Two Spokane economists have joined the camp predicting a recession this year in the U.S. economy.
But Eastern Washington University’s Grant Forsyth and Avista Corp.’s Randy Barcus also said they expect the Inland Northwest to ride out the storm in comparatively good shape. International trade and high times on the farm should moderate the effects of whatever recession does develop, they said this week.
Moderate, but not insulate.
“We’re not separate from the national economy,” Forsyth said. “The national economy, as it starts to slow, will push us down as well.”
The United States wobbled in and out of a recession – periods of declining economic activity – during parts of 2000 and 2001. Credit market upheavals and a downturn in many housing markets threaten to end a long period of expansion since then.
The national economy’s chief steward, Federal Reserve Bank Chairman Ben Bernanke, said Thursday he will do whatever is necessary to prevent a recession. But prominent investment bank Goldman Sachs, for one, has advised clients a downturn lies ahead.
Forsyth said he has been edging closer to a similar conclusion for months. As a member of the Washington State Economic and Revenue Forecast Council, he fills out a brief survey prior to each quarterly meeting that sounds out member expectations.
In November, he gave odds of 40 percent a recession loomed. “I was one of the more pessimistic people,” he said.
With a Feb. 2 meeting ahead, Forsyth said he now gives a recession a 55 percent chance.
Credit market problems run deeper than was understood a few months ago, and weakening employment statistics have heightened apprehensions, he said.
Barcus gives 2-to-1 odds of a recession. Lifting a phrase from Bernanke predecessor Alan Greenspan, Barcus said he has become “less sanguine” as he reads national economic indicators. Some of his observations have reinforced his concerns.
As Avista’s economist, he helps the utility plan for expected growth in its service territories. In mid-2006, he projected a 10 percent slowdown in new customer connections in Medford, Ore., where Avista delivers natural gas. Instead, the number tumbled 50 percent.
“That was the biggest projection error I’ve ever made,” Barcus said, adding that activity in Spokane and Kootenai counties also trailed his estimates.
Nevertheless, Barcus said the Inland Northwest should continue to grow, in part because long-suffering natural resource sectors like mining and agriculture have rebounded.
Rural counties are again pumping income into Spokane’s economy, as are Canadians crossing the border to spend the strongest Canadian dollar in 20 years.
“It’s been a long time since the outlying areas supplied anything but workers,” Barcus said.
He said international trade, long a mainstay for the state and region, should become even more important as the weaker dollar gives U.S. commodities, manufacturers and service providers an edge against foreign competitors.
Forsyth said stalwarts Microsoft Corp. and Boeing Co. provide underpinnings. About 40 Spokane-area companies are aerospace suppliers.
Jeff Zahir, labor market economist for the Washington Department of Employment Security, shares the optimism of Barcus and Forsyth regarding local economic conditions, adding that he is unsure recession accurately characterizes the nation’s economic prospects.
“Use the word ‘recession’ with a grain of salt,” Zahir said. “You can’t say it’s now. You can only say it was.”
Zahir said Spokane County added 5,100 jobs between November 2006 and November 2007, a growth rate of 2.3 percent. Job growth in 2008 will slow to 1.5 percent, he said, but that’s “nothing to sneeze at.”
“It’s good news. It’s simply not as good as what we’ve seen.”