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Washington’s latest economic review: positive indicators amid ongoing uncertainty

The Washington State Economic and Revenue Forecast Council (ERFC) released their latest economic review this week, finding positive trends in the context of ongoing economic uncertainty.

Among the primary takeaways ERFC provides in their economic reviews is how the revenue picture looks. While ERFC underscored that the COVID-19 pandemic limits predictability, revenues are on the right track.

Revenue collections since the November forecast are $593 million (9.0%) above expectations.

Additionally, Washington car and truck sales surged in January to their highest level in more than two years. The seasonally adjusted number of new vehicle registrations increased 15.6% in January to 312, 600 which ERFC notes was the highest level since November 2018.

The number of new vehicle registrations increased 11.8% over the year in January. The upward trajectory of these figures have been cited in some transportation proposals of late.

On a less optimistic note, ERFC expects deep cuts in aerospace employment during 2021 as Boeing’s overall production has been pared down and 787 production has moved to South Carolina.

Here is a more in-depth look at what ERFC reported.

What Washington employment data says

ERFC expects the following:

  • A 1.3% increase in Washington employment this year which is
    down from the 3.5% increase in the November forecast.
  • Above average growth through the remainder of the forecast as the economy recovers from the pandemic-induced recession.
  • Employment growth to average 2.2% per year in 2022 through 2025 compared to the 1.7% average rate expected in November.
  • In the three month period since the November ERFC forecast was released, “employment declined 1,100 which was a 66,300 worse outcome than the increase of 65,200 expected in the forecast.”
  • Private services-providing sectors lost 7,400 jobs in November, December, and January, weighed down by the loss of 19,900 jobs in leisure and hospitality.
  • The manufacturing sector managed an increase of 1,200 jobs in spite of the loss of 1,300 aerospace jobs.
  • Construction employment increased by 4,300 jobs.
  • State and local government employment increased by 3,900 jobs. Federal government employment declined by 3,200 jobs.
  • New Quarterly Census of Employment and Wages (QCEW) data subtracted 20,900 (0.6%) from the estimated level of total employment in October 2020.
  • Due to the lower-than-expected employment growth in November, December, and January, employment is 87,200 (2.6%) lower in January than expected in the November forecast.
  • Washington’s unemployment rate reached 7.1% in December, up from 5.7% in November. This was the first increase in the state’s jobless rate since July.
  • Despite the increase in December, the unemployment rate is down significantly from the 16.3% rate reached in April which was an all-time high in the series that dates back to 1976.

What data says about personal income in Washington

  • According to U.S. Department of Commerce, Bureau of Economic Analysis (BEA) income estimates for the third quarter of 2020, Washington personal income fell from $544.4 in the second quarter to $534.2 billion (SAAR) in the third quarter of 2020.
  • ERFC found that the reported 7.3% decline in Washington personal income was the 10th lowest among the states and District of Columbia and was significantly better than the 10% rate of decline for the U.S. as a whole.
  • Washington’s above average figures with respect to personal income can be attributed to above average earnings growth, wrote ERFC. Washington earnings growth in construction, retail trade (including electronic shopping), and information (predominantly software publishing and other IT services such as internet publishing and web search portals) all significantly outperformed the U.S. average.
  • On the other end of the spectrum, durable manufacturing, which includes aerospace, was a major drag on Washington earnings growth in the third quarter.

What data says about housing and home prices in Washington

  • ERFC found that Washington housing construction improved in the fourth quarter of 2020 and slightly exceeded the forecast. The number of housing units authorized by building permits increased to 45,600 (SAAR) from 42,600 in the third quarter.
  • Single-family permits averaged 26,600 units in the fourth quarter and multi-family permits averaged 19,100 units.
  • Single-family construction has fully recovered to prerecession levels but multi-family construction remains lower. Housing construction got off to a very strong start in the first quarter of 2021.
  • Seattle-area home prices increased rapidly for a sixth consecutive month after three consecutive monthly declines. December Seattle home prices were up 13.6% over the year.

What factors could alter the trajectory of economic indicators

Economic indicators could exceed expectations if faster than expected COVID vaccine distribution leads to greater consumer confidence, a return to more typical spending patterns and increased employment.

But if COVID vaccine distribution slows and infection rates increase, ERFC writes that the state could see a slower pace of economic reopening, reduced consumer spending and employment. The numbers would also trend downward if Congress does not pass additional fiscal stimulus legislation, which is unlikely.

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