Idaho’s Forest Products Sector: Hopeful for Stable 2019

Forest products, a traditional mainstay sector in Idaho, continues to play an important role in many Idaho communities. Idaho’s forest products sector — logging, wood product mills, paper factories and furniture manufacturing — provided more than 11,700 jobs in 2018. In addition, a few thousand more worked at trucking companies transporting logs, wood products and pulp.

Employment has grown 35 percent from the recession-caused low point of 8,705 in 2010, but it is still 18 percent below its 2006 peak of 14,327 and far below its heyday in the 1970s.

Source: Idaho Department of Labor

The job losses mostly resulted from the impact of technology, which allows a mill to produce twice as much lumber today as it did 25 years ago with the same number of workers and from reduced timber harvests from Forest Service land following changes in policies that occurred in the 1990s. From 1990 to 2000, the timber harvest on federal lands in Idaho fell from 704 million to 149 million board feet.

Where the Jobs Are

The following table shows the industrial make-up of the sector. Wood manufacturing, which produces lumber, plywood, oriented strand board, doors and window frames, manufactured homes, and wooden pallets and boxes, is the largest industry. Manufactured home fabricators employ more than 800 in southwestern Idaho, mostly in Canyon County and some in Washington County. Paper manufacturing is the highest paying in the industry sector. About two-thirds of the paper jobs are in Nez Perce County in north central Idaho, where Clearwater Paper makes tissue paper and paperboard. Furniture manufacturing is the only industry that added jobs. More than half of the furniture manufacturing jobs are in the southwestern region. Kitchen cabinet manufacturing employs nearly 1,000 people.

Source: Idaho Department of Labor Census of Employment and Wages

Forest product is a relatively high-paying sector. Its average job paid $60,400 last year, compared with the average pay for all sectors of $42,900.

The following table includes the number of forest product jobs in Idaho’s regions and counties in 2018 and 15 years earlier. The southeastern and eastern regions are the only ones that saw job growth between 1993 and 2017, while the other regions saw their forest product sector lose significant numbers of jobs. Each of those regions currently has 2,600 to 2,800 jobs.

The table also shows the relative importance of forest products. Forest products provide 6.5 percent of north central Idaho’s total payroll, while providing less than 1 percent in the south central, southeastern and eastern regions. In Benewah County, forest products provide 25.7 percent of total payroll. It makes up more than 10 percent of payroll in Lewis, Adams, Boundary and Nez Perce counties.

Source: Idaho Department of Labor Quarterly Census of Employment and Wages

 2018: Solid Performance

Idaho’s forest product sector put in a solid performance in 2018, expanding production and sales. Total sales of lumber, pulp and paper produced in Idaho rose to $2.05 billion in 2018, up 5 percent from $1.94 billion the year before, according to the annual report on Idaho’s forest products by the Policy Analysis Group at the University of Idaho’s College of Natural Resources published in January. Lumber production rose 2 percent in 2018 to 1.83 billion board feet. Lumber production has increased every year since its low point in 2009 during the recession. Loggers harvested 1.15 billion board feet of timber in 2018, 6 percent more than the year before. Harvests increased 32 percent on federal lands largely because of work of forest collaborations and implementation of Good Neighbor Authority between the U.S. Forest Service and Idaho Department of Lands.

As 2018 dawned, lumber prices were on the rise. An increase in housing construction, along with repair efforts in Texas and Florida after hurricanes, intensified the demand for lumber. Supply constraints — caused by a reduction in Canadian lumber production because of forest fires and wood-boring beetles in 2017 — also pushed up prices. Adding to the upward pressure was uncertainty about tariffs which led many users to stockpile lumber before tariffs hit. Then prices collapsed as concerns about expected mortgage rate increased and housing affordability made it appear likely that U.S. housing construction would drop and as the stockpiles slowed lumber sales. The Random Lengths composite price for framing lumber rose from $436 per thousand board feet at the beginning of the year to its highest peak ever of $582 in early April and then dropped to $332 by the end of the year. Lumber prices over the past 23 years are shown in the following graph for perspective.

Source: Random Lengths

U.S, housing starts rose 4 percent from 1.2 million in 2017 to 1.25 in 2018, its highest level since the financial crisis began in 2017, but considerably lower than its historic norms, shown in the following graph.

Besides lumber, many other forest product sectors, including furniture — especially wooden kitchen cabinets — manufactured homes, plywood, oriented strand board and door and window frames are tied strongly to housing construction.

Source: Federal Reserve Bank of St. Louis

Source: Federal Reserve Bank of St. Louis

What Will 2019 Bring?

At the beginning of the year, prospects for Idaho’s forest product sector appeared to be dimming. Concerns about a U.S. recession were relatively high and mortgage rates, which impact the number of housing starts, were on the rise. Homebuilder confidence fell to its lowest level in more than three years, and construction permits for houses, which signals how much construction is in the pipeline, were falling. By May, the consensus of economists is that the chances of a recession had dropped, and the end of interest rate hikes by the Federal Reserve will keep mortgage rates from rising too sharply. Home price appreciation continues to moderate, improving affordability, which should bolster housing starts. Lumber prices edged up this year from $332 in early January to $351 by late April. It looks likely the forest product sector will probably be stable in 2019., regional economist
Idaho Department of Labor
(208) 799-5000 ext. 3984