C I T Y O F B O I S E

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1 C I T Y O F B O I S E D E P A R T M E N T O F F I N A N C E A N D A D M I N I S T R A T I O N Office of Budget Development & Monitoring Economic Brief Mike Sherack, Senior Budget Analyst & Brent Davis, Budget Manager Volume 9 Quarter 3 (CY) 16 (July 1 September 30) Quarterly Summary Employment The labor force in Boise continues to grow and the unemployment rate remains low at 3.2%. Construction Housing Construction activity continues at a solid pace but Q3 permit volume and revenue fell from Q3 15. Inventory is 15% above this time last calendar year, but is still low and housing demand is high. The housing market remains a seller s market. Sales Tax Airport Traffic State sales tax receipts increased by $30 Million, or 7.5%, over last year. Sales tax revenue growth is expected to remain strong. Total air passenger traffic continues to post solid yearoveryear (YOY) gains. Inside this issue: Projections The GDP outlook is good following what is turning out to be a subpar 16. Consumer sentiment is in a good range. Interest rates are rising and are projected to increase further in Idaho housing start growth is projected to slow from a very strong 16. Quarterly Summary 1 NOTE: Signs indicate a general economic outlook compared to the previous quarter and/or year. Employment Data 14 Construction Activity 57 Housing Trends 8 State Sales Tax 8 Airport Traffic 9 Projections 10 CY = Calendar Year Q = Quarter YOY = YearOverYear MSA = Metropolitan Statistical Area 100 basis points = 1% Employment Total Boise employment as of September 16 is up 1,781 jobs, or 1.6%, compared to last September. Comparing the end of Q2 (June) to the end of Q3 (September) total employment fell by 1,656 jobs, or 1.4%, due to seasonality. When compared with September 15, Boise s unemployment rate is down 40 basis points, from 3.6% to 3.2%. When compared to the prior quarter end (June), the unemployment rate is unchanged at 3.2%. Relative to comparable cities in the western United States, Boise continues to post low unemployment numbers, though not as low as Salt Lake City or Colorado cities, which are below 3.0%. Boise s unemployment rate for September was 10 basis points below Ada County, 30 basis points below the Boise MSA, basis points below Idaho, and 160 basis points below the United States. NOTE: This quarterly brief is based on the calendar year, not fiscal year, unless otherwise stated. 1

2 Employment (continued) 4.5% Boise City (Unadjusted) Unemployment Rate 15 September % 3.5% 3.0% 2.5% 2.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 5.5% Comparable CY Q3 Unemployment Rates 5.0% 5.1% 5.0% 4.8% 4.5% 4.0% 3.5% 3.3% 3.3% 3.7% 3.6% 3.4% 3.5% 3.8% 3.7% 3.2% 3.3% 3.5% 3.4% 3.0% 2.5% July Aug Sept Boise City Ada County Boise MSA Idaho United States 2

3 Employment (continued) Total Boise City Employment Monthly 125,000 1, , , , , , , , , , , , , ,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sep September Unemployment Rate Comparative Western Cities 8% 6% 4.5% 5.4% 5.1% 5.9% 6.0% 4% 2.9% 2.5% 3.5% 2.8% 2% 0% Denver Fort Collins Boise Reno Eugene Salem Salt Lake City Spokane Tacoma Source: Idaho Department of Labor, data through September (not seasonally adjusted); US Bureau of Labor Statistics, data through September (not seasonally adjusted) 3

4 Employment (continued) Boise MSA NonFarm Employment Sector Information The Boise Metropolitan Statistical Area (MSA) has 54 different employment sectors that respond differently to economic conditions. The following table highlights the four best and four worst performing industries for Q3 compared to both Q2 and Q3 15. Compared to Q3 15, Specialty Trade Contractors again had the largest percentage increase of jobs, at 28.5%. Computer and Peripheral Equipment Manufacturing had the largest decrease, 17.2%. Quarter over Quarter Average # Jobs % Change Year over Year Average* # Jobs % Change Gains Gains Mining, Logging, and Construction 1, % Specialty Trade Contractors 3, % Employment Services % Mining, Logging, and Construction 4, % Specialty Trade Contractors % Local Government Education 1, % Construction of Buildings 0 5.2% Goods Producing 5, % Losses Losses Government (2,000) 4.3% Management of Companies & Enterprises (100) 1.6% Local Government (1,600) 6.0% Business Support Services (0) 3.7% Local Government Education (1,300) 7.7% Computer & Electronic Product Mfg. (600) 5.3% State Government Educational Services (600) 10.6% Computer & Peripheral Equipment Mfg. (300) 17.2% Data through September (not seasonally adjusted) *The four sectors with the largest YOY gains and losses are shown in the graph below. Four Employment Sectors With Largest YOY Gains and Losses (Sectors Listed Above) 30% 28.5% 22% 23.0% 14% 11.6% 11.4% 6% 2% 10% 1.6% 3.7% 5.3% 18% 17.2% 26% Source: Bureau of Labor Statistics (not seasonally adjusted) 4

5 Construction Activity Boise construction activity continues at a strong pace, but quarterly permit revenue and volume fell compared to Q3 15. Some measures, such as single family permits, number of living units, residential valuation, and trade permits, are higher than 15 based on a yeartodate comparison, but other measures, such as commercial construction permits, are below 15. Housing demand and building activity remain strong, with low interest rates, though the inventory of homes for sale has trended upward this year. Growth in housing starts is projected to slow following very high growth in 16, aided by higher projected interest rates. For commercial construction, growth may be leveling off following a period of high growth, but activity is at a high level and expected projects suggest robust activity will continue. Graphs Showing Monthly Boise Construction Figures CY 15 (9 Months) vs. CY 16 (9 Months) Single Family Permits Duplex Thru Sixplex Permits Large Multiple (More Than Sixplex) Permits Total Residential Housing Permits

6 Construction Activity (continued) Total Living Units Residential Dwellings Value ($ Millions) Dwellings Other Permits Commercial Construction Permits Commercial Construction Value ($ Millions) Trade Permits 1 1, ,600 1, ,0 60 1, Source: 6

7 Construction Activity (continued) Total Permit Revenue Quarterly 2,800,000 2,493,658 2,581,224 2,615,799 2,465,768 2,400,000 2,000,000 1,717,849 2,343,065 2,487,461 2,234,752 2,146,999 1,906,031 1,600,000 1,0,000 1,573,267 1,663,921 1,726,607 1,429,771 1,365,496 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sept Total Permit Value Quarterly 250,000,000 8,040, ,411, ,229,801 0,000, ,000, ,000, ,636, ,389, ,997, ,779, ,538, ,606, ,221, ,946, ,387, ,788, ,382, ,534,682 50,000,000 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sept Total Permit Volume Quarterly 5,500 5,000 4,500 4,000 3,500 5,695 4,988 5,578 5,671 5,286 4,869 5,021 4,900 4,879 4,515 4,573 4,429 4,402 3,911 3,693 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sept Source: 7

8 Housing Trends (latest available data) According to the latest Corelogic home price index (HPI) report in September, singlefamily home prices for Idaho increased by 7.7% over last year, above the national average of 6.3%. Total inventory for September increased by 15.1% over last year. Average foreclosures for the quarter are the same as Q3 of 15. Housing Trends N/A N/A Source: and State Sales Tax The City receives its portion of sales tax revenue from the State on a quarterly basis. A total of 11.5% of gross sales tax collections is shared with cities across Idaho, based on relative property value and proportionate population. The chart below reflects the gross sales tax collected by the State. Gross sales tax collected in the third quarter increased by $30 Million, or 7.5%, compared to last year. Compared to the prior quarter, gross sales tax increased by $44 Million, or 11.3%, which is partly due to seasonality and is consistent with historical trends. The gross sales tax collection amount remains consistently higher than previous years, and Boise s share has increased slightly in the last three years. Gross State Sales Tax Collection by Quarter ($ Millions) Quarter 1 Quarter 2 Quarter 3 Quarter 4 Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sept Source: Idaho State Tax Commission 8

9 Airport Passenger Traffic The number of air passengers is typically a good indicator of the global and local economic environment. During the third quarter, total passenger traffic increased by 46,034 passengers, or 5.7%, compared to last year. Compared to the prior quarter, total passenger traffic increased by 40,169, or 4.9%. Total passenger traffic growth remains positive, aided by the addition of nonstop flights to DallasFort Worth in June. Total Passenger Traffic Quarterly 850, , , , , , , , , , , , , , , ,614 7, , ,000 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sept Total Passenger Traffic Monthly 315, , , , , , ,223 8, ,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan '13 Dec '13 Jan '14 Dec '14 Jan Dec Jan Sept Source: Department of Aviation, City of Boise 9

10 Quarter 3, 16 Projections: Economic Growth, Interest Rates, and Housing Starts Recent, current, and projected key economic indicators are provided to give insight into market and business cycle trends. Data is from the Idaho Division of Financial Management, October 16 Forecast, which uses IHS Economics for national variables, except for the University of Michigan Consumer Sentiment Index information, which is from Federal Reserve Economic Research (FRED) and the University of Michigan. Real GDP (net of inflation) 2.8% 2.3% 1.8% 16 growth is positive, but lower than 14 and % U.S. Idaho Univ of Michigan Consumer Sentiment Consumer sentiment is down slightly from 15, but still in a good range Interest Rates 6.0% 5.0% 4.0% 3.0% Interest rates remain low, and are projected to increase Prime Rate Existing Home Mortgage Housing Starts (% Change) Idaho housing starts are very strong, but are projected to grow slower than for the country % 10.0% 0.0% US Idaho 10