Overheated economies will cool in 1996, but expansion - albeit at slower rates - is expected to continue nationally, regionally and locally.
That seems to be the consensus forecast of a panel of economists who participated in an economic forum sponsored by The Spokesman-Review in December to gather information for our annual look at the state of the local economy. The panelists answered questions from 17 Kootenai and Spokane County residents.
John Mitchell, chief economist for U.S. Bancorp and one of the region’s leading economic analysts, offered his expectations of the national and regional economic outlooks for the coming year.
Mitchell noted that the nation is entering its sixth year of the current economic expansion. That has happened only twice since World War II. The expansion is particularly remarkable in that it has occurred without inflationary pressures.
The expansion slowed in 1995, compared with the rather phenomenal 1994 growth rate of 4.1 percent. Mitchell said 1995 will come in at about 3 percent.
“As we move through 1996,” Mitchell said, “the U.S. economy will continue to expand, but at a slower rate, probably between 2 and 2.5 percent.”
Of particular importance to the Northwest is the economic strength of Southeast Asia, and the improving strength of Latin America. That will create strong export markets, Mitchell said. And an improving Canadian economy may begin to restore the flow of Canadian cash into the Northwest.
Regionally, the mantle of top economic performance has shifted from Idaho to Oregon.
“Idaho has slowed significantly from its pace of last year,” Mitchell said.
Employment grew 6 percent in 1994, slowed to about 2.7 percent in 1995, and will likely continue with a slower expansion this year. Mitchell expects the state to see 2.5 percent employment growth and about 6 percent personal income growth for the year.
Washington’s expansion slowed to a 2.1 percent rate in 1995, but Mitchell calls that performance remarkable.
“Washington has continued to expand in spite of the major curtailments in aerospace on the West Side,” Mitchell said. “This is the first Boeing bust since the end of the second world war that has not been accompanied by a decline in (overall economic) activity. All that has happened is that the state has slowed down. And that’s rather remarkable based on past history.”
Mitchell sees the state recovering to employment growth of 2.6 percent and 6 percent growth in personal income for 1996.
The economists anticipate that Spokane will reflect that same trend.
Spokane County has created somewhere between 4,000 and 5,000 new jobs in each of the past three to four years, they say. That rate should slow this year, but job growth will continue.
Mitchell likes the prospects of Spokane and other smaller Western cities like Boise, Medford, Salem and Reno, all of which continue to have the combination of good infrastructure and low costs that should continue to attract an in-migration of individuals and companies leaving higher-cost areas.
That in-migration is expected to push the population of Spokane County beyond 405,000 during the year.
Spokane’s housing market, after being on fire for the past three years, is entering a cooling-off period, the economists agreed. Housing prices have accelerated at rates beyond the rate of wage growth here, creating an affordability problem.
In 1996, though, the market should begin to make its adjustment. Prices may begin to come down as wages begin to move up, narrowing that affordability gap.
Spokane’s principal economic growth should again be concentrated in the services sector, although manufacturing showed a surprising strength in 1995 that may continue in 1996.
Retail, coming off a disappointing 1995, remains an enigma with predictions ranging from 6 percent growth to no growth.
Of the five economists making up the forum’s panel, only Gary Smith expressed concerns about the local economy approaching a downturn in 1996.
Smith pointed out that Spokane’s economy has enjoyed eight years of sustained expansion, and now is in search of a “soft landing” as that expansion slows.
“I guess I’m a little less optimistic,” Smith said. “The ‘R’ word hasn’t come up here, and there may not be a recession, but I think anxiety is in place, and it might be deserved at this stage of the game.”
Placing this slowdown in the context of a still-strong national economy, though, bodes well for achieving a successful slowdown, Smith suggested.