Idaho was not immune from the national recession that took a bite out of retail sales. While retail has been recovering since 2010, sales and employment remain below prerecession levels despite population growth, and the outlook remains mixed.

Retail fell and now is rising: Retail activity, based on sales subject to Idaho sales tax and adjusted to 2013 dollars, fell 11.1 percent from $23.8 billion in 2007 to $18 billion in 2010. Since then sales have been increasing, but at $21.2 billion in 2013, remained below the prerecession peak.

Big ticket sectors lost the most jobs: Big ticket items were hit the hardest between 2007 and 2012. Motor vehicles and items that had been in particularly high demand before the recession during the housing boom – appliances, furniture, furnishings, building materials and garden supplies – suffered. Sporting goods, hobby, book and music stores lost sales to Amazon and other Internet retailers.

For general merchandise stores, growth in discount and dollar stores helped offset large losses at department stores. Higher gas prices explain much of the 7.3 percent increase in per capita sales at gasoline stations. The biggest increase – 16.3 percent – came from nonstore retailers including online shopping ventures as well as mail-order operations and vending machines.

The various Idaho retail sectors showed similar losses and gains. Big ticket items, especially those related to construction and home improvements, had the largest drops. Much of the growth in nonstore retail in Idaho came from Scentsy, the Meridian maker of candle warmers and fragrances.

How Idaho compares to other states: Idaho’s retail sector fared slightly worse than average. While U.S. retail employment fell 2.9 percent between 2007 and 2013, Idaho’s fell 5.4 percent. Ten other states had larger percentage losses. Only seven states – North Dakota, Texas, New York, South Dakota, Oklahoma, Washington and Utah – and the District of Columbia saw increases in retail employment between 2007 and 2013.

Sluggish income growth: Since the recession, incomes have fallen and recovered slowly. U.S. per capita disposable income, when adjusted for inflation, rose 2.1 percent from 2007 to 2013 while Idaho’s fell 1.2 percent. Idaho was one of seven states to lose income during that period. Nevada had the largest loss—12.2 percent – while North Dakota had the largest increase—41 percent.

The recession and its aftermath hurt low-income households most sharply and had little effect on high-income households. Economists recognize lower-income families have a higher propensity to spend – rather than save – extra cash so their decreased incomes resulted in steep cuts in retail spending.

Loss of wealth: A tremendous decrease in home prices along with a tumble of the stock market early in the recession wiped out a lot of household wealth, leading many consumers to curtail spending. As the stock market recovered and home prices rose in the last year and a half home owner wealth grew. Also contributing to the improvement is the reduction in credit card debt that occurred after the recession. Although credit card debt has risen in the last couple of years, in December it still was 16.7 percent below its peak of more than $1 trillion in July 2008.

Household wealth – also called net worth – includes the value of homes, stocks, bank accounts and other assets minus mortgages, credit cards and other debts. The net worth of households and nonprofits was $80.7 trillion at the end of 2013 – about the same level as 2007 – which means that Americans finally regained the $10.6 trillion in wealth lost in the financial crisis. The improvement in wealth is likely to increase spending by the well-off while low-income families have little wealth and their spending power depends more on gains in wages.

Student debt weighs on many consumers: With record numbers of students attending college after the recession, despite soaring tuition, student debt rose 90 percent from $520 billion in the third quarter of 2007 to $1 trillion by the third quarter of 2013, according to the Federal Reserve.

The average undergraduate borrower who graduated in 2012 owed $29,400 in student loans, up 25 percent from four years earlier, according to the nonprofit Institute for College Access and Success. With many recent college graduates struggling and underemployed, that debt is greatly reducing their ability to increase their spending.

Slower population growth: Idaho’s population, like the U.S. population, has grown more slowly since the recession began. Fewer citizens of foreign countries are moving to Idaho, and many Mexican citizens who were long-term residents and other states returned to Mexico. Fewer people moved from other states into Idaho.

Both the state and the nation had drops in birth rates. Idaho added 185,143 people to its population base in the six years before the recession (2001 to 2007), but added 107,031 in the six years during and after. The U.S. added more than 16.3 million people before the recession and fewer than 14.9 million during and after.

At the same time that population growth slowed, it aged. The age cohort that typically spends the most money on retail as its members form households and raise children grew slowly. The 25-to-44 cohort grew 3.4 percent in Idaho between 2007 and 2012 and 0.4 percent in the U.S.

In addition, many youth stayed in or moved back into their parents’ homes when they ran into problems finding work. Many also postponed marriage and child-bearing because of the hard economic times. Another group that typically has relatively large amounts of income spent on them is children.

Between 2007 and 2012, Idaho’s population under age 25 grew 2.5 percent while U.S. under-25 population grew 1.2 percent. Also, with so many families strapped for money, they were forced to spend less on their children, and their teenagers and college students have less to spend because they are finding it more difficult to get jobs as the unemployment rate for youth remains high.

Consumers lack confidence: Consumers cut back on spending when they are worried about losing their jobs or financial problems. The Thomson Reuters/University of Michigan index of consumer sentiment averaged 89 in the five years before December 2007 when the recession began and 64.2 in the 18-month contraction that followed. In March, the index was 80 as consumers remained fairly cautious.

Higher gas prices limit consumer choices: Like other Americans, Idahoans have watched their purchasing power erode by higher gas prices. From January 2004 to December 2007, the price of gasoline averaged $2.54 a gallon. From January 2010 to December 2013, it averaged $3.36.

That means consumers spend more on gas and related products, reducing the amount available to spend freely. Every 10 cent rise in gas prices removes about $11 billion from consumers’ wallets over the course of a year, according to estimates by Global Insight.

Online vs. Brick and Mortar: More retail sales are being conducted on the Internet, resulting in fewer retail jobs in local communities. Staples announced March 5 that it plans to close 225 of its office supplies stores in the United States and Canada by 2015 as part of a $500 million cost-cutting program. At the same time, it is increasing its online sales, which already account for half of its total sales.

Cost-cutting means fewer jobs: The recession intensified the pressure to keep prices low, leading to new technology and procedures that reduce the number of workers needed by the average store.

What’s next? Retail employment is likely to continue to grow slowly in Idaho and the nation as consumers become more confident, incomes and wealth increase and population grows faster.

Kathryn.Tacke@labor.idaho.gov, regional economist
(208) 799-5000, ext. 3984