ECONOMIC PULSE

An update on the local and national economy

Posted May 2006

International trade energized Seattle over the past quarter century: what is Seattle's outlook?

Who remembers Seattle as a blue-collar city with a small-town attitude in the 70s and early 80s? Remember when the flood of imports from Asia transformed the city? To manage the flow of goods and money, there was a corresponding influx of international financiers, shipping brokers and their counterparts who moved here from all over the nation and the world. Gleaming high-rise buildings shot up to provide office space. Seattle's streets bustled; restaurants and stores filled with customers.

JIM BATES / THE SEATTLE TIMES

Fast-forward to today: the Seattle and Tacoma ports combined are the third largest container shipping port in the United States. So, here we go again — office-using employment is predicted to continue to expand at a rate of four percent a year, which means that demand for office space will continue to grow. Also, Seattle is expected to be one of the U.S. leaders in cumulative job growth over the next three years.

Seattle and the suburbs are building office space. (See feature story on high-rise construction.) Many projects include residential and retail, along with office space. Retail is poised for substantial growth in the next couple of years. Taxable retail sales grew 5.8% in 2004 and 9.4% in 2005 and are predicted to grow 6.9% this year and 6.5% in 2007.

The Seattle area has sound fundamentals with high educational levels, good income trends, low unemployment and positive in-migration. Moody's Economy.com predicts that the gross metro product of the Seattle area will grow 4.8% this year, 4.4% in 2007, 4.7% in 2008 and 4.5% in 2009 - at least half again more than the growth levels predicted for the U.S. economy.

Expect net in-migration to be positive through at least 2009. After net losses for migration in 2002 and 2003, we saw 6,300 more people move here than move away in 2004, and 19,300 in 2005. Predicted for this year are 21,000 more people moving in than moving away; 26,700 in 2007, 27,600 in 2008 and 27,200 in 2009.

Another strength of the Seattle area is personal income growth. Income growth slumped to 0.5% in 2001, 1.4% in 2002, and 1% in 2003 before it took off in 2004, rising 7.8%. It is expected to grow 4.7% in 2005, 7.4% this year, 5.8% in 2007, 5.6% in 2008 and 5.9% in 2009.

The Seattle area is ranked in the top 10% for economic strength according to Policom. The Seattle-Tacoma-Bellevue MSA ranks 34th among 361 MSAs* in the U.S. That beats the San Jose MSA, which is at 89th, but trails Phoenix, which is 11th and Las Vegas at 23rd. The top-ranked MSAs have had an extended period of time with rapid, consistent growth in both size and quality of jobs and earnings for employees in small businesses, construction and retail. Policom uses these three sectors because they react quickly to the flow of money coming into an area.

We hear about every fluctuation in hiring by the big companies like Boeing and Microsoft, so it's easy to overlook steady employers, such as governments. In 2004, state and local governments were the #1 employer with 173,700 workers, or about 12.7% of nearly 1,370,000 total employees in the region. High-tech employed 109,500 workers. (High-tech is included in the figures below; but was broken out separately because of high local interest.)

The other top 10 industries in 2004 and the number of workers for each were:

The Seattle area ranks at the top of many measures of economic vitality, quality of life and retail success. Here is a sampling:

During the past 25 years, our economy has become more diverse. Boeing is hiring and has orders that should provide significant employment for years to come. Microsoft continues to grow and create more wealth, and its former employees have become a driving entrepreneurial force. Venture capital is attracted by our high-tech epicenter and is expected to provide a consistent boost.

Exports to China and other countries are increasing, providing some balance to the import-export market. Washington's third-largest trading partner is China, with our state selling airplanes, coffee, technology and other goods to China. Therefore, the relationship between Washington state and China is more balanced than that of the rest of the U.S., according to David Bachman, University of Washington professor of Chinese politics and foreign policy.

Net migration will continue to be positive, bringing a steady stream of young, well-educated workers.

The University of Washington has five Nobel laureates, and is a ranked at the top of national and international institutions for its research study and as a research grant recipient. Washington has two major research institutes: The University of Washington with two branches and Washington State University with three branches. There are four comprehensive institutions: Central Washington, Eastern Washington, Evergreen State College and Western Washington, plus 33 independent four-year institutions, 34 public community and technical two-year colleges. Together, the two-year and four-year colleges educate more than 400,000 students statewide each year. There are other private career institutions such as cosmetology and computer graphics.

All told, the Seattle region's economic outlook is robust for the remainder of this decade.

*Metropolitan Statistical Area (The Seattle-Tacoma-Bellevue MSA is the counties of King, Pierce and Snohomish.)
**Designated Market Area (The Seattle-Tacoma DMA includes 17 counties in Western Washington.)

Seattle Area Economic Trends

Sources: Seattle Market Overview Issue 1, 2006; "Puget Sound Economic Forecaster" © March 2006 Conway-Pedersen Economics, Inc.; Précis Metro © 2005 Moody's Economy.com; Economic Strength Rankings 2005 by Policom, an independent economic research firm which specializes in analyzing local and state economies; Beacon Hill Institute for Public Policy Research 2004; Milken Institute 2004; U.S. Census Bureau 2005; Property & Portfolio Research; news stories from The Seattle Times and the Seattle Post-Intelligencer; Washington State Office of Management and Budget.

Bases: Most references are to the 3-county area of King, Snohomish and Island counties. Exceptions are noted. Unless otherwise noted, source is March 2006 "Puget Sound Economic Forecaster" by Conway-Pedersen Economics, Inc.

* Seattle inflation is reported only in even-numbered months.

** New Passenger Vehicle Registrations are for King, Snohomish and Pierce counties. Source: R. L. Polk.

† Home Sales data is King, Snohomish, Pierce and Kitsap counties. Source: Northwest Multiple Listing Service.

‡ Housing permits are for residential, privately owned units.

^ Taxable Retail Sales - only major categories listed.