Idaho unemployment hits 5.6 percent

Idaho's total number of unemployed workers reached a record of 43,000 in November, Idaho Department of Labor Director Roger Madsen predicted Wednesday.

Madsen gave the Associated Taxpayers of Idaho a sneak peak at the newest unemployment data, which will be officially released Friday. Madsen spoke at the annual tax conference in Boise that drew about 400 business and government leaders from across the state to the Boise Centre on The Grove.

The Idaho unemployment rate reached 5.6 percent, Madsen said, up from 5.4 percent in October. He predicted unemployment will top 6 percent early in 2009.

The previous record for the total number of furloughed workers was 41,000 during the 1982-'83 recession. But unemployment rate was far higher then, 9.4 percent, as the state had fewer residents.

Madsen said Idaho will recover from the economic slide and be stronger than ever. "I am confident that Idaho will get though this recession, just as it has other downturns," he said.

The taxpayers' conference focused on the economy and included two out-of-state experts who offered prescriptions for recovery.

IDAHO'S TAX RATES TOO HIGH?

Scott Hodge, president of the Tax Foundation, a conservative think tank in Washington, D.C., said Idaho's tax rates are not competitive and should be cut.

State and local taxes account for 10.1 percent of state income in Idaho, ranking 13th highest in the nation, Hodge said. Wyoming ranks 48th, Montana 40th, Washington 35th and Utah 22nd.

"You stand out in this high-tax state in the middle of a low-tax oasis," he said.

Hodge suggested eliminating the corporate income tax, which he said is the most anti-growth of all taxes.

"It's going to be really difficult for Idaho to gain a comparative advantage to any of your neighbors without eliminating one of your major taxes," he said. "Only permanent tax cuts will change people's behavior long term."

If ending the corporate income tax isn't possible, Hodge suggested cutting both personal and corporate rates. He acknowledged that may be tough in the current environment, but warned against raising taxes, citing the case of Maryland. In January, Maryland raised personal and corporate taxes, sales taxes and cigarette taxes to close a $1 billion deficit, only to see revenues come in 44 percent below projections. So, in November, voters approved state-run slot machines "in a desperate attempt to raise revenue from people who are bad at math, or the poor," Hodge said.

A RECOVERY A YEAR FROM NOW?

Bill Conerly, an economist from Lake Oswego, Ore., predicted a national economic recovery about a year from now - a more positive forecast than that of many economists. He said consumers are wary now and raising savings rates, but in the coming months they'll pay down credit cards and other debt, and most will keep their jobs.

"With 8 percent unemployment, that leaves 92 percent employed," Conerly said. "And money burns a hole in people's pockets."

In the near term, the push to ease credit is compromised by tension between regulators in the nation's capital calling for looser lending, while bank regulators in the states worry about the liquidity of individual banks. "The guys in Washington, D.C., are saying one thing, the on-the-ground bank examiners are saying another thing."

Conerly warned that with recovery will come with an increase in interest rates of between 3 percent and 4 percent, in order to control inflation. Conerly predicted the Federal Reserve will increase rates beginning as soon as nine months from now.

He said employers should be using the recession to weed out unproductive workers. But when the economy turns, Conerly said, employers will face a labor shortage as baby boomers retire.

"You need to think about whether you will have the right talent after this downturn is over," he said.

Conerly said long-term prospects are solid. "The American economy is resilient and strong, the American people are resilient and strong, the American nation is resilient and strong. That's the best economics lesson you'll get today."

Dan Popkey: 377-6438