Seattle economic forecast: no fireworks for 2014
While Seattle-area employers will continue to hire more workers this year, and local economic growth probably will outpace the nation’s, it’s not the kind of projection worth popping Champagne corks over.
Seattle Times business reporter
In a loft-style work building near downtown Seattle, Champagne bottles line the walls of a cavernous underground room strewn with cardboard shipping boxes.
“It’s messy, because we’re really busy,” said Bryan Maletis, owner of Fat Cork, a small importer and online seller of artisanal Champagne from France.
Patting a stack of boxes headed for the East Coast, Maletis noted that people increasingly feel comfortable buying a $50 bottle of bubbly.
“We get real-estate agents, accountants and lawyers who are spending more on their clients,” Maletis said. “We also get people who call us and want to ship 10 bottles to their friends. That wasn’t happening two years ago.”
The economy still faces headwinds from a shaky jobs recovery and persistent long-term unemployment, so it’s not exactly “Happy Days Are Here Again.”
But stock prices are at lofty levels, the recovering housing market is bubbling right along, and an anticipated pickup in economic growth nationwide is brightening the sales prospects of some local business owners.
With monthly sales doubling year-over-year, Maletis said he soon will start to distribute East Coast orders from a New York City warehouse and add Burgundy wines to his product assortment. He also plans a modest amount of hiring at Fat Cork’s offices in Lower Queen Anne.
His company’s small-but-steady growth is something of a metaphor for the Seattle-area economy in 2014: While employers will continue to hire more workers this year, and local economic growth probably will outpace the nation’s, it’s not the kind of projection worth popping Champagne corks over.
In terms of jobs, local economist Dick Conway predicts growth will slow from a post-recessionary peak of 3.2 percent in 2013 to 3.0 percent in 2014. Still, that’s better than the nation’s estimated advances of 1.6 percent and 1.8 percent, respectively.
The main reason for an expected deceleration locally is Boeing. The aerospace company and its subcontractors accounted for about a third of the region’s post-recession job growth, but Boeing no longer is in hiring mode, Conway said.
What’s more, Microsoft is working on a major restructuring that seems to make a significant increase in its local payrolls unlikely.
“Boeing is in neutral. Microsoft is in neutral,” Conway said. “They’re still major forces in our economy. They’re just not major forces of growth at this point.”
Economists believe growth instead will come from the likes of Amazon.com, with its seemingly insatiable need for new office space in downtown Seattle, as well as an array of smaller businesses that feed off economic expansion both locally and beyond.
They say Seattle’s resurgence hinges on an unabated housing recovery, stronger demand globally for local goods and services, and on the Other Washington avoiding default on the federal debt.
Conway said strengthening U.S. and European economies will lift such businesses as Federal Way-based timber giant Weyerhaeuser and Bellevue-based truck maker Paccar.
“We expect good growth ... due to the national recovery and an increase in foreign exports,” he said. “All of this will be modified by Boeing topping off.”
Local job growth
The U.S. economy appears to be gaining strength just as the local economy taps the brakes a bit on job growth.
The Seattle area, which generates about half the jobs in Washington, recently hit a soft patch after regaining pre-recession employment levels last summer.
The local jobless rate dropped to a 57-month low of 4.7 percent in May and stayed below 5 percent until August, when it shot up four-tenths of a percentage point to 5.2 percent.
As of November, the aerospace-manufacturing sector is down 2,300 jobs compared with a year ago, a 2.5 percent decline, while federal government jobs locally are off by 600, or 2.6 percent.
Still, the region is doing better than the state and nation as a whole: Neither is back to pre-recession employment levels, and both have jobless rates significantly above Seattle’s 5.6 percent in November.
Economists say the local economy benefits from strong growth of its technology and health-care sectors, which tend to pay above-average wages and boost overall wealth.
Employment at software publishers is up 4 percent from a year ago, edging out a 3.4 percent gain at hospitals. A main beneficiary is the retail sector, with year-over-year job growth of 5 percent.
Employment also is up at construction companies, financial-services firms, and hotels and restaurants.
“The housing market continues to improve, and automobile sales are strong,” said Steve Lerch, chief economist and executive director at the Washington State Economic and Revenue Forecast Council. “Things are picking up, and that does accumulate.”
Lerch predicts personal income statewide will rise 5.2 percent in 2014, up from an estimated gain of 3.1 percent in 2013. (That still would be below the state’s pre-recession growth rates of 8-plus percent.)
Dave Barber, head of business development for Bartell-Barber Family Investments, which owns Seattle furniture maker Urban Hardwoods, points to one recent purchase in particular as proof of a brightening economic outlook.
Urban Hardwoods makes its tables from locally salvaged wood and sells them for thousands of dollars at stores in Seattle, San Francisco and Santa Monica, Calif.
“A software company purchased a series of our conference tables, and we’re preparing that order right now for delivery,” Barber said, declining to name the buyer. “Sales are good, and we have higher expectations for (2014)”.
The U.S. jobless rate is at a five-year low of 7 percent, and the Federal Reserve predicts it will fall to 6.3 percent in 2014 and 5.8 percent in 2015.
Unemployment in Washington is 6.8 percent, but if you take into account people who can only find part-time work or are too discouraged to even look for a job, the rate is 14.8 percent.
An estimated 25,000 long-term unemployed workers in the state lost their federal benefits Saturday because Congress did not extend an emergency aid program before the holiday break. Although the Senate likely will vote in January l to reinstate the jobless benefits for three months, it faces a tough sell in the Republican-led House.
The Economic and Revenue Forecast Council predicts Washington’s economy will continue to grow slowly this year, with job gains in most sectors except for aerospace and federal government.
But it also warns that Washington’s comeback is vulnerable to a possible housing-market disruption, uncertain U.S. fiscal policy and the potential for slower economic growth in China.
House-price appreciation boosts employment in the construction and financial-services sectors and makes people feel better off, which gives them confidence to splurge on items like new furniture and cars. The worry is housing prices will rise well beyond the reach of first-time homebuyers, eventually causing sales to fall.
Meanwhile, a new federal budget deal reached between House Republicans and Senate Democrats prevents a government shutdown in January, but the debt ceiling still needs to be raised in the spring.
“Buying a car or house will become more expensive if the debt ceiling isn’t increased,” Lerch said. “Employers and financial markets would see it as a default, and interest rates would go up.”
Economists also say the debate over whether to extend federal jobless benefits to long-term unemployed workers carries significant implications for consumer spending and the broader economy. Cutting the benefits could shave two-tenths to four-tenths of a percentage point from economic output, according to some estimates.
Exports are key
The Seattle economy, with its local production of airplanes and software, is more export-driven than most U.S. metro areas.
Exports statewide are up nearly 9 percent year-to-date through the third quarter, continuing a strong pattern of growth since 2011, industry data show.
But economic weakness in China, the state’s largest export partner, could drag down local exports, Lerch said.
“The Chinese economy definitely has slowed down since the double-digit growth we saw through 2011. The question is whether it stays at 7.5 percent or so GDP growth, and whether it succeeds at shifting its economy toward domestic consumption,” Lerch said. “To the extent that they’re successful, that’s just going to broaden the market for Washington goods in China.”
John Jastrem, chairman and CEO of Callison, a Seattle-based architecture firm with more than 900 employees worldwide, said he’s optimistic sales will climb 14 or 15 percent in 2014, on top of 12 percent growth in 2013.
That’s translating to more hiring at Callison’s local offices. The firm, which does a wide range of commercial design work, added about 35 employees over the past year and is looking for an additional 40 here, Jastrem said.
“Across the board, things have improved. International markets, specifically Asia, are growing the fastest,” he said. “But we also are seeing accelerated growth in the U.S.”
Amy Martinez: 206-464-2923 or email@example.com. On Twitter: @amyemartinez