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Spokane, Washington  Est. May 19, 1883

Recession not off the table, local economists say

“What Recession?”

That was the title of a panel featuring local economists’ forecasts Wednesday morning.

The question of whether there will be a recession has loomed since at least last year when inflation spiked and the Federal Reserve began raising interest rates. Lately, some indicators have pointed toward a “soft landing” as growth and inflation have slowed.

Steve Scranton, senior vice president and economist for Washington Trust Bank, said it’s normal to see conflicting economic data in times of transition.

“What we don’t know for sure is, are we transitioning to slow growth or are we transitioning to recession?” Scranton said.

People can use that conflicting data to argue either way.

“Believe what you are seeing, not what you’re hearing,” Scranton advised. “If your business is doing fine, keep doing what you are doing.”

Scranton reiterated that recessions are a normal part of the business cycle.

“Yes, we will absolutely have a recession, we just don’t know when. For those that are well-run businesses, while times are good, this is when you plan for the bad times.”

The annual economic forecast breakfast at the Spokane Convention Center was organized by Greater Spokane Inc. and Spokane Business Journal.

Vange Ocasio Hochheimer, an economics professor at Whitworth University, said local wages have increased because there is still a labor shortage. Also contributing to wage inflation is an expectation by workers that inflation will continue in the future.

“We expect wage growth to stick around a little bit longer,” Hochheimer said.

As with the state and the country, local labor demand exceeds the number of workers looking for jobs. In Spokane, health care and transportation occupations have the greatest shortages.

“Access to education in occupations with the greatest labor shortage will contribute to economic growth and stable wages,” Hochheimer said.

Grant Forsyth, chief economist for Avista Corp., gives it a 50-50 chance that there is a recession in the next 12 to 18 months. That’s an upgrade from last year, when he expected a 70% chance of a mild recession.

“It didn’t happen, but I’m still reasonably pessimistic,” he said.

Home prices and rents in the metro region have stabilized, but remain high, Forsyth said, especially in Kootenai County. The vacancy rate for rental units is low at 0.5%.

Housing supply will remain low thanks to a decline in residential permitting along with a substantial number of homes lost to this year’s wildfires.

“This is going to be an ongoing challenge for us,” Forsyth said. “At the same time we are trying to build new housing, we have to replace housing that has been incinerated – and I don’t use that term lightly – in fires.”

Nationally, the growth of the economy has been fueled by a lot of debt, Scranton said.

The Fed is trying to slow the economy by making it harder to borrow, which will affect the smallest and weakest businesses the most.

“The message is either you slow spending on your own, or we will make you slow spending by making it so unaffordable or so unavailable that you can’t keep borrowing that way,” Scranton said.

The Fed believes it can do this without tipping into a recession.

“We’ll have to see how it plays out,” Scranton said.

James Hanlon's reporting for The Spokesman-Review is funded in part by Report for America and by members of the Spokane community. This story can be republished by other organizations for free under a Creative Commons license. For more information on this, please contact our newspaper’s managing editor.