Is the U.S. economy headed into a recession? Has inflation peaked? When will the labor market ease?
While economists debate questions like these, it’s helpful to hear from employers on the ground, the men and women who own and operate businesses throughout Washington state. That’s why AWB staff spent the summer collecting information from employers through a variety of channels, including a series of in-person meetings held throughout the state, as well as a new quarterly employer survey.
That information, combined with fresh data from the AWB Institute’s economic dashboard called the Vitals, shows that employers continue to face challenges from inflation, a lack of qualified workers, supply chain disruptions, and a challenging tax and cost environment. At the same time, they’re growing more concerned about the possibility of a recession.
In short, it remains a challenging, complex — and anxious — time to run a business.
Our first set of data came from a road trip. In July and August, AWB staff traveled the state to visit with employers and business leaders in their hometowns. The meetings were focused on three main topics: people, power and production.
People, or ensuring a skilled workforce, remains a top concern for a majority of Washington employers, despite the rise in inflation and signs of a cooling economy. At every stop, employers told us they continue to have a hard time finding qualified workers. Many are raising wages, offering new benefits and adopting flexible schedules in an effort to attract staff.
Power, or the rising cost of energy, is an issue that’s only going to increase in importance in the coming years. Many employers report rising energy costs already, and few said they were prepared for the surge in fuel prices coming next year as Washington’s cap-and-trade system goes into effect.
Production of items made in Washington is at the center of the state’s goal to double manufacturing over a 10-year period. It’s an ambitious goal, and it’s intertwined with people and power. If Washington is going to double manufacturing, we’re going to need more workers. And we’re going to need to preserve the competitive advantage that low-cost power has long provided to Washington.
The second data set comes from a new round of survey responses. In the latest AWB employer survey, conducted over a two-week period in July and August, employers once again said that inflation (68%) and lack of qualified workers (65%) remained their top two concerns, consistent with an earlier survey conducted in the spring.
But the fear of a recession was growing, with nearly three-quarters of employers saying they were very or somewhat concerned about it. While only 3% of employers reported making layoffs, 15% said they delayed hiring because of recession concerns and more than one-third of respondents said they delayed making capital expenditures.
Our final data set comes from the Vitals, an online dashboard that tracks economic progress on nearly three dozen categories — everything from population growth to high school graduation rates — down to the county level.
Updated numbers from the Vitals shows that Washington’s taxable retail sales grew at an annual rate of 10.7% in the first quarter, down slightly from 12.2% growth the previous quarter. Some counties saw strong growth, including Pend Oreille (45%), Skamania (40.5%), Franklin (37%), Ferry (28%) and Douglas (26%). Only two of Washington’s 39 counties recorded lower retail sales.
That’s mostly good news, but the Vitals also show there was no growth in quarterly employment for the state as a whole between the first and second quarter, and 28 of 39 counties saw drops in average quarterly employment. The national and state unemployment rates remain extremely low, but this is a data point worth monitoring. Also worth watching: Workforce participation rates have decreased slightly since 2019 and the total number of Washington residents employed last year was 641 fewer than our pre-pandemic total.
It’s well known that employers crave certainty and predictability, two things that have been in short supply during the last two-and-a-half years. This is why we need new and better solutions to the issues facing employers, and why employers need us to be champions for the economy.
For more information on the Vitals, visit www.awbinstitute.org.
Kris Johnson is president of the Association of Washington Business, the state’s chamber of commerce and manufacturers association.