ECONOMIC PULSE
An update on the local and national economy
Posted January 2007
Seattle expected to outperform the nation for the next several years
Don't worry. Keep shopping.
Seattle is not like the rest of the country. Don't think that current doom and gloom stories about economic conditions nationwide apply to us. They don't, and most likely won't, at least not for several years.
"A recession next year (national or local) seems pretty unlikely to us," commented Douglas Pedersen, a principal in the Conway Pedersen Economics, Inc. economic research firm based in Seattle.
"None of the 50 Blue Chip economists predict a U.S. recession," Pedersen said. "The weakest real GDP (gross domestic product) growth rate for 2007 is 1.9 percent and the consensus is 2.5 percent." These rates are too low to trigger a national recession.
A second predictor of the economy's direction is employment: "As shown in the December Puget Sound forecast (posted in late November), we're forecasting 2.9 percent and 2.7 percent employment growth in 2007 and 2008 — roughly twice the expected U.S. growth rate," said Pedersen. The national growth rates are predicted to be 1.2 percent and 1.4 percent respectively. Aerospace continues to add jobs and software employment is expected to grow through 2009, according to the Washington State Revenue Forecast.
Population change is a third predictor: "Strong population growth is helping to support the housing market," according to Pedersen. Puget Sound population growth rates are predicted to be 1.8 percent and 1.7 percent in 2007 and 2008, double the national rate of 0.9 percent growth for each year.
The revenue forecast acknowledges that "higher interest rates will have an adverse impact on the Washington housing market" but expects that it will be "offset by strong population growth." Nonresidential construction is also growing. Moody's Economy.com, a respected national firm, estimates that the Seattle-Bellevue-Everett MD has "about half the excess supply of housing inventory than is average for the nation."
Seattle consumer price data edged ahead of the national average in 2005. Core inflation (excluding food and energy) in Seattle rose at an annual rate of 3.4 percent in 2006 (through August) compared with 3 percent for the U.S. city average in the same period.
Conclusion: Local and national sources agree that the Seattle economy will outperform the nation for the next several years.
Stories about consumer confidence are interesting, but when it comes to the economy, is it what people feel that's important? What people say about how they feel? Or what they actually do? As the December 2006 UCLA Anderson Forecast put it: "If you feel great and you shop, that's good news for the economy. If you feel lousy and you shop, that's good news too."
Definitions: The Puget Sound region is the four counties of King, Kitsap, Pierce and Snohomish. The Seattle-Bellevue-Everett MD is King and Snohomish counties.
Sources: Copyright 2006 Conway Pedersen Economics, Inc.; December 2006 UCLA Anderson Forecast article "Models or Minds" by Edward E. Leamer; November 2006 Economic and Forecast Council "Washington Economic and Revenue Forecast"; Copyright 2006 Moody's Economy.com analysis by Andrew Gledhill August 2006 edition
Seattle Area Economic Trends
| U.S. ECONOMIC INDICATORS | Q4-06* | Q3-06 | Q4-05 | |
| U.S. GDP (billions) | $11,500.5 | $11,432.9 | $11,163.8 | |
| Annual Growth % Change | 2.4% | 1.6% | 1.8% | |
| Inflation (CPI) U.S. | 2.042 | 2.033 | 1.982 | |
| PUGET SOUND ECONOMIC INDICATORS | Q4-06* | Q3-06 | Q4-05 | |
| Inflation (CPI) (Seattle-Bellevue-Everett) | 2.105 | 2.096 | 2.021 | |
| EMPLOYMENT | 1,801,100 | 1,783,200 | 1,746,800 | |
| - Government | 281,100 | 280,000 | 280,600 | |
| - Wholesale & Retail Trade | 275,900 | 274,200 | 268,700 | |
| - Professional & Business Services | 240,400 | 237,100 | 228,400 | |
| - Information ( incl. Software Publishers) | 87,300 | 85,100 | 80,800 | |
| - Aerospace | 73,700 | 71,500 | 69,400 | |
| Unemployment Rate (Seattle-Tacoma-Bellevue) | 4.6% | 4.6% | 4.9% | |
Housing Permits |
26,600 | 28,500 | 31,000 | |
Home & Condo Sales |
72,200 | 74,100 | 81,100 | |
| Average Home Price |
$394,300 | $397,800 | $369,900 | |
| U.S. 30-Year Mortgage Rates | 6.6% | 6.6% | 6.2% | |
TAXABLE RETAIL SALES (King, Pierce, Snohomish and Kitsap counties) |
Q4-06* | Q3-06 | Q4-05 | |
| Total Taxable Retail Sales | $72,396,000 | $71,050,000 | $66,559,000 | |
| Goods: | ||||
| - Motor Vehicles & Parts | $13,609,000 | $13,455,000 | $12,740,000 | |
| - General Merchandise | $7,260,000 | $7,125,000 | $6,735,000 | |
| - Food & Beverage | $7,221,000 | $7,120,000 | $6,856,000 | |
| - Gasoline Stations | $5,234,000 | $5,113,000 | $5,001,000 | |
| - Building Materials & Garden Supplies | $4,730,000 | $4,722,000 | $4,376,000 | |
| - Furniture & Electronics | $3,356,000 | $3,315,000 | $3,108,000 | |
| - Clothing & Accessories | $2,935,000 | $2,887,000 | $2,735,000 | |
| Services: | ||||
| - Food Services & Drinking Establishments | $5,533,000 | $5,432,000 | $5,139,000 | |
| Note date change | Q3-06 | Q2-06 | Q3-05 | |
Airport Passengers (Sea-Tac) |
8,648,638 | 7,830,514 | 8,579,644 | |
Bases: Most references are to the 3-county area of King, Snohomish and Island counties. Exceptions are noted. Sources and Data Notes: Unless otherwise noted, source is Copyright Conway Pedersen Economics, Inc., Seattle, WA "The Puget Sound Economic Forecaster"
* Projected
Housing permits are for residential, privately owned units. Home Sales data is King, Snohomish, Pierce and Kitsap counties. Taxable Retail Sales - only major categories listed. Sea-Tac International Airport Traffic and Operations Summary