How is the Pierce County economy doing? Not great, according to new report
A new economics report shows that the economy is stagnating in Tacoma and Pierce County amid the Trump administration’s whiplash tariff policy, higher-than average inflation and affordability issues.
University of Puget Sound associate economics professor Andrew Monaco sat down with The News Tribune on Jan. 27 to discuss the 2026 Pierce County Economic Index Report. Monaco led a team of economists who authored the report for the Tacoma-Pierce County Chamber of Commerce.
Economic uncertainty and rapidly changing federal and foreign policies are driving instability in many markets nationwide, and Pierce County is not immune, Monaco said.
Inflation, cost of living still high
Inflation in Pierce County is still high, and it remains more expensive to live in Western Washington than other parts of the country due to the area’s desirability and more high-income people moving here, as Monaco told The News Tribune in 2024. According to the report, inflation in Pierce County was 2.7%, outpacing inflation at the national level.
Households or firms that are risk-adverse have been more hesitant to make large purchases, increase investments or expand operations, per the report. According to the U.S. Economic Policy Uncertainty Index, 2025 was the highest sustained level of policy uncertainty in the last 25 years, rivaling the 2020 pandemic and the 2008 financial crisis.
“As Pierce County experienced in 2021-2023, rising inflation significantly dampens the local economy,” per the report. “Faced with higher prices, consumers buy less in real terms, leading to lower county [Gross Domestic Product]. Local businesses face higher input costs, which puts further upward pressure on prices while simultaneously reducing production.”
Many economists, including Monaco, believe that while retail sales in Pierce County are relatively flat, higher income households are spending a lot more and lower income households are cutting back spending because the cost of living is high. Due to Washington’s regressive tax system — which relies on sales-and-use taxes, business-and-occupation taxes, property taxes and other taxes instead of income tax — Monaco said lower income people are being hit worse by high inflation because higher income households can absorb more economic volatility.
Unemployment rate ticks up, AI layoffs
The Pierce County unemployment rate ticked up slightly to 5% and employment fell 1% year-over-year, which “follows national trends, but Pierce County’s unemployment remains slightly higher than the national average,” per the report. The labor force participation rate in Washington hit 61.7%, the lowest in 10 years, “suggesting a dropoff in labor market engagement across the state.”
Advancements in Artificial Intelligence and machine learning will likely continue to impact the tech economy and the labor market in Tacoma and Seattle, Monaco said. Although developments in AI can lead to productivity gains and more data centers will bring jobs to the region and stimulate the economy, “Job replacement due to AI is a real threat,” according to the report.
“Earlier this year, several leading tech firms announced major layoffs. Microsoft reduced its workforce by nearly 3% in May, including almost 2,000 jobs in Washington. Amazon eliminated almost 14,000 jobs, 40% of those in engineering roles, with approximately 2,300 positions based in Washington,” per the report. “Moves like these from industry leaders often serve as a harbinger for broader economy-wide restructuring. Since many Pierce County residents work in the tech and engineering sectors outside of Pierce County, the long-term structural impacts of AI will permanently reshape the landscape of skilled labor markets in the region.”
Building permits drop, housing costs rise
According to the report, building permits in the Tacoma-Seattle-Bellevue area are down — 17.3% year-over-year. Construction material sales in Pierce County have fallen 7.3%-year-over-year as well, meaning fewer homes and buildings are going up, as demand and home prices continue to rise.
“Prices facing producers are on the rise, and housing affordability has not improved in Pierce County, according to the Housing Affordability Index and apartment rent data,” per the report. “Mortgage rates are still hovering above 6%, while housing demand remains high.”
Heading into 2025, apartment rental rates have continued to rise for 1- and 2-bedroom apartments in Pierce County, according to the report. The average 1-bedroom apartment cost $1,473/month in the second quarter of 2025 (a 1.8% increase year-over-year) and a 2-bedroom apartment cost $1,793/month on average (a 1.5% increase year-over-year).
Trump tariff, immigration policy harming Tacoma business
President Donald Trump’s continued whiplash tariff strategy has directly impacted shipping in the Ports of Tacoma and Seattle, per the report. A reminder: Tariffs are taxes on imported goods paid by the American importer. As it becomes more costly to do business overseas, American companies are passing that price onto consumers, Monaco said.
Total container traffic is down in both ports about 3% overall, and automobile traffic is down nearly 22% from last year, a direct result of unstable international trade policies and reduced trade with China (the largest trade partner at the Northwest Seaport Alliance), per the report. Despite a strong start to the year — in anticipation of tariffs taking effect — the ports lost any gains, according to the report.
Trump’s tariffs are also impacting housing construction. Rising tariffs have increased construction costs, and Trump’s immigration policy is constraining construction labor supply, “adding to the upward pressure on housing construction prices,” per the report.
Monaco said the unprecedented 43-day government shutdown in the fall meant crucial economic data collection and forecasting didn’t happen, which means economists don’t have access to updated personal income and GDP at the county level. Late and missing data has likewise hindered decision-making at the local, state and federal levels, in addition to local businesses, per the report. There is concern that another government shutdown is coming, as the current resolution to keep the government funded ends on Friday, Jan. 30.
The White House’s intense and unprecedented pressure on the independent Federal Reserve Bank to cut interest rates is adding to economic uncertainty by threatening to “breach the firewall insulating monetary policy decision-making from political influence,” according to the report.
What will happen in the future?
Although there are economic challenges in Pierce County right now, Monaco said overall the local economy is strong and stronger than it was in 2020.
A good thing about Pierce County’s economy is that it is diversified across a range of private and government sectors, which makes it more stable amid volatility, he said.
“There’s a lot of bluster from the [Trump] administration about, like, ‘The economy’s doing great,’ and that’s definitely not happening,” Monaco said. “We’re not seeing active downward trends. It’s not like the recession is coming next week or anything like that. But it’s kind of unremarkable. There’s this flatness to a lot of things, and I would say that a lot of what we see in Pierce County is kind of reflective of broader national trends in terms of inflation is a little bit sticky here, and still a little bit higher than they want to be.”
Monaco said as long as the Federal Reserve stays politically independent and does its job, he thinks there will continue to be as much stability and flatness as we’ve had so far in 2025.
That being said, “At any moment, there could be an announcement of a new economic policy, a new immigration policy that impacts labor markets, a new tariff policy, a new tax break or stimulus checks, who knows what idea is coming around the corner that could just disrupt things, right?” Monaco said. “It makes it really difficult to come up with a forecast.”
Monaco admits, “It’s rough out there,” and that most people do not have the power to predict or control what’s going to happen.
“Staying informed is really important,” he said. “You’re not crazy. It is one of the most expensive places in the country to live. There is data to back that up. There is a lot of uncertainty right now. That’s all valid, what you’re experiencing, those feelings that you’ve got right now about where things are at. But that doesn’t mean that things are declining actively, we’re not approaching a recession, it’s just sort of floating along.”
This story was originally published January 29, 2026 at 5:00 AM.
