On the Economy
Boeing pullback may signal worse cuts to come
Boeing's announcement today that it will pull back on passenger-aircraft assembly shouldn't be a surprise. Worldwide demand for jets has collapsed because of the recession and financing remains under pressure. But considering the global nature of the economic downturn — and the global base of Boeing's customers — much worse cuts may yet come.
Special to The Seattle Times
Boeing's announcement today that it will pull back on passenger-aircraft assembly shouldn't be a surprise. Worldwide demand for jets has collapsed because of the recession and financing remains under pressure.
A little more than a year ago, Boeing was still hiring and commercial orders remained solid despite the national housing collapse. But back then we were also the headquarters of Washington Mutual and Safeco, with an economy so diverse and strong that reporters were coming here to check out Seattle's secret.
There was no secret. The region's diverse, high-quality economy was out in the open — as was the danger: that Seattle could not continue to fly above the turbulence if the recession became deep, long and global. It has, and here we are.
Statewide, the unemployment rate was 8.9 percent in February. In Snohomish County, home of Boeing's Everett assembly, it was just under 10 percent. All this, and the bulk of thousands of already-announced Boeing job cuts haven't gone into the pipeline.
So a nip to production of the 777; a tuck to increases that had been planned for the 747-8 and 767. This won't hurt. Will it?
Not yet. But as I've written before, considering the global nature of the downturn — and the global base of Boeing's customers — much worse cuts may yet come.
The profits out of Wells Fargo are nice, but they don't signal relief from the widespread downturn globally. Many nations are suffering far worse than the United States. Some happen to be good Boeing customers. The turmoil in the capital markets makes financing difficult. Even uncertainty can freeze big deals.
Gov. Chris Gregoire's timing couldn't have been better. She announced the formation of a council to bolster aerospace manufacturing in the state. There have been committees before, of course. So what this new group of business, labor and government representatives accomplishes will be what matters.
They need a bias for action — but not panic. Reset, Great Disruption, whatever you want to call this, it has the potential to reset the competitive table. It will undermine traditional strengths and players, and bring out long-simmering distortions and weaknesses.
No region can lie on a smug sofa of past accomplishments. At the same time, the Puget Sound region remains one of the world's foremost aerospace hubs. We're not the next Rust Belt. The issue is how to address a world of competition that will only increase as the economy resets.
One big help would be some consensus on a few critical questions.
A biggie: Are we pricing ourselves out of the aerospace industry?
Another: Is government following innovative practices in economic development, not only in taxes and regulations, but forward-leaning efforts to attract new investment and talent here?
The panel won't have credibility if it just blames Boeing workers. American workers are already wondering why their wages have been stagnating in recent years and good jobs sent overseas as the corporate elite and very rich have only become more wealthy.
One of the reasons these aerospace jobs are so important is because they pay enough to disproportionately support the jobs of others. On the other hand, if repeated work stoppages make Boeing a less-reliable manufacturer in a competitive market, workers need to take notice.
We need honest brokers of reality-based information — is that too much to ask? If we don't get it, we'll have even more reason to be jumpy.
You may reach Jon Talton at email@example.com
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About On the Economy
Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest