Best known for potatoes and dairy, agriculture has long been viewed as the staple of Idaho’s economy. While agriculture continues to play an important role, manufacturing has quietly become one of the leading industries driving the economy forward. In recent years Idaho has gained a unique competitive advantage in the industry with an increased concentration of manufacturing jobs being added to the economy. Although growth in manufacturing has struggled nationally, Idaho is poised to see continued growth in the industry.

Since the end of the recession in 2010, Idaho’s manufacturing industry has fueled the state’s economic expansion. Of the jobs added to Idaho’s economy between 2010 and 2014, manufacturing had the second highest growth rate at 12.7 percent – nearly doubling the state’s total job growth of 6.9 percent. The 6,700 jobs added in manufacturing accounted for 16 percent of the state’s total job growth since the end of the recession.

Growth in manufacturing has been well distributed throughout most of the state. Five of Idaho’s six regions saw double digit growth rates over the previous four years. Although north central and eastern Idaho saw the largest percentage gains, growing more than 20 percent each, the growth that has taken place in south central Idaho has also been notable. Fueled by food manufacturing giants like Chobani, Frulact and Clif Bar, the Magic Valley has added has added nearly 1,500 manufacturing jobs since 2010. This growth recently led President Obama to recognize the region as one of 12 “Manufacturing Communities” across the U.S. this year.

Southeastern Idaho was the only region in the state to lose jobs in manufacturing over the previous four years. While the state grew 12.7 percent overall, manufacturing jobs in southeastern Idaho decreased 4 percent.

While the raw growth of the manufacturing industry is impressive, shift-share analysis shows that Idaho also has a significant competitive advantage in manufacturing at the national level.

Shift-share analysis determines how much of an industry’s regional employment change can be attributed to national trends and how much can be attributed to unique regional trends. Shift-share takes the difference between base and current year employment and divides industry employment gains or losses into three categories: national growth effect, industry mix effect and regional competitive effect.

The national growth effect identifies the share of jobs created or lost in a region’s industry that are due to the national employment trends of all industries.

The industry mix effect identifies the share of jobs either created or lost due to national employment trends of a specific industry.

The final share, or the regional competitive effect, identifies the share of jobs gained or lost in the region’s industry that are due to the unique competitive advantage or disadvantage of the region. In other words, the competitive effect identifies how much of the growth cannot be explained by national trends in the specific industry or by the economy as a whole.

Since 2010, Idaho has had a distinct competitive advantage in the manufacturing industry. Of the nearly 7,000 manufacturing jobs that have been added to the economy, approximately 53 percent of the industry’s growth in Idaho is unexplained by national trends, meaning approximately 3,700 jobs were added to the economy due to Idaho’s unique competitive advantage in manufacturing compared to the rest of the country.

Location quotients can also help analyze the strength of a region’s industry by comparing an industry’s job concentration of a given area to the industry’s concentration on the national level. Location quotients greater than 1, and especially those greater than 1.25, identify industries that are producing beyond the region’s needs and are producing for export. Using the industry’s location quotient to find the industry’s multiplier can then be used to identify the number of jobs supported by exports.

Three of Idaho’s exporting manufacturing industries, – food, wood, and computer & electronic manufacturing saw location quotients increase from 2010 to 2014. Food manufacturing had a location quotient of 2.30, wood manufacturing of 2.87 and computer and electronic manufacturing of 2.08 in 2010, by 2014 the industries’ location quotients increased to 2.40, 3.32 and 2.38 respectively.

Idaho’s jobs supported by exports in these industries increased from an estimated 17,200 in 2010, to approximately 20,300 in 2014. By 2014, manufacturing exports supported more than 60 percent of the total jobs in these industries and roughly 3 percent of all jobs statewide.

As manufacturing jobs are projected to decrease 5 percent across the U.S. by 2022, Idaho appears to be heading along a different path. The Idaho Department of Labor projects that jobs in manufacturing will increase 11 percent in Idaho from 2012 to 2022 – adding more than 6,000 jobs to the total economy.

Future growth of the manufacturing industry will play a critical role as Idaho’s economy moves forward. Growth in the industry will not only bring a significant number of jobs to the economy but also jobs with high wages. In 2014 the average manufacturing wage was $58,400, 54 percent above the state’s average wage of $38,000. As a result, those with the necessary skill sets will benefit as the manufacturing industry continues to grow and change.

Christopher.StJeor@labor.idaho.gov, regional economist
(208) 557-2500 ext. 3077