August 11, 2011 in News, Region

Pessimism darkening Washington’s economic forecast

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OLYMPIA — Washington’s economic outlook for the next two years has gone from cautiously optimistic to “a sinking feeling of pessimism,” the state’s chief economist said Thursday.

“The risk of the economy slipping back into recession has increased significantly,” Arun Raha said in the latest economic and revenue update. Money coming into the state in the form of taxes and fees is below projections, and that’s liable to continue for the rest of the year.

In June, Raha was confident that Washington and the rest of the United States would avoid a double-dip recession in which the economy would trend down again. He said he believed the state was in a “soft patch” but growth would continue, although slowly.

Since then, debt problems have spread to Europe, the U.S. government barely avoided a default on U.S. bonds but couldn’t escape a downgrading by a major rating agency, and consumer confidence “is in the tank.”

The June forecast assumed the economy would begin to improve in July, and keep going. That hasn’t happened, Raha said Thursday in a press release.

State job growth hasn’t been as strong as projected, the single-family housing construction sector remains flat, banks and local governments have been laying off workers and about the only manufacturing sector growing is aerospace. State revenue collections are down about $9 million below forecast since June.

All of those trends are significant because Raha is scheduled to make a revised revenue forecast in mid September to predict the amount of money the state can expect to take in and compare that with the amount it is budgeted to spend through June 30, 2013, the end of Washington’s current two-year budget cycle.

Revenue figures routinely vary somewhat between forecasts, but a significant drop in projected revenues could lead to calls by some legislators for a special session to make deeper cuts, sooner.

State agencies were ordered earlier this week to identify ways they could cut their budgets by as much as 10 percent.

Five comments on this story so far. Add yours!

• 

  RedCedar on August 11 at 8:03 p.m.

  It’s not “pessimism”, that’s darkening the forecast. It’s facts. Pessimism is an emotion that is easy to cure with therapy, happy pills, or a good lay. Facts, however, are a bit tougher to dismiss. If “consumer confidence” is down, however, I see that as a cause for optimism, because it means that more people are less likely to go into debt to buy stuff that they don’t need, so in the long run they’ll be better off. Of course that’s bad for this quarter’s sales tax revenue.

• 

  lewis8457 on August 11 at 8:35 p.m.

  that is right our economy only works if enough people are spending money but the way things are going even the better off folks are stashing their money for better times.

• 

  bdr on August 11 at 9:26 p.m.

  Now that the Bill Gates computer has nearly destroyed the world , USPS is about to croak too……

  I wonder if Bill could get off his duff and invent the Star Trek meal machine to feed 6.5 billion hungry unemployed people while they Google?

• 

  Dazzeetrader11 on August 11 at 9:40 p.m.

  Lewis is correct. My opinion is that it’ll stay like this until volatility index falls and the fear is resolved. Adminstrations must change….USA, Wa St, Spokane etc.

  Flirting with Socialism or communalism or redistribution politics won’t fix this.

• 

  D Statler on August 12 at 7:33 a.m.

  @ Dazzee, Making everybody pay a fair share will go along way to fix this. :^) It costs money to live in our beautiful state. Hard to spend money when you don’t have any to spend. Unless you can raise your credit/debt limit and continue as usual. Tightening the Government purse strings now makes great sense.Too bad we didn’t do it sooner while times were good.Running our State like a viable buisness is the only real answer.