2/5/2010

State forecast sees jobless rate peaking in 2nd quarter

Washington will likely outperform other states as the nation pulls out of the recession over the next three years, according to predictions released Friday by Washington’s Economic and Revenue Forecast Council.

The state’s economy continues to lose jobs, but the rate has slowed to a trickle in recent months and growth in some sectors has already turned positive, the council said. It forecast the state’s unemployment rate to peak at 9.8 percent in the second quarter of this year.

The council said the state’s success hinges on its large, stable software and aerospace industries.

“The successful first flight of Boeing’s new 787 Dreamliner is excellent news for the aerospace industry in the state,” the council reported.

The council also reported that with the success of Microsoft’s new Windows 7 product, “modest employment growth in the software publishing” is expected in the next year.

But there will be obstacles to economic recovery. Credit to small businesses is depressed, the construction industry is hurting and consumer confidence is low.

“From the perspective of the small-business owner, loans are hard to get,” said Arun Raha, the executive council’s executive director. “The decline in commercial real estate has hurt regional banks. Credit to small business remains tight because they get loans from these banks.”

Since 1992, 64 percent of new jobs have come from small businesses, so their credit crunch will create “significant headwind against the recovery,” according to the council.

The construction industry is also holding down the economy.

“In spite of fairly strong recovery in 2012 and 2013, construction employment will still be 36,000 below the previous peak at the end of 2013,” reported the council.

Overall construction employment is expected to “bottom out” during the third quarter of this year. Residential building is forecast to increase in late 2010, although nonresidential construction is expected to decline until next year.

Low levels of consumer confidence are also taking their toll on the market. But confidence is expected to grow as the job market improves.

“We are following the same pattern of recovery (as the nation), and that recovery is likely to continue,” said Raha.

However, there’s still a “10 percent chance that things could go to pieces again,” and according to the council, and there is a 5 percent probability that its predictions were overly pessimistic.

Kaitlin Strohschein

Puget Sound Business Journal