Happy days will be here again, but no time soon
Local economists aren’t panicking, but can’t relax just yet
Tuesday, August 9, 2011
OLYMPIA — Despite the uptick in hiring throughout July, economists are bracing for what they think will be another year or two of stagnancy for Southwest Washington in the economic recovery.
After the worst week for the stock market since the financial crisis hit in the fall of 2008, the Labor Department announced that the nation’s unemployment rate dropped to 9.1 percent as 117,000 jobs were created in July.
Even so, ratings firm Standard & Poor’s downgraded the nation’s AAA credit rating for the first time in 70 years Friday. The firm decried the government’s debt reduction deal as insufficient to solve America’s financial crisis.
Looking forward, leading state and local economists are wary about the signs, warning of the possibility of a double-dip recession and continuing slow growth.
Scott Bailey, an economist representing Southwest Washington in the state Employment Security Department, follows key indicators that reveal the pace of the economic recovery. To him, the signs do not look promising.
One of the most important indicators, Bailey said, is temporary employment. When business picks up, employers start hiring temporary workers first.
The number of local temp agency hires was cut in half during the recession. It recovered some of that, but has not grown for the last six months, he said.
There were roughly 55,000 temporary employees throughout the state before the recession, Bailey said; that number dropped to about 33,000, then climbed to around 42,000. However, it has not grown for the last three months, he said.
The temporary employee tally also dwindled on the national level. There were about 3.7 million before the recession. It dipped to nearly 2.4 million and rebounded to roughly 2.9 million, staying flat for the last six or seven months, Bailey said.
The most recent statistics, from May, show a markedly high unemployment rate — 12.7 percent — in Clark County.
“At both the national and local level, that number is still too high,” Bailey said. “A third of our workforce works over in Portland, and they were hit harder by the recession. That loss of commuter jobs really pushed up our unemployment rate.”
Bailey also follows trends among those seeking unemployment benefits. Again, he indicates dismal signs.
“We’re seeing more and more people locally and nationally who run through 99 weeks of unemployment benefits and still do not have a job,” Bailey said.
Given the volatility and unpredictability of the market, Bailey refrains from forecasting when the recovery might pick up pace.
Another local economist, Bill Conerly, a business consultant from Lake Oswego, Ore., does have a prediction for the next year.
“I’m forecasting an improvement in the economy, that GDP continues to grow,” he said. “But we won’t be where we should be.”
Conerly mainly looks to such factors as employment, sales and production in manufacturing, wood products and exports to evaluate the health of the regional economy.
“Manufacturing activity has improved,” he said. “(However), in the last few months, it has hardly improved at a fast pace.”
Conerly predicts stronger growth by the end of 2011. State officials, on the other hand, expect the struggle to persist beyond this year.
Marty Brown, the director of the Office of Financial Management, suspects the pace of the recovery will pick up near the second half of the 2011-2013 biennium.
“We’re improving every month,” he said, “but we never quite improved the amount we forecasted we were going to improve.”
Brown sits on the state’s Economic and Revenue Forecast Council, which produces several projections of what the state can expect for revenue and the economy each year. The council takes into account GDP, food prices, inflation, and gas prices along with a number of other factors.
Brown notes that some companies, including Boeing and Microsoft, are hiring. Meanwhile, the crucial construction sector and the housing market lag.
“We need to get a bunch of these foreclosed houses out of the market, so then we can start building houses,” he said, “because that gets people working.”
Arun Raha, the council’s executive director and chief economist, said he worries more about the construction sector than any other part of the economy.
“It’s not doing much,” Raha said, “and it is disproportionately represented in our revenues than it is in our economy. Even though the economy may improve, until construction improves, revenues will have a drag on them.”
He and other economists expect to wait a couple years before construction in the housing sector will return to a healthy level.
Raha also looks to retail to see whether consumers are buying big-ticket items — cars, for instance, or major household appliances such as washing machines. Such consumer spending died down after the magnitude 9.0 earthquake and devastating tsunami hit Japan in March, significantly slowing down the chain of supply.
“Consumer confidence has declined since then,” he said. “So, whether or not they’ll start buying these big-ticket items again when they’re available remains to be seen.”
The probability of a falling into a double-dip recession has increased over the course of the past few chaotic weeks for the markets, Raha said. The delicate recovery was not as strong as he expected throughout July.
Raha’s confidence remains high that the nation will eventually rise strong from the financial slump, but though he hates to admit it, he is growing pessimistic about the near future. He suspects the recovery could pick up pace sometime next year, but he is not sure which sector of the economy might provide the crucial improvement.
“Now, my view is that perhaps the pace of the recovery will not pick up for some time,” Raha said. “I really can’t see where the growth is going to come from right now. All I see around me are things that are holding back growth.”