You as consumers of news prefer that the information and analysis we provide be freshly observed and reported, not recycled and rehashed.
To fulfill our obligation to you, we are pleased to report that, with this the latest in our regular series of six-month outlooks on the regional economy, we are leaning toward revising the forecast that we have been sticking with for what seems like several years.
But this bit of good news comes with a more-than-offsetting dollop of gloom: The revision we have in mind is to make it more pessimistic.
To recap: For months we have been telling you that the recession, followed by a pseudo, jobless, prosperity-free recovery, dampened by the collapse of the housing market and the homebuilding industry, high overall unemployment, and shaky confidence among consumers and businesses, who are unconvinced that the upturn is real or durable, has been marked by a few pockets of decent performance, at least in Washington. Such as: Aerospace. Agriculture. Much of tech. And, until recently, the performance of economies in Asia and Europe to which we sell goods and services.
It’s that “until recently” qualifier that has us hedging our forecasts. Ag is still doing well. Tech is still in reasonably good shape, although the swoon of Facebook’s IPO suggests some hesitations about parts of the sector.
Aerospace, on the other hand, is a bit worrisome. That’s a problem because of how much a difference it has made in propping up the economy; as of May, aerospace employment in Washington was up by 8,100 jobs over a year ago.
That kind of year-over-year growth can’t continue. Boeing and others within aerospace will continue to hire to replace retirement-eligible workers, but at some point they’ll have all the bodies they need to accommodate the ramp-up in plane production. Meanwhile, airlines, especially foreign carriers, are giving indications they’re full up for the moment on planes. The travails of the markets in which they operate could well cool the ardor for placing more orders.
And that brings us to the real cause for concern: China and Europe. Even while the U.S. economy was in disarray, the continued buying power of both those markets provided some solace to exporting companies here.
But now China is slowing, and Europe is a mess. As officials of the state Department of Commerce noted recently, a contracting European economy has the potential to cause trouble for us in multiple ways: Not just in reduced purchases of Washington-made goods and services, not just in lower job-producing direct investment in this state (think of the SGL/BMW plant in Moses Lake as an example), but in the ripple effects in China, which could respond to lower trade with Europe by closing off more of its home market.
More cause for concern: Energy prices are likely to rise. We’ve already had one bout of that this year with gasoline, and natural gas won’t stay cheap forever. Interest rates cannot go lower. The federal government will be cutting defense spending, and state and local governments continue to slice budgets because of lower tax revenues. As for housing, the sector that launched our present predicament, the recent TNT headline about the fifth consecutive year of declining home values in Pierce County suggests we’re still a long way off from normal in that industry.
Sorry, we didn’t mean to launch the second half of 2012 on such a downer. It’s no more fun for us to write this stuff than it is for you to read it. But, hey, we just promised “updated.” We didn’t promise “encouraging.”