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I think most of us would agree that Southern Idaho is a great place to live. With its unique and beautiful landscapes, abundant outdoor recreational opportunities, and an attractive way of life, this area has long been treasured by natives and is increasingly being discovered by others. In addition to these qualities, and partly because of them, we also enjoy good economic conditions and opportunities. 

Idaho’s economy has been resilient and even thrived through the past five years of volatility. As of the third quarter of 2024, Idaho’s gross domestic product (GDP) grew at an annual rate of 4.6% compared to 2.7% for the nation. Idaho’s personal income also grew by an annualized rate of 3.9% compared to 3.2% for the U.S. 

Idaho’s employment growth has been equally impressive. In 2024, Idaho’s nonfarm employment grew by 3.6% compared to 1.4% for the nation. In fact, Idaho’s employment has now recovered back to its pre-pandemic trendline. Zooming into our Southern Idaho markets, nonfarm jobs grew during the same period by 2.4% in the Twin Falls metropolitan statistical area (MSA) and 4.6% in the Boise MSA. 

Idaho’s unemployment rate has also fared well at 3.8% versus 4.1% for the nation. Unemployment locally was 3.8%, 3.6%, and 3.1% in the Twin Falls, Boise, and Burley market areas, respectively. Interesting, job postings per unemployed Idahoan is right at 1.0, meaning that the number of unemployed workers is nearly equal to the number of job postings. 

While we are fortunate to enjoy good economic conditions, growth creates its own challenges. In a 2024 Idaho Department of Labor survey, the top concerns listed by Idaho businesses were: 1) supply or cost of workers, 2) economic uncertainty, and 3) high labor turnover. It is likely these challenges will continue into the near future. 

So, what does all this mean as we look forward to 2025? I am always hesitant to offer forecasts since I do not own a crystal ball and even the “experts” are usually wrong on their economic forecasts. The world has too many moving parts and surprises for anybody to confidently forecast future economic activity. With that said, the Idaho Division of Financial Management produces an economic forecast in its efforts to estimate state tax revenues. Unsurprising, the state forecasts continued strong economic activity for Idaho.

Nonfarm employment is projected to grow by 2.4% annually through 2027—not as strong as this past year, but still well above the current national rate. Annual growth for personal income and wages is forecasted at 6.44% and 7.26%, respectively, for the same period.

Those figures all seem reasonable based on where we are today. But, as a banker and amateur economist, I would argue the level and direction of interest rates will have the largest impact on all these metrics. Interest rates are the most important price in the world. They have a major effect on everything from the number of homes being built, to the number of new jobs created, to how much I earn in my savings account.

So, what is the expectation for interest rates? Using “forward curves” we can get a picture of the “pros” expectations for interest rates based on futures contracts, market swap rates, and current outstanding Treasury instruments. These indicate “the market” expects the 1-month rate to drop from 4.32% to 3.85% by the end of 2025. This rate is significant because it affects a lot of consumer and business credit and investments, like credit cards, lines of credit, and money market funds. 

The 10-year rate is expected to increase from 4.54% to 4.62%. This rate is also significant because it is the most common rate our government borrows at and is closely correlated to mortgage rates. So, for those of you waiting for lower mortgage rates, the market is not expecting them in 2025. With that said, even though these expectations are based on actual transactions by the most knowledgeable money managers in the world, their future expectations are almost always wrong as well. 

I can tell you at First Federal, we do not try to predict interest rates. We manage our balance sheet to different interest rate scenarios. I would encourage you to do the same—not put too much certainty into any interest rate forecast you read but instead think in probabilities of different interest rate scenarios.

Best wishes for a healthy and prosperous 2025. As always, thank you for your relationship with First Federal. Please let us know if there is anything we can do to assist you with your financial well-being.