a sign of a tight labor market, meaning that some employers had to compete to attract the workers they wanted, while many job seekers had no problems finding and keeping jobs.

The pandemic downturn set records both for the number of Idahoans out of work and for the number of initial unemployment claims filed with the Idaho Department of Labor. That’s old news. The real news is how well Idaho’s labor market recovered. During the height of the pandemic, Idaho took second place to Utah for losing the fewest jobs, but did not outperform many other state in gaining jobs back.

Data collected by the U.S. Bureau of Labor Statistics (BLS) Business Employment Dynamics program track quarterly jobs lost and jobs gained for every state. The numbers for the second quarter of 2020 were horrible. Every state and territory in the U.S. lost more jobs than were created. Utah was the state that had the lowest net job losses in the nation, with a jobs gained to jobs lost ratio (JG/JL) ration of 0.60. Idaho was in second place (JG/JL=0.57) and Montana came in third (JG/JL=0.49).

During the third quarter of 2020, things began to turn around for employment. Idaho’s Q3 JG/JL ration was 1.29, which is good because any ratio above 1.0 means a net increase in the number of jobs. In comparison, Utah’s JG/JL ratio was better than Idaho’s at 1.47. For comparison, New Jersey had the best net job creation in the country during Q3 with a JG/JL ratio of 2.71.

Idaho’s missing workers

At the peak of the pandemic downturn, Idaho’s seasonally-adjusted unemployment rate was 11.6%, so a recovery back below 4% looks respectable. Idaho’s unemployment rate actually dropped below 4% in December 2020 and has kept dropping every since, so the job market has been getting steadily tighter since then.

The latest employment statistics from BLS report that Idaho had a seasonally adjusted unemployment rate of 3.1% in April, indicating a tight job market. This is good news for job seekers and not great news for employers who always want to keep labor costs as low as possible

Unfortunately, the federal U-3 unemployment rate doesn’t count non-payroll gig workers, discouraged workers who want a job but have given up looking or the people who can’t get full-time jobs so they work as “involuntary part-time” employees. Nor does the U-3 unemployment count parents who haven’t been able to return to jobs in the long-term because affordable child care or elder care is no longer available.

Instead of looking at the U-3 unemployment rate, it is worth looking at employment measured against population instead. This provides a measure of whether net job growth is keeping up with population growth, because Idaho’s population grew by some 52,000 between July 2019 and July 2020, according to the U.S. Census Bureau.

The labor force participation rate is defined by BLS as the percentage of the population that is either working in jobs covered by unemployment insurance or actively looking for work. The labor force participation rate for Idaho remained approximately 64% for the five years before the pandemic. It dropped to around 63% during Q2 2020, recovered to 64.3% in September, and then steadily dropped thereafter to 62.7% in April 2021. This decline since September means that people are leaving Idaho’s workforce.

The ratio of those employed versus population is the percentage of the population that is currently working. For Idaho, this ratio yields a similar result as the labor force participation ratio. From 2014 to the end of 2019, the number of people working in Idaho grew from around 60% to over 62% of its population despite Idaho’s growth. This ratio did a nosedive at the beginning of Q2 2020 but then recovered to 60.9% in January before slightly decreasing by April 2021. What this ratio shows is that post-pandemic Idaho has lost workers on a per capita basis when compared with the time before COVID-19 arrived in town.

These two metrics show that Idaho’s dropping U-3 unemployment rate is not telling the whole story. Compared with the time before the pandemic downturn, 1% fewer people are now working on a per capita basis. Their paychecks and the consumer goods they would have purchased are now missing from the economy. Idaho has lost the contributions of these workers.

Rising prices

For the BLS West region, which includes Idaho, May 2021 prices advanced 0.8% in April and 4.7% since May 2020, as measured by the Consumer Price Index for All Urban Consumers (CPI-U). The May increase was influenced by higher prices for new and used motor vehicles and an increase of 28.2% in the price of gasoline.

The 4.7% year-over-year advance is not as bad than it sounds. The CPI-U was unusually low last year, when it dropped from 3.1% in February 2020, decreasing by -0.02% in March 2020 and by -0.4% in April 2020, indicating a drop in prices for many consumer commodities.

By comparison, the CPI-U for the whole country advanced 0.6% since April and 5.0% since May 2020, better than the West since April but worse than the West a year ago. The West’s performance was also better than the South or Midwest regions, which advanced 0.8% and 1.0% respectively since April and 5.6% for both regions since May 2020.

The Northeast regional outperformed the rest of the country, advancing just 0.5% since April and only 3.9% since May 2020. While there is no CPI data just for inflation in Idaho, it is clear that the northeast states have seen the smallest price increases compared to the rest of the nation.

Idaho productivity

Labor productivity compares goods and services produced with the amount of labor used to do so. For example, if the goods and services produced per unit time goes up compared with the year before, productivity has increased.

Labor productivity in the private nonfarm sector rose in 45 states in 2020. Given the economic downturn, this appears counterintuitive; however, productivity is measured by the labor output of goods and services versus the number of hours worked. Even if output falls with respect to the previous year, so long as the number of hours worked fell even more than output, the productivity will still be positive. This was the case for 2020: output decreased in all 50 states in 2020 but hours worked fell even more in all but five states. The five states with negative productivity growth were Idaho, Montana, Oklahoma, South Dakota and Tennessee.

The number of hours worked decreased in all but one state. That state was Idaho, where the hours worked actually increased 1.1% in 2020. Idaho’s labor output of goods and services declined in 2020 while the number of hours to produce that output actually went up, putting Idaho dead last in the nation for labor productivity during 2020.

BLS issued a revision of its first quarter 2021 productivity results, showing an increase in non-farm productivity for the nation of 5.4% compared to Q4 2020. Productivity results for individual states were not included.