Local economists see little, if any, turnaround in 2010
Inland Northwest residents should not expect much out of the region’s economy next year, forecasters John Mitchell and Grant Forsyth said Thursday.
Job and income growth will be minimal, housing prices may weaken further, and where and how a recovery from the recent recession will take hold remains unclear, the two economists told 600 gathered for an annual Greater Spokane Incorporated economic outlook breakfast.
Forsyth, a professor at Eastern Washington University, said the severity of the recession was a surprise.
At last year’s breakfast, he expected some improvement in employment, income and home prices. None of that happened, but the low end of his range for Spokane sales tax revenues – minus 4 percent – was relatively accurate.
Sales tax revenues in 2010 will climb 1.5 percent to 5.5 percent, Forsyth said.
Employment in Spokane and Kootenai counties has fallen 3 percent, Forsyth said, and the economy will, at best, recoup those losses in 2010. Every Eastern Washington county has lost jobs this year, and many of the dislocated workers are showing up in Spokane, he said.
Incomes have fallen 3 percent in 2009 and would have slipped more but for increases in Social Security, veterans’ benefits and other transfer payments. Without an increase in Social Security payments, income growth next year will be less than 1 percent, he said.
Forsyth said the mix of added jobs will determine how fast the area recovers. Jobs in finance, for example, stimulate more new hiring in other industries than does retail.
Until job growth returns to a rate of at least 2 percent, he said, unemployment will remain above 8 percent in Spokane and Kootenai counties.
Mitchell, a consultant and former economist for U.S. Bank, said Americans are living in a unique space between the reality of deflation and the expectation of inflation.
“If you didn’t get a raise this year, you got a raise,” he said, because the Consumer Price Index through September declined 1.3 percent.
Although he endorsed the consensus among economists that the recession that began in 2007 is over, Mitchell said the turnaround may not be as strong as the 3.5 percent growth reported for the third quarter suggested.
Incentives for first-time homebuyers, the cash-for-clunkers program, and potentially short-lived inventory restocking could have distorted the real picture, he said.
More broadly, economic stimulus spending, the rescues of banks and automobile makers, and liberal monetary policies — some appropriate under the circumstances — have made an accurate reading of the economy’s true state difficult, Mitchell said.
He said health care reform, stricter pollution standards and reform of the financial system, should they become law, will add to the challenges. What’s clear, Mitchell said, is the change in expectations among Americans experiencing economic dislocation few have ever faced before.
“We’re coming back to a very different place,” he said.