2007 looks good, not great

Local and state economists gauge where Washington business is headed

Megan Patrick
VBJ Staff Reporter

Don’t expect a recession this year, but don’t expect economic times to remain in the boom they’re in right now, says Evelina Tainer, chief economist for the Washington State Employment Security Department’s Labor Market and Economic Analysis Branch.

"2006 was a really good year," she said. "We’ll probably be going a step down this year and just have a good year."

Typically, states can’t keep up robust paces for more than two to three years.

The forecast is much the same on the local level – a downtick, but nothing too drastic, said Scott Bailey, regional economist with the Washington State Employment Security Department.

But there is no fool-proof way to forecast the economy.

"Nationally, prognosticators are all over the map," warns Bailey. "Most are predicting slower growth, others say no, we’ll be surprised, and others are saying recession."

Taking in other factors, recession does not look eminent. In Clark County, the job market grew 3.3 percent in 2006 – a good figure, according to Bailey.

He expects 2007 to be a bit slower at 2 or 2.5 percent job growth.

Construction is slowing, and as it has been a significant boom in the county, employment in that sector should drop off. Added to that is the upcoming layoff of about 300 high-wage jobs at the Georgia-Pacific pulp and paper mill in Camas, which will have a ripple effect throughout the county.

"But if I’m wrong, I’ll be wrong on the low side," Bailey said. "I doubt growth will be much lower than (2 percent)."

On the state level, 2006 brought good growth in construction, manufacturing and business and professional services.

Nationally, construction has cooled in massive strides with rising interest rates and declining housing sales, but Washington saw continued growth, even in the second half.

Nonresidential construction, especially road construction, will likely continue at a healthy pace as residential slows down.

"The fact that it’s growing suggests the economy is different here and we won’t see the kind of downturn in construction in 2007 that has been felt on the national level," Tainer said.

Aerospace and software manufacturing are still booming in Seattle but several large employers around the state have delivered big blows to employment.

Other factors showcase the economy’s mixed bag:

• As a whole, consumers are spending faster than their incomes are increasing. In the short term it means retailers are doing well, but in the long run, it paints a dire picture. "We’re all supposed to be saving for retirement, so we’re going to be worse off down the road because it can’t be sustained," according to Tainer.

• Manufacturing payrolls are on the rise statewide and are considerably higher than the national level.

• While the state’s unemployment rate is currently higher than the national rate, it’s trending down steadily and employment gains are outpacing national gains.

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