Although the region experienced gains in employment, wages, population and housing as the United States marked its longest economic expansion in history earlier this year, local economists predict regional growth could slow going into 2020.
The region gained 38,000 jobs since the first half of 2009 – the start of a prolonged increase in economic activity – primarily driven by the private services sector.
The region could see up to a 1.5% increase in employment growth going into 2020, depending upon consumer consumption, Grant Forsyth, chief economist for Avista Corp. told roughly 800 people attending Greater Spokane Incorporated’s annual economic forecast event Wednesday at the Spokane Convention Center.
“It’s true we are doing OK, we have the longest expansion in U.S. history, but it’s entirely being driven by consumption right now,” he said. “If consumption wanes, the economy is going to go through a pretty strong shock because the other one-third of GDP is really not doing anything at the moment.”
During the summer, the country saw an inversion of the yield curve – a traditional predictor of a future recession in which short-term interest rates such as three-month Treasury notes yielded more than 10-year Treasuries – and the Federal Reserve subsequently cut interest rates, John Mitchell, principal of M&H Economic Consultants, told the audience.
Mitchell said the recent inversion has rekindled interest in policy responses. As the United States faces a trillion dollar deficit, slowing global growth and trade conflicts, policymakers will have to look at new ways to stimulate the economy while addressing the deficit.
But, Mitchell said, it’s likely the economic expansion will continue into next year.
Forsyth said employment activity during the 2002-07 economic expansion was led by construction and manufacturing job gains. During the current expansion, which became the longest in U.S. history on July 1, education and health care jobs are leading job gains.
“Going forward, I think the region has to be very mindful of what’s happening with health care policy because it’s been one of the primary drivers of our prosperity in this expansion, more so than the previous expansion,” he said.
Population growth in Spokane County slipped to 1.4% this year, compared to 1.8% in 2017. Although population growth is expected to remain above 1% in 2020, its hard to say if it indicates a prelude to another recession or the beginning of a prolonged period of slower growth, Forsyth said.
Idaho and Washington are among the top five states for job growth during the current economic expansion, placing third and fifth, respectively, in September, according to the U.S. Bureau of Labor Statistics.
Education is key to economic growth in the region, Vange Ocasio Hochheimer, assistant professor of economics at Whitworth University, said at the event.
She pointed to concepts by economists Milton Friedman and Adam Smith, both of whom outlined correlations between investing in education and economic growth. Friedman believed education brings about “neighborhood effects” that include lower poverty and crime rates, a productive labor force and good citizenship.
Firms will locate to areas with an educated workforce with clusters of complimentary businesses, which, in turn, creates a spillover of knowledge and innovation, Ocasio Hochheimer said.
Spokane’s labor market has the highest demand for jobs in the transportation, retail sales, and maintenance, repair and installation sectors, with an excess supply in health care jobs – mirroring the state’s labor market, Ocasio Hochheimer said.
It is important to invest in meeting labor shortages while paying close attention to labor surpluses in the region, as there’s opportunity to attract new businesses to the area, she said.
“We have a golden opportunity right now as we have a double-edged sword for growth of new and existing businesses as well as the opportunity to invest in education for our labor force to fill the shortages that exist in some sectors,” Ocasio Hochheimer said. “It is an exciting time to be a part of the Spokane region right now, because we can all be a part of the strength of the arm that moves this forward.”
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.