Pierce County economy will bounce back from COVID-19, but it will take time, experts say
The message from the 2021 Pierce County Economic Index is that things could be worse but have a ways to go before getting better.
The index, produced by Neil Johnson of Sound Resource Economics and presented Wednesday morning by the Tacoma-Pierce County Chamber’s annual Horizons Economic Forecast breakfast, showed that federal stimulus payments gave a 5.2 percent boost in the annual index amid the coronavirus pandemic.
That counts as the 11th consecutive year of growth for the county.
“So looking forward, we’re looking at probably about 1.9% increase in 2021. But that’s relative to our relatively strong 2020,” Johnson said in his presentation.
The event, normally held as a breakfast gathering for businesses in downtown Tacoma, was held virtually as a pre-taped presentation featuring various speakers from local, state and federal entities.
Anticipated new relief coming this year is set to put the index 1.9 percent higher in 2021, but according to the report, “It is possible that the annual PCEI value could fall in 2022 as economic coronavirus relief payments and programs end.”
Real total personal income, Johnson noted, was up 4.6 percent to $56,800, but again, that’s tied to government stimulus payments.
Income growth in 2021 is forecast to be lower, with a 2.5 percent increase in total real personal income and a 1.25 percent gain in real personal income per capita, according to the report.
What growth there was wasn’t shared by all.
“if you’re in the leisure and hospitality, business, that was bad. If you were in, say professional business services, or finance, things look pretty good there,” Johnson said.
For retail sales, Johnson noted, second quarter was “a disaster” in some areas.
“So middle of 2019 to middle of 2020, retail sales were up about 1.3 percent. That’s pretty anemic. That’s inflation adjusted dollars,” he said. “The vast majority of that is due to an abysmal second quarter. You saw different sectors ... just plummeting.
“You had, for example, new and used auto dealers, they were off about $75 million to $80 million. Some miscellaneous retailers sort of offset that by being up about 80 percent.
“The construction sector that was off about $147 million just in that quarter. So it’s sort of a mixed bag in terms of what you actually saw there. Some sectors again, up really good, other sectors down.”
Going from March to April alone, Pierce County saw 50,000 jobs lost with 63,000 workers losing jobs, according to Johnson.
“If you fast forward to say, August, even through the end of the year, we’re down maybe 10,000 jobs within the first count,” he added.
According to the report: “Assuming the pandemic is brought under control in the last half of 2021, the unemployment rate is forecast to end 2021 in the low 7 percent range.”
Unlike the Great Recession, where some jobs just didn’t materialize again in the aftermath, Johnson said this is a different scenario.
“We’re down about 5,000, on leisure and hospitality, and those will probably come back,” he said. “There’s probably a pent-up demand for that type of stuff. It’s just a matter of how damaged were businesses.
“Another sector that that was down is construction, but that was already forecast to be down over 2020 and 2021, just based upon building permits. I’m looking to first to be sort of where we were pre-pandemic, maybe first quarter, second quarter of 2022.”
Johnson expects a rebound for the Port of Tacoma.
According to the index report: “Longer term there is the hope that the Biden administration will end the tariff war with China, allowing a return to pre-2020 traffic levels.”
Local business insights
Three panelists followed Johnson representing the local health, leisure-hospitality and construction industries.
MultiCare President and CEO Bill Robertson told the audience that his health care system had taken a significant financial hit in 2020.
“We had a negative impact on our operating margin of about a quarter of a billion dollars, which is a pretty big number for us,” Robertson said. “... We have mitigated a fairly significant piece of that, but still a very difficult year financially for us as institution.
“I’d say 10 years’ worth of change happened in about 10 months for the health care industry in the state of Washington, but more broadly in the United States.”
He blamed the loss of non-COVID related care for the dramatic drop, outpacing income generated by COVID treatment.
“By way of an example, our ER services at Mary Bridge Children’s Hospital are half the normal volume. And we only get paid when we’re taking care of patients,” he said.
He also noted the downturn has created acquisition opportunities, leading “in some ways” to MultiCare’s recent acquisition of Capital Medical Center in Olympia.
Looking ahead, Robertson said he sees virtual care expanding “dramatically,” along with more community care.
Anthony Anton, president and CEO of Washington Hospitality Association, told the audience that his industry is reeling from 2020.
“As of October ... we’d already lost 2,000 businesses permanently. So at some point, it just becomes overwhelming. It’s devastating,” Anton said. “The urgency to get us back open is frustrating. And people are doing everything creatively they can to survive.”
He said that before the last round of restrictions, customer demand was there, making him optimistic for an eventual turnaround, just not probably in 2021 given the current state of vaccine rollouts and disease spread.
“When we can open, we know the demand is there,” Anton said. “And when you look at general generation changes, assuming that COVID hasn’t changed them permanently, millennials and whatever we’re calling the generation before ... they have a higher demand on experiences, which is hospitality.
“If you look toward the lodging side, I think state to state or international travel is on a two-year delay. I think some of the airlines are getting closer to three to four. I’m a little more optimistic because I think people do want to live. But that means we’re going to have to see our own state for awhile to really keep our local communities that depend on tourism going.”
Anton said his expects the industry to reinvent itself coming out of the pandemic.
“And so when workers have been out of work for three months already, and now projected to be out of work until June, a lot of them are going to leave the industry permanently,” he said. “And so we’re going to have to build back differently. We’re going to have to build back with different skill sets.”
He’s optimistic that Pierce County can become a reinvented culinary hub.
“Pierce County and Tacoma are so well suited, and Bellevue, to take away Seattle’s culinary hub title. I think Seattle has not shown its passion for hospitality over the last year and a half, two years,” Anton said. “And I think there’s this window here for Pierce County to say, ‘Why can’t we have all the James Beard chefs? Why can’t we have the premier restaurants? Why can’t we have the culinary hubs and really compete well?’”
Dan Absher, CEO of Absher Construction, said on Wednesday’s broadcast that his industry, while not hit as hard as other sectors, did see a loss of about a third of anticipated revenue for 2020.
“Urban high-rise living has taken a hit,” he noted. “A lot of those projects have been delayed or postponed.”
Replacing that to a certain point, he predicts, is suburban growth.
“I see kind of what I would call middle, from duplexes, triplexes, eight-plexes and then suburban villages will become popular,” Absher said.
Given the trends, smaller construction businesses could benefit.
“I think as far as the future ... there will be a lot of opportunity for small businesses to do smaller construction projects,” he said. “And I feel bullish about the opportunities in the construction industry to reshape itself for small businesses to continue to open and operate successfully.
“I feel the construction industry is a lot like the restaurant industry. It’s high risk, a lot of people come in and out of it. But both industries are a great example of the America where you can achieve the American dream.”
Insights on equity
Rick Wade is the U.S. Chamber of Commerce’s senior vice president of strategic alliances and outreach and was Wednesday’s keynote speaker.
Wade noted the chamber’s efforts to address wealth disparities and inequity.
“Based on data, we have now launched perhaps the most impactful historic, business-driven initiative in American history, called the Equality of Opportunity Agenda. And it’s very deliberate, very targeted, where we’re looking to advance not just private sector solutions to addressing inequality, but policy solutions,” he said. “Not just at the federal level, but at the state and local level, around several domains: education, criminal justice, health, unemployment, entrepreneurship and even wealth.”
He noted that according to at least one estimate, “If we close the inequality gaps in America, that our economy grows by some $8 trillion.”
Former Gov. Christine Gregoire, who now serves as CEO of the business group Challenge Seattle, told the audience her group has helped launch Washington Employers for Racial Equity, which offers a report on findings of how Washington is doing and works to advance policy and to help support racial equity in the business world.
About 70 employers so far have joined in the effort.
“This is a problem that it will take all of us working together to solve,” she noted. “And so we want to join as an employer group to do what we can to ensure that everybody knows that the welcome mat is out.”
She added that when equity is achieved, “we will actually be more prosperous, we will actually be more successful, not only as companies but as a state.”
