The Inland Northwest was a region whose assets were temporarily frozen during the fourth quarter of 1996.
The chilling economic effects of November’s ice storm and December’s harsh weather may look bad on paper, but in the long run, economists say, will do little to disrupt the region’s methodical - if unspectacular - growth.
“I’m not trying to downplay the fact that (the ice storm) was a significant event,” said economist Randy Barcus, senior market forecaster for Washington Water Power Co.
But from an economist’s viewpoint, he said, the disruption was a collection of individual inconveniences. Most of the losses to the broader economy, though, will be made up during the first and second quarters of 1997.
“To the extent you’ve got a trend growing, it’s a disruption to the trend,” said John Mitchell, chief economist of Portland-based U.S. Bancorp.
The fourth quarter of any year can be victimized by slowdowns in key economic areas like home sales, larger construction projects and employment rates. But the 1996 dips were deeper than comparable figures in the fourth quarter of 1995.
Home sales in Spokane and Spokane County were down from 1,350 in the last three months of 1995 to 1,215 in 1996.
Spokane building permits were off sharply, from 1,004 to 718. So was the value of those permits - $96 million in the fourth quarter of 1995 as opposed to $67 million in 1996.
Figures reflecting retail sales during the fourth quarter are not yet available. The fourth-quarter figures represented in this report are reconstructed from taxes collected on sales that occurred during the first quarter. Undoubtedly, though, the overall retail sales in Spokane and Kootenai counties will reflect the effects of disruptions in commerce caused by the bad weather.
But, Barcus says, most of these statistical declines represent postponed rather than lost projects or purchases.
“Any time there is any kind of unusual event that occurs in a community, there’s always economic pluses and minuses,” Barcus says. “Some of these are just delayed reactions. Economists call it pent-up demand.”
A delayed building project will probably be resumed in the spring when the weather is better. Purchases are put off until the roads improve. Inventory shortages caused by closed highway passes or airports may mean lost sales during a given week or month, but consumers still need most of those items when they arrive.
Barcus said some losses are irreversible. Potential restaurant sales on a given day during the bad weather, for example, are lost forever. Lost work income isn’t recoverable for many. And uninsured property damage represents a net economic setback.
Money paid by a homeowner for snow removal, or hauling away downed trees, is money that homeowner might have otherwise spent on consumer goods he or she now can’t afford. But that money is not lost to the local economy.
“Some people have more money than they otherwise would have,” Barcus says. “It means the people shoveling the roofs and the roads, and the guys with the plows on the front of their trucks are going to have a nice Christmas.”
In fact, Barcus says, a natural disaster can ultimately mean a net economic gain as relief funds become circulated through a local economy.
“I worked on a state economic task force trying to assess the impact of Mount St. Helens,” Barcus says, “and the bottom line was all the money that came in for the cleanup actually enhanced the economy.
“Those millions of dollars are going to go into local labor’s pocket, and they will be spent in retail establishments in this community.”
Other indicators that were less weather-related showed fourth-quarter downturns as well.
Aluminum, silver and wheat prices were down during the quarter, each hitting their lowest points in two years.
But a year-to-year comparison between 1995 and 1996 probably offers a truer picture of the current character of the Inland Northwest economy, and prospects for 1997.
We are a region fixed in a pattern of slow growth, and that trend should continue in 1997, economists say.
Home sales were off slightly in 1996 from 1995 in Spokane and Kootenai counties. Average unemployment rates for the two years were virtually unchanged. Spokane’s building permits were down slightly, year-over-year, but the value of those building projects was up slightly.
Average annual aluminum prices were down year-to-year, but wheat prices were up and silver prices were practically identical. Retail sales were slightly higher in 1996 than in 1995.
The key, economists say, is that however plodding the growth might be, the Inland Northwest region is expected to continue its decade-long expansion through 1997 and beyond.
“The number of bills we send to our customers is a pretty good real-time indicator,” Barcus says, “and we were up 1 percent at the end of 1996 over 1995.”
Barcus said his forecast going into the year was that WWP would see a 2.5 percent increase in its customer base, “And it looks like we actually had 3.5 growth percent throughout Washington and Idaho,” he added.
Mitchell, a long-time observer of the Pacific Northwest economy for U.S. Bank, views the Inland Northwest as a simmering pot, waiting for some catalyst to turn up the heat and get things boiling again.
That catalyst, he says, is the blistering pace of the Puget Sound’s economic resurgence.
“You’re going to start seeing some spillover effect from the West Side,” Mitchell says.
It was just such spillover from a booming Puget Sound economy that started Spokane’s five-year mini-economic boom in the late 1980’s. Boeing’s rebound, Microsoft’s prosperity and the planned addition by Intel of 1,000 high-paying jobs a year in Pierce County for the rest of the century, is recreating those same conditions.
Puget Sound economists say the average cost of a home in the Puget Sound region will increase more than 7 percent annually in both 1997 and 1998. Apartment vacancies in King County were at 3.5 percent at the end of the year, the lowest since 1980. That means rents will jump during the next year. Downtown vacancy rates fell below 5 percent in 1996, a 10-year low, meaning lease rates will rise. Seattle experienced 5.3 percent employment growth in 1996.
“That means upward pressure on wages, and difficulties in finding enough people,” Mitchell says.
By comparison, Spokane home prices increased by about 1 percent in 1996. And initial estimates are that total employment grew by about one percent here during 1996.
All that means that companies in Seattle and down the I-5 corridor to Portland as well, will begin looking again for cheaper and more productive places to do business.
And Spokane and the Inland Northwest should look just as attractive, if not more so, than they did in the late 1980s.
Mitchell says the spillover will begin to evidence itself in 1997, but the real benefits are probably still a year away.
, DataTimes ILLUSTRATION: 2 Graphics: Inland Northwest year end economic review; Inland Northwest fourth quarter economic review
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