Where we go from here depends on how Great Recession shapes up
The national trends can't be avoided, even in a Seattle that didn't depend on a housing boom for its sustenance. Our overseas trading partners in Asia offer only partial relief.
Special to The Seattle Times
You don't have to live in Phoenix or Dayton, Ohio, to see how the Great Recession has damaged your city and state, perhaps permanently. Although Seattle and the Puget Sound region remain one of the nation's stronger metro economies, the hurt here is obvious.
Marquee companies such as Boeing, Alaska Airlines, Starbucks, Weyerhaeuser and, for the first time in its history, Microsoft have laid off workers. More than 171,000 workers in the Seattle-Tacoma-Bellevue area are officially unemployed, with the real number likely far larger.
Downtown Seattle has lost 10 percent of its retailers, a sign of a deeper retail crisis that has affected suburbs, too. Commercial real estate is in trouble.
Container traffic at the Port of Seattle fell 7 percent last year compared with the year before (from August to December, it dropped almost 12 percent). And the nation's largest bank failure destroyed a major headquarters and eliminated thousands of well-paying jobs.
What happens next will weigh heavily on what kind of place the Puget Sound region will be over the next generation.
The United States appears to be in a technical recovery, but the relief for many seems slight. Foreclosures continue. Many companies still have trouble getting loans as U.S. bank lending pulled back at its steepest rate since 1942.
State and local government finances remain in crisis, despite repeated and often unprecedented cuts.
Unemployment is a particularly dangerous enemy of a real recovery. Most economists agree it could take years to recover the jobs lost in the recession, and then many people will work for less pay than they did before.
Joblessness among teenagers, young people, minorities and men is particularly high. Entire classes of jobs will never come back.
Seattle, of course, has been in bad unemployment territory before. The Boeing bust starting in 1969 produced a peak unemployment rate of more than 12 percent. But not since the Great Depression has the national and global economy been so damaged.
The national trends can't be avoided, even in a Seattle that didn't depend on a housing boom for its sustenance.
Our overseas trading partners in Asia offer only partial relief. While China and other nations appear to be rebounding, American demand for imports is weak and the Chinese economy faces a dangerous bubble. A downturn there would batter Washington state exporters.
If China avoids that fate, it becomes an even more formidable competitor against the region's technology sectors.
Economists have wondered about the shape of recovery. We can rule out a "U," with a quick rebound to match the white-knuckle collapse. An abstract "V," with a long, lazy left leg implies a continuation of today's trends, a slow, extended recovery. But that assumes no further shocks on a fragile system.
Now the scary stuff: A "W" indicates a double-dip recession. "L" lingers as a lethal likelihood (hey, if you don't laugh, you'll cry). An L-shaped outlook means the economy would bounce around on the bottom for perhaps years. Nobody knows: We've never been in this territory before.
With that caveat, let's consider two scenarios:
Goldilocks: In this just-right recovery, the world and local policy work in our favor to create a steady, sound expansion.
We continue to do better than the nation as a whole. Microsoft rebounds. Boeing wins the Air Force tanker contract and labor peace. Talented young people and top researchers continue to come here, seeding new ventures and expanding our footprint in software, gaming and biotech.
In this scenario, green tech becomes profitable and Seattle a leader. Inflation stays low. Government is able to plug its fiscal hole in a way that does the least damage to job creation, education, university funding and business formation, especially in vulnerable blue-collar industries.
The U.S. economy recovers enough, combined with exports, to give the region's ports a lift.
The big bad wolf: The dismal decade of the 2000s is followed by one even worse, without a real-estate bubble to cloak decline. We suffer more financial collapses and fiscal crisis.
Because of the persistence and depth, Seattle can't avoid the worst consequences. Among them: more layoffs and persistent joblessness, massive loss of local businesses, declining living standards, draconian cuts to public services, scarce venture capital and even political unrest.
Here, the metro area becomes Balkanized as cities fight over a shrinking pie. It is unable to prepare its transportation infrastructure for a high-cost energy future, or to keep the ports competitive.
Also, because of the dismal capital markets and rising Asia, Seattle stops creating hot tech companies and, combined with severe university cutbacks, stops luring top talent.
Neither of these possibilities is a fairy tale. A middle ground will be challenging enough. That's why the Puget Sound area will have to make all the right moves, and hope a highly unstable world economy cooperates.
You may reach Jon Talton at firstname.lastname@example.org
About Sound Economy
Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest