Even healthy, local economy faces large questions

The after-effects of the recession tug at the economy. And Seattle could be hurt by weakness in emerging markets.
Construction cranes in Seattle's Belltown area (January 2014)

Construction cranes in Seattle's Belltown area (January 2014) Graham Coreil-Allen/Flickr

The economic and financial numbers are beginning to roll in for 2013 — great year for the stock market, jobs increased though not rapidly, there was little or no inflation. Plus, the overall U.S. economy grew, home prices rebounded in most areas and the global economy was stronger than expected.

In the Seattle area, there was solid growth with the unemployment rate dipping to 5.3 percent. Statewide, the rate was the lowest in five years. Boeing and the International Association of Machinists agreed on a new contract that brings the 777X to the Seattle area, including a $10,000 bonus to about 31,000 machinists.

In the first quarter, the local economy will get a short-term boost from Boeing totaling nearly $750 million. The new contract with the International Association of Machinists to bring the 777X to the Seattle area includes a $10,000 bonus to about 31,000 machinists, about $310 million.  According to The Seattle Times, other regular bonuses to both white collar and blue collar workers for Boeing's good financial performance in 2013 are expected to add another $400 million.

Long term, the agreement with machinists assures jobs in the Puget Sound area, but aerospace employment dropped about 2,500 jobs in 2013. That's a clear sign that while Boeing has a huge backlog and new airplanes in its future, it will likely build them with far fewer workers than in the past.

So, last year was OK, but where are we now? Recent reports point to some continued questions about the economy. Gross domestic product, the sum of all the goods and services in the economy, grew 3.2 percent in the fourth quarter, down a bit from the unexpectedly strong 4.1 percent in the third quarter but suggestive of a strong recovery.

But then the U.S. Bureau of Labor Statistics' report in early January dashed some of those hopes with a tepid report on job growth — only 74,000 jobs were added in December, well below expectations. The unemployment rate dropped from 7 percent to 6.7 percent but for the wrong reason: Most of the decline was because there were fewer people actually looking for work.

Two key numbers in the report help tell the overall story on the economy and jobs. The BLS said that for 2013 the labor force participation rate declined by 0.8 percentage point while the employment-population ratio was unchanged. The participation rate is the lowest it has been since the 1970s, well before women started entering the work force in large numbers. The unchanged employment ratio means that the economy may have added jobs during the year, but it was barely enough to offset population gains.

In Washington state, the unemployment rate fell to 6.6 percent in December, the lowest rate in five years, according to a Jan. 23 report by the state Employment Security Department. The Seattle-Bellevue-Everett area was at 5.3 percent in December, capping a somewhat volatile year for the local economy.

Paul Turek, an economist with the department, said recent job weakness has “dissipated” with the addition of 4,800 jobs in December.  However, the declining unemployment rate continues to be the result of more people leaving the workforce.   

Overall, then, it's clear the economy is still suffering from the after-effects of the steep recession more than four years after it officially ended in June 2009. Here are the big questions about the economy in Seattle and Washington state for the coming year.

Where is the economy headed? The economy should continue to post modest growth for 2014, perhaps about 2.5 to 3 percent on average for the year. There are still a few “buts” for the economy. The state Economic and Revenue Forecast Council, the state’s chief economic forecaster, said the softness in the Chinese economy, continuing slow growth in Europe and a possible debt-ceiling crisis in Washington will affect how quickly the economy grows.


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