Region’s economy may stay flat

Brace for another year of economic malaise.

Economists told some 700 people attending Greater Spokane Incorporated’s regional economic forecast Tuesday morning that this year has been worse than they initially anticipated and that next year holds little promise.

One in four young people are unemployed, house prices fell by more than 7 percent last year, employment growth is flat, and a dysfunctional Congress and a low-on-options Federal Reserve offer little encouragement.

Perhaps most surprising: The average Spokane household has the same purchasing power it did in 1996, said Grant Forsyth, economics professor at Eastern Washington University.

“To recover, people need to regain purchasing power,” he noted after his presentation. That won’t be easy as he forecast a 0.5 percent growth in household income as inflation grows at a faster, albeit anemic, rate.

Other statistics Forsyth said underscored the region’s difficult path to recovery:

• Population growth is less than 1 percent.

• Unemployment remains above 9 percent.

• Employment growth is 0 percent.

• Income growth is less than 1 percent.

• Taxable sales, which help fund government services, grew by less than 1 percent.

Economist John Mitchell told the audience of Spokane businesspeople, government and education officials that while economies in the United States, Europe and Japan, for example, are growing, they aren’t doing so quick enough.

He quoted a story in the New York Times to underscore the disconnect between voters, debt and expectations of government: “Most voters in these places have yet to come to grips with the notion that they have promised themselves benefits that, at current tax rates, they cannot afford. Their economies have been growing too slowly, for too long, to pay for the coming bulge of retirees.”

Forsyth did note that Washington state has added 45,000 jobs – but two-thirds of those were in the Puget Sound region.

“That leads me to worry about a lopsided recovery,” he said, “especially in our rural areas.”

Smaller government, lowered entitlement payments from Social Security and Medicare, and the persistent struggles of natural resource industries, leave rural communities vulnerable. He said that per capita, rural areas have more government employees, more retirees dependent on government payments, and fewer job opportunities than cities.

Though good economic news is elusive, Forsyth did note that wheat prices were high this year; heavy equipment manufacturer Caterpillar Inc. is expanding into Spokane; recent free trade agreements with South Korea, Panama and Colombia should further bolster agricultural exports for Eastern Washington; and regional banks were carrying fewer bad loans on the books.

Still, he said, “To be honest, it wasn’t that good of a year for the region.”