We could tell you that predicting the strength and direction of Washington’s economy in 2017 requires complex algorithms and careful balancing of dozens of factors and indicators including, but not limited to, interest rates, the value of the dollar, farm output and commodity prices, real-estate values and housing starts, retail sales and consumer confidence, unemployment and labor demand, freight traffic by rail, truck and ship, tax-law changes, oil and gas production and new policy directives in D.C. and Olympia.
But who are we kidding? All those are important, but trying to weave them all together into one narrative is a hopelessly and needlessly complex operation.
What you need to know about the Washington economy this year can be summed up, and answered, with two questions: How’s Boeing doing? And the tech sector?
The reader’s initial response to that proposition, and the first question, could be anticipated as, “well, duh. When doesn’t Boeing matter to the regional economy?” And as to the second, “Maybe tech matters in Seattle or Bellevue or Redmond. What’s it got to do with the rest of the state?”
Let’s tackle that one first because there’s an element of truth to the objection. No matter how much everyone wants a piece of it, tech is not a significant economic sector beyond King County. It’s not a direct influence on the economy of Tacoma and Pierce County.
But tech is so outsized a presence in King County — from the number of people employed to the salaries at which those people are employed — that it can’t help but have an indirect effect on other regions and sectors, from the housing market to commercial real estate to construction to operating costs for businesses to the money being pumped into government coffers.
Business memories tend to be short, but it hasn’t been so long ago that the experience of the dot-com bust, and the jobs and millions in invested capital it burned, has been entirely forgotten. In these parts people have, if anything, a heightened vigilance for signs of a repeat.
This tech boom looks different — it involves more players, isn’t tied to a single sector like social media or gaming, doesn’t seem to be based on one hot-at-the-moment technology or faddish idea, and companies are actually delivering profits instead of promises of profitability. But since people know that assurances that “this time it’s different” mean that it isn’t, the sense of wariness increases for the inevitable failures and flameouts. Washington’s economy doesn’t need white-hot performance from tech; it does need sustained performance, or there will be consequences, even for parts of the state that believe they’re not reliant on it.
Boeing isn’t always the dominant story in the state’s economy, but it sure helps to have it on the positive side of the ledger. The aerospace sector has its own legacy of contributing to economic slumps in the state of Washington, but the most recent nasty recession wasn’t one of them. Aerospace helped prop up the economy while residential housing was trying to take it down.
Boeing isn’t in expansion mode at the moment. From late January to late November, the company’s employment in the state dropped by 5,600 jobs. More cuts are coming in 2017, with the production rate on the 777 at Everett to be cut in August.
But that doesn’t mean the aerospace sector is in full swoon. The aerospace product and parts category of the Employment Security Department’s monthly calculations for November 2016 shows a decline of 5,100 jobs from a year ago. With the usual caveats — different data sets and methodology — if those numbers are at least ballpark accurate it suggests that the non-Boeing portion of the sector is picking up a bit of the slack.
While attention has been focused on the wide-body planes and their future, the 737 program quietly chugs away in Renton, with yet another production rate increase scheduled for the third quarter of 2017, to be followed by one in 2018, and yet another in 2019. As the number of 737s produced increases, so does production at hundreds of vendors and suppliers (including many in Pierce County). What the regional economy needs is for the 737 market to remain healthy (i.e., no wave of order cancellations) and for the order book for the other models to stabilize.
Keeping those sectors in reasonably decent shape won’t solve problems for every corner of the state, or every company or would-be job seeker; that’s where all those other factors and industries matter. But if you’ve got big problems in aerospace and tech, everybody’s got big problems.
Bill Virgin can be reached at email@example.com.