As the new year rolled in, official forecasts predict the Pacific Northwest may be in for a mild recession with minimal job loss in 2023, according to the latest Southwest Washington Labor Market Report.
“A recession isn’t here yet, and whether and when it arrives continues to be debated,” said Scott Bailey, regional economist with the Washington Employment Security Department.
The nation’s gross domestic product showed a 3.2 percent gain in the third quarter of 2022. Meanwhile, consumer spending was up 2.3 percent, nonresidential investment grew 6.2 percent and exports rose 14.6 percent.
“The downer, of course, was residential investment, as higher mortgage rates have kicked in and slowed down new housing activity,” according to the report.
Of the three measures tracking corporate profits, the one that Bailey links most closely to inflation fell by 7.4 percent in the revised third-quarter numbers. Bailey noted, however, that it was still 50 percent greater than the average from 2012 to 2019.
Total U.S. personal income rose 0.3 percent in November, even when payments like Social Security, Medicare and unemployment insurance benefits were factored out.
Industrial production declined for the second month in a row. Factory production and mining declined sharply, Bailey said.
“The decline of manufacturing output is the one red flag this month — we’ll be looking to see in the next two months whether this was a blip or the beginning of a trend,” Bailey said.
Retail and food services sales proved to be volatile for the fifth month in a row. Sales rose 0.9 percent in October before falling 0.7 percent in November. In December food services at the national level increased by 0.8 percent, and retail sales remained elevated.
“It would be no surprise to see them stagnate as they revert to the long-term trend,” Bailey said.
Employment nationally and locally were both up in November. However, the national numbers are still 0.7 percent short when factoring in population growth, said Bailey. Job openings, the rate of hiring and the rate of quitting all remain high across the country. All three are higher than the equivalent Washington rates.
In Clark County, preliminary estimates showed Clark County nonfarm employment rose by 1,100 jobs on a seasonally adjusted basis. There was above-trend hiring in construction, manufacturing, business services, and accommodations and food services, Bailey reported.
The unemployment rate in Clark County was estimated at 4.6 percent in November, compared with 4.1 percent in November 2021.
Inflation has dropped over the last four months, with the Consumer Price Index rising 2.3 percent from July to November and the personal consumption expenditure implicit price deflator increasing 3.3 percent.
“So inflation in the past few months has actually been lower than the year-over-year rate,” read the report.
Interest rates closed out the end of last year up — the federal funds rate hit 4.3 percent and mortgage rates were 6.4 percent.
“What this means for the Fed and interest rates going forward is anyone’s guess,” Bailey said.
