Braking Point A Significant Slowdown In The Region’S Economy Was Triggered In Part By Ups And Downs In Markets Worldwide
Blame it on Australia.
Canada and Japan can share some of the fault as well.
Spokane’s economy stumbled in 1998, and much of the reason can be attributed to the Inland Northwest’s connections to the rest of the world.
Two years of bumper crops of wheat in Australia, for example, have depressed wheat prices in the United States and left Washington and Idaho farmers reeling.
The flagging Asian economy means airlines in Japan and elsewhere can afford fewer Boeing planes, resulting in massive layoffs in Seattle and economic shivers throughout the rest of the state.
A poor Canadian economy means the exchange rate punishes visitors from Alberta and British Columbia, who are staying home instead of shopping and traveling in Washington and Idaho.
“We are in a world economy,” said Neil Meyer, an extension economist with the University of Idaho. “No one is isolated.”
The result of the world economy’s dampening impact on Spokane is a year of slower growth in a three- or four-year period that has been marked by slow growth.
While the Inland Northwest boomed in the first half of the decade, adding thousands of new jobs, the pace dropped dramatically in the mid-1990s.
The region made modest gains in 1996 and 1997, but external factors, such as low wheat prices, in 1998 acted as a further brake on the economy. “It was clearly a slow year,” said John Mitchell, U.S. Bank’s chief economist. “Spokane’s been clicking along with growth rates in the 2 percent vicinity. It dropped off a little bit last year.”
Phil Kuharski, a retired economic analyst for Prudential Securities, may differ with Mitchell’s numbers, but he agrees that the cause of Spokane’s doldrums are the result of low prices for commodities and trouble in Asia.
“In a normal year, economic activity might be 3 to 5 percent growth,” said Kuharski. “This year, we might be almost flat. (The external factors) are the difference. We are certainly not being affected by (high) interest rates or major changes in tax policies.”
Evidence of the slowdown can be found in a variety of measures:
Unemployment climbed in Spokane County, from 4.6 in 1997 to 4.7 percent last year.
The number of out-of-state drivers getting Spokane County driver’s licenses, a measure of the region’s population growth, declined from 8,542 in 1997 to 8,301 last year.
The number of passengers using Spokane International Airport declined as well, from 3.04 million to 2.95 million.
It wasn’t all bad news for the region in 1998, however.
Buoyed by low interest rates, housing sales and construction soared.
The value of building permits also shot up, with the big gains in Spokane County due in part to the $110 million River Park Square and Nordstrom project.
But other key indicators, such as the average home price in Spokane County and overall population growth, remained essentially flat.
That flatness can at least partially be explained by the struggling periphery, said Mitchell.
While Spokane has evolved over the years, it has never completely distanced itself from its historic role as a shopping and service hub for the outlying regions.
Poor prices for wheat, apples and potatoes, the struggling mining and timber industries and the plummeting Canadian dollar are all going to be felt in Spokane, Mitchell said.
“When you have weakness in the hinterland, you have some trouble there,” he said.
Although commodity prices are affected by events overseas, the regional economy is impacted by events closer to home as well.
When California’s economy suffered in the early 1990s following defense industry cuts, it resulted in a substantial number of people moving to Spokane and North Idaho.
But now that California’s economy has rebounded, the migration has dwindled to a trickle, said Spokane Community College economics instructor Tony Pizelo.
“We’re one of the places where people move to when it’s not going well there, and it’s doing well there,” Pizelo said.
Help, however, may be on the way for the region’s sluggish economy.
There’s reason to believe that the economy may begin to improve in 1999 and perk up substantially in the first decade of the new millennium as Asia recovers from its slump, Kuharski said.
“We should see tremendous growth in the world economy in the next 10 years, and it should be extremely beneficial for the region,” he said. “We have to go through a little tunnel here before we get into the sunshine of the next century.”
Short term, however, the Inland Northwest could benefit from changes closer to home.
One of the largest could be River Park Square, which Kuharski believes could act as a catalyst for economic development throughout the region.
“Economic activity is somewhat like a stone being thrown into a pond. If you throw a pretty good stone, the ripple effect reaches pretty far out,” he said.
“There’s a lot of power in the investment process, and the $100 million in new capital is magnified in Spokane” because of the city’s isolation.
There may also be hope for wheat farmers, because the odds are against Australia having three strong wheat harvests in a row, said Meyer.
“If everyone has a super good crop again, we’re in a world of hurt,” he said. “If prices are low again, for 1999, I think we’re going to see a lot of people having sales and going out of business.”
Pizelo doesn’t see major changes on the horizon for 1999, and said the slow growth of the past few years is not unusual for Spokane.
“What we might be seeing here (in 1998) is not so much a huge drop-off but just returning back to normal,” he said. “People who have lived here aren’t alarmed by slower growth in Spokane because they’ve gotten used to it.”
Like Kuharski, Pizelo believes the long-term outlook for Spokane is a positive one as technology helps further close the distance between the Inland Northwest and the rest of the world.
“Our fundamentals are good,” he said. “I’m optimistic 10 years down the road. Some of our disadvantages won’t be as big disadvantages 10 years from now.”
Graphic: Year-end economic review, 1997-1998