Regional outlook tepid
Economic growth will be minimal at best, expert says
The 2009 outlook for the Spokane-Kootenai County economy is more of the same marginal growth that has characterized most of 2008, Eastern Washington University professor Grant Forsyth said Thursday.
Speaking at the Greater Spokane Inc. annual economic forecast breakfast Thursday, Forsyth said he expects the region to continue to outperform the national economy, but not without potential contraction by several measures.
He projected employment growth of less than 1 percent, with 2.5 percent growth the best case and a loss of 1 percent the worst.
Change in other major indicators – home prices, personal income growth and taxable sales – also will hover around zero, although the possible swing for Kootenai County home prices ranges from an 8 percent increase to a 10 percent decrease.
In Spokane County, housing prices could trend from a 5 percent increase to a 4 percent decrease.
Forsyth called the freefall in Kootenai County construction activity “shocking” – September building permits are off 56 percent compared with September 2007 – although the decrease in Spokane County was only slightly better: 45 percent.
The sharp reversal of the job growth that characterized the Kootenai County economy through 2007 is also worrisome, he said, as is a net loss of bank deposits, which will reduce the funds available for investment.
The Kootenai County unemployment rate has more than doubled over the past year, to 6.6 percent. The Spokane County rate in September was 5.5 percent, up from 4.3 percent a year earlier.
Forsyth projected a bare 1 percent growth in personal income for the two counties, which would not be enough to keep up with inflation. For the city of Spokane, that will translate into a range for 2009 sales tax growth of 10 percent to minus-4 percent, with the rest of the county doing somewhat better.
“It’s not going to be a great time in terms of income growth,” Forsyth said, adding that consumers are “credit exhausted.”
He said the good times farmers enjoyed last year are over. Spokane hospitals, on the other hand, have rebounded from the negative operating margins that were squeezing them four years ago.
Forsyth, taking a swipe at protectionism, said export growth has contributed strongly to the area’s relative economic strength.
“Neener, neener, you trade haters,” he said.
John Mitchell, former U.S. Bank chief economist, said the economic pain for the nation as a whole is far from over.
The bursting of the housing price bubble has reverberated through the global financial system in ways and to an extent never envisioned by most economists, he said.
The natural resource and high-tech sectors of the Northwest economy have struggled with the downturn’s implications, Mitchell said, but he too pointed to exports as a strength, in large part thanks to aerospace.
Job growth in Washington through August, he noted, was the fifth best in the nation. Idaho ranked 45th.
Mitchell said the steps taken by policymakers to shore up the financial system are starting to work, but what the ultimate cost might be is unknowable.
Unknown, too, are the long-term repercussions of government intervention in the private sector. “We have crossed some huge Rubicon without a great deal of thought,” Mitchell said.
He predicted gross domestic product growth in 2009 of less than 1 percent, with inflation falling to less than 3 percent. The U.S. economy will recover, he said, but not without reshaping the outlook for many Americans who have had no experience with hardship.
“This is a generation-shaping event,” Mitchell said. “What you’re seeing is the end of the way we were.”