Slow but steady

COEUR d'ALENE - Kootenai County can expect continued slow growth with an uptick in the housing market, an increase in vehicle loans and slow but steady job creation, a panel of economic experts said on Monday.

"It's coming back, but it's coming back slow," said keynote speaker John Mitchell, the former chief economist for U.S. Bank.

Mitchell presented his economic outlook entitled "46 months, Headwinds, Tailwinds and Challenges" to a group of about 50 people who attended the final program in North Idaho College's Cardinal Connections series.

"In two more months this will enter its fifth year," Mitchell said referring to the slow recovery of the 2008 recession.

In the current state of the economy, he said there are worries about International Monetary Fund, states no longer have declining employment, and the country is still 2.85 million jobs below where it was in January 2008.

"But we are also 5.88 million jobs above the low point in February of 2010," he said, adding the gold market is down, the stock markets are near nominal record levels, and the federal government continues to feed an air of uncertainty with competing budget visions, risky fiscal policies and sequestration.

Compounding those factors is the Federal Reserve spending on treasuries and securities, to hold down short-term interest rates.

"Short-term rates are near 0 percent, and could stay that way for seven years," Mitchell said. "No one in this room has ever lived through anything like this."

That in part could be a major factor in the increased activity in the housing market. He said 30-year mortgage rates are sitting at 3.43 percent.

"With rates like that, is it any wonder housing is coming back?" he said. "Housing is on a tear."

In the fourth quarter of 2012, residential housing was up 17.6 percent, according the U.S. Department of Commerce.

In Coeur d'Alene, housing purchases were up 1.89 percent in the fourth quarter. Housing statewide was up 13.5 percent for the year.

Mitchell said the economy is facing some strong headwinds.

Fiscal policies, such as ending the so-called Bush tax cuts, the end of the employment tax cut and sequestration impacts are still playing themselves out across the economy.

Real wealth loss is a factor, with homeowners equity at 63 percent of where it was in 2005, he said. Global shocks are an issue, with financial turmoil in Europe and China.

There is a lot of uncertainty in the economy with things like the Affordable Care Act, Mitchell said, adding that there is still quite a bit of diminished confidence in the economy.

"Most recessions are pretty short," he explained. "This recession was over four years ago, and we still have 3 million jobs to go."

On the bright side, Mitchell said there are some healthy tailwinds at our backs as well.

Income and employment levels are increasing. Housing is experiencing an upturn, and personal balance sheets are looking stronger, Mitchell said.

"People are adjusting their finances to deal with the economy," he said, adding the result is stronger balance sheets.

Monetary policies have been positive, he said, and a diminishing drag on the economy from state and local governments is helping with the economic recovery.

"And fracking has literally changed the world," he said.

Mitchell pointed out several unknowns as well.

What happens overseas in Syria, North Korea, Senakus and Venezuela? What is going to happen with our current domestic policy? And how will the actors behave while responding to incentives and unintended consequences?

"How will businesses respond to the Affordable Care Act?" he wondered. "Will we start seeing businesses with 57 employees reduce them to 49 employees.

"Will start seeing 29-hour work weeks?"

Overall, Mitchell said, the economy will continue to grow slowly, and it will be driven by the housing sector.

"Idaho and Coeur d'Alene will come along with that," he added.

Mitchell joined a panel of economic professionals after his presentation to discuss some of the drivers of the local and regional economy.

Bill Before, CFO of Spokane Teachers Credit Union, said they are seeing a sharp increase in automobile loans, which are up 24 percent over last year.

"RV loans are up even higher," he said. "They are up 45 percent over last year."

Christina Edmundson, who teaches business law and economics at North Idaho College, said she is seeing more reaction from employers this year.

"Employment opportunities are coming back for students," she said.

Alivia Metts, regional economist for the Department of Labor, said she recently started to look into labor force participation rates in North Idaho.

For the first time since the 1980s, she said there appears to be a labor shortage firming up.

"The 16- to 19-year-olds are declining," she said. "They have just disappeared."

She has not been able to determine where they are going, but added the older workers are stepping in to fill those lower level jobs.

"We are also losing the 25- to 29-year-olds," she said, which account for much of the construction industry workforce. "And they are not all going to North Dakota as you would think."

She said many of the workers in that age group are moving into jobs in the Tri-Cities area of Washington, and other jobs in Spokane.

"We may be headed for an employment shortage," she said, adding that demographics indicate our region is going to have a significant number of retirees in the near future. "Considering that, there is room for concern."

Monday's Cardinal Connections event was the last of a three part series that covered education, health care and the economy, said director Max Mendez.

The Cardinal Connections series was a trial program designed to replace NIC's long-running Popcorn Forum series. Mendez said organizers were assessing the success of this year's program to determine if the series will be funded in coming years.