State economist cites ‘sinking feeling of pessimism’
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 about $9 million below the June forecast.
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.