Business

Bill Virgin: World plays big role in region’s recovery

Weyerhaeuser logs destined for Lianyungang, China, are loaded onto the cargo ship Sun Ruby in August at the Port of Olympia. International markets and trends are a big temblor the Washington and Puget Sound regional economies will face this year.
Weyerhaeuser logs destined for Lianyungang, China, are loaded onto the cargo ship Sun Ruby in August at the Port of Olympia. International markets and trends are a big temblor the Washington and Puget Sound regional economies will face this year. Staff photographer

Hope you enjoyed the recovery, such as it was.

Hope you’re prepared for the downturn, whatever form it takes.

It might be a tough argument to make to those who lost their jobs during the recession — employees of Washington Mutual and the other banks and mortgage companies that folded, residential construction workers and contractors, anyone affiliated with building-products manufacturing, people in disrupted industries, such as retailing and media — but Washington and the Puget Sound region didn’t fare too badly.

That was because of multiple pillars — aerospace, certain pockets of manufacturing, the tech sector and agriculture prime among them — large and strong enough to prop up the state and regional economies.

The reality distortion field that is the Seattle tech sector might convince observers that economic life has been nothing but blue skies and boom times, if that’s all they were looking at.

But it also wasn’t a case of gloom, despair and agony.

In 2016, just OK is going to look quite attractive if, by the end of the year, we find that’s what we wound up with.

Those pillars are going to get a shaking in 2016. The questions are how severe the shaking will be, how sturdy the economic supports we’ve relied upon still are and whether the recovery restored any of the woe-beset sectors to sufficient health to be counted on in the next downturn.

Which, as it happens, may already be here. We’ve already seen scattered news stories of job losses, often in smaller communities and rural areas that don’t have large employment bases to start with. The two Alcoa aluminum smelters, for example. Or the plywood veneer mill in Omak. Or, to cite an example in an urban area close to home, the Tacoma Tideflats lumber mill that Interfor shut down.

A handful of layoff and shutdown notices could be dismissed as scattered and unrelated, or indicative only of problems in one specific industry. Get enough of them, though, and the suspicion arises that there is something bigger going on.

There is. Or more properly, there are. A lot of it can be traced back to China, where the economy is slowing. In a less managed economy like ours, the economy and the workers who make it up would take their lumps until conditions came into balance. For an assortment of political, social and economic reasons, though, China’s leaders don’t feel they can afford to do that, so they’re attempting to manage the decline, keeping some excess production open that ought to be idled. That production has to go somewhere. Where? Guess.

The Chinese also aren’t buying as much as they used to, so that production from other countries has to go somewhere — stuff like Canadian lumber. Where? Aw, you’re too good at this.

International markets and trends are a big temblor the Washington and Puget Sound regional economies will face this year. Whatever help Washington got from export markets in recent years may not be there in 2016. China, we’ve discussed. Europe is a mess for multiple reasons and on multiple fronts. Countries that rely on natural resource exports, from Canada to Australia to Mexico, are getting squeezed by low commodity prices for materials such as oil and wheat. Compounding the problem for the U.S. is the strength of the dollar, making our natural resource exports less competitive. That’s not good news for Eastern Washington.

So what can we count on?

Of all the pillars we’ve counted on until now, aerospace looks to be the most reliable. Boeing isn’t adding to its workforce, but it still has to hire workers to replace those who are retiring. The company also wants to make sure the transition to the 737 Max and planned increases in monthly production rates do not repeat the unpleasant experiences the company has endured. Meanwhile, suppliers and contractors need to add bodies to keep up.

Manufacturing still has pockets, and pockets within those, of relative health. At the recent Pacific Marine Expo in Seattle, some boat builders lamented weakness in the market because of low oil and salmon prices. But at least one large yard reported a full order book and said it would hire workers if it could find them.

Ever since the dot-com meltdown any growth in the tech sector has been regarded with suspicion, as in, “This is just froth, and it won’t last.” The sector may not add people at such a frenetic rate in 2016, which is bad news for Seattle property developers, but it’s not standing on the precipice of a big contraction. We think.

None of that suggests an economy to which adjectives like robust might be attached, but it’s not a scenario of doom, either. While it’s possible that conditions will turn out to be much uglier than we’re conjecturing now, it’s also possible that one of the previously troubled sectors, such as retail or finance, might revive themselves and contribute some growth.

If they’re of a mind to do so, for the sake of the state and regional economies, 2016 would be an ideal time to start.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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