The first month of the year is prime economic forecasting season, time for those of us who play at economic prognostication to offer up a platter of new predictions while hoping target audiences didn’t bother looking at how well last year’s offerings held up.
Your columnist is on the agenda for one such event, whose organizers have helpfully provided a list of questions to be discussed. So in preparation, let’s take a run at coming up with answers:
Question: Are economic conditions better now than they were a year ago? Unemployment is still high and inflation is low. Do you see that changing this year?
Answer: Yeah, sort of. It’s all right. Not bad, not great. Nothing special. It’s bland. It’s American cheese. It’s beige. It’s a day in late March. It’s smooth jazz. It’s ... all right, you get the idea. Don’t expect much out of this year. Could we get a surprise and break out of the doldrums? Sure – but maybe in the wrong direction.
Q: How is the Northwest economy doing and what is the outlook for the Washington economy?
A: Depends where you are. The Seattle-Eastside services and tech corridor will do well. The ag sector has had a run of good years. Manufacturing-reliant local economies are on the mend, thanks to a decent run in aerospace. Consumers are spending, kind of, so retailing is doing incrementally better. Housing is climbing out of the trough. Washington should have a decent year.
Q: What “thing” will have the biggest effect on the Northwest economy this year?
A: If you’re speaking specifically about just 2014, it’ll be a bunch of things – energy prices, foreign and national markets for Washington-made goods and services, more recovery in housing. If you’re thinking about the 2014 as it sets up what happens in the long run, see the answer to the question after next.
Q: What is employment doing in Washington? What industries are adding jobs and what industries have lost jobs?
A: Aerospace helped prevent the recession from being any more damaging than it was in Western Washington, but it won’t provide the same spur to growth in 2014 that it has (Boeing alone is down by nearly 4,000 jobs just this year in the state). You’ll see very modest employment growth this year, because: Obamacare’s costs and employment threshold will discourage hiring on; companies that survived the recession learned to do so by producing more with fewer people; companies in some sectors are struggling to find employees with the skills and training they want; and there’s still considerable skepticism about this economic up-cycle’s strength and duration.
Q: What are Boeing’s long-range plans for Washington?
A: To see the state in its rearview mirror (presuming that airplanes had rear-view mirrors).
Q: What are the greatest risks in 2014 and beyond for Boeing? For Microsoft?
A: For Boeing: The emergence of foreign competitors in the commercial aerospace sector. Delays in getting the 737 Max and other models to production. The inability to manage an increasingly dispersed supply and production chain. Significant cutbacks in military spending.
For Microsoft: Naming a chief executive who doesn’t fit. Continuing to flail about in mobile and consumer products. Losing market position in the low-profile stuff that makes the company serious money.
Q: What do you believe is the outlook for some of our major trading partners? What world economies are affecting the Northwest the most and how?
A: Truth be told, there’s only one that really matters — China. Sure, Europe and Canada are interesting, but for its size and importance as supplier, buyer and competitor, the discussion largely starts and stops with China. And you could fill the rest of this paper with conjecture, all of it well-founded in analysis and all of it conflicting, about what’s really going on with China politically and economically.
Q: What long-term changes to the national and regional economies do you see as a result of the financial crisis and subsequent attempts by our federal government to address the crisis?
A: Was there an attempt — a serious one — to address the crisis?
Q: How are the Fed’s decisions regarding interest rates affecting the U.S. economy?
A: They aren’t. If people and businesses don’t have the confidence to borrow money or make investments, it doesn’t matter if you drive interest rates to the point of giving away money. And if that reflects a new sobriety about spending, that’s not exactly a bad thing.
Q: The stock market: In 2014 are the markets going down, or up, or staying where they are?
Q: Which three Northwest stocks would you buy now, if any? And which one (if any) would you short?
A: We’re not stock touts, nor should we be (if we really knew, would we tell you?). But don’t you get the slightest bit nervous about stocks when the market generally is predicting a much healthier economic growth rate than the current trend line? And don’t you start reminiscing about the last tech bubble when paying nearly in the mid to high 60s per share for Twitter (not a Northwest stock) buys you just 75 cents a share in revenue (that calculation courtesy of Yahoo Finance), not to mention the losses?
Q: How is the fiscal health of Washington state in terms of the state budget, long-term pension obligations, etc.? Are we in better shape than California?
A: That’s setting a rather low bar, don’t you think? Washington hasn’t been one of the basket-case states in terms of budgets. But add on the burdens that health care “reform” brings, and take away the economic prop provided by Boeing, and then tell us how your budget looks.
Q: Before we wrap up for the night, any parting thoughts, panelists?
A: You now have 12 months to forget what we predicted.Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.