See what this study just found about Idahoans’ income. You’ll be encouraged | Peter Crabb

The local economy has bounced backed. But can it grow with the population?

Idaho’s unemployment rate has declined to 3%, near the historic low seen in 2019. The unemployment rate in Boise is just 2.9%.

The labor market has recovered from the pandemic shutdowns, but business investment must rise for the overall economy to grow. A larger percentage of the population working does not immediately imply a better standard of living. We can all work a lot more but not really live any better.

As economic studies have shown for years, real economic growth comes from higher labor productivity. The well-being of any community depends on the ability of its workers to produce goods and services. When people are more proficient at what they do, we can all live better.

According to the Bureau of Labor Statistics, productivity at U.S. businesses rose 14% over the last decade, down from 29% the previous decade. Businesses are not seeing the proficiency gains in their workers that they used to.

Economic research also shows that gains in labor productivity depend on how much capital businesses have to invest. Capital investments include both new physical capital, like machines and computers, and human capital, like technical training.

While jobs may be plentiful, to achieve true and lasting economic growth we need private investment. Investment in equipment, software, and property improves worker productivity and our standard of living.

Idaho’s workforce has certainly grown as more people move from other states, but will investment? One potential source for increased business investment is the gain in wealth Idaho is experiencing.

According to a new study of 2019 tax data by Wirepoints, a nonprofit that studies Illinois’s economy and government, Idaho experienced a greater net gain in personal income as a percentage of the economy than any other state. Many of the people moving here have a source of capital that could end up in local businesses.

So we may not like the increased traffic or higher housing prices, but our new neighbors bring needed capital. A higher overall income level is likely to lead more private investment, which is required for true, long-term growth.

Not only have we bounced back, our economic potential is rising.

Peter Crabb is a professor of finance and economics at Northwest Nazarene University in Nampa. prcrabb@nnu.edu