Washington State
Economic Outlook
Pacific Northwest Regional Economic Conference
May 15, 2008
Bret Bertolin
Senior Economic Forecaster
Economic and Revenue Forecast Council
www.erfc.wa.gov
Key National Economic Variables
2006
2007
2008
2009
2010
2011
Real GDP, %Ch
2.9
2.2
1.4
2.2
3.0
3.2
Personal Income, %Ch
6.6
6.2
4.1
4.4
5.1
5.6
Disable Personal Income, %Ch
5.9
5.8
5.4
3.4
4.8
5.4
Consumer Price Index, %Ch
3.2
2.9
2.5
1.6
1.9
1.8
-12.6
-25.8
-33.0
31.1
24.7
14.1
1.8
1.1
0.3
0.7
1.3
1.6
-0.5
-1.9
-2.4
-2.3
-0.1
1.3
Construction Employment, %Ch
4.9
-1.0
-5.5
-2.3
1.1
4.1
Unemployment Rate
4.6
4.6
5.3
5.6
5.5
5.1
3-month Treasury Bill Rate
4.7
4.4
1.8
2.5
4.3
4.6
Mortgage Rate
6.4
6.3
5.1
5.6
6.8
7.1
Housing Starts, %Ch
Nonfarm Payroll Employment, %Ch
Manufacturing Employment, %Ch
Rest of
Washington
1.05
2007M01
0.95
2006M01
0.95
2005M01
1.00
2004M01
1.00
2003M01
1.05
2002M01
Seattle
2001M01
1.6%
2000M01
WA
1999M01
1.10
Trough = 100
1.20
1998M01
2008M01
1.15
2007M01
2006M01
2005M01
2004M01
2003M01
US
2002M01
2001M01
2000M01
1999M01
Trough = 100
Employment Growth
1.20
0.9%
1.15
1.10
2.3%
0.3%
Washington's Relative Advantages
Above Average Exposure to Export Markets
Expanding Aerospace and Software Sectors
Not too "Bubbly" a Housing Market
Washington's Export Orientation
Exports/Personal Income
Exchange Rate
1.2
30
25
1.1
1.0
15
Index
10
5
0.9
0.8
0
2007
Washington
U.S.
Washington Ex. Trans. Eq.
U.S. Ex. Trans. Eq.
0.7
0.6
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
Percent
20
0
Aerospace
Software
2011Q1
2010Q1
2009Q1
2008Q1
2007Q1
2006Q1
2005Q1
2004Q1
2003Q1
2002Q1
2001Q1
2000Q1
1999Q1
1998Q1
1997Q1
1996Q1
1995Q1
1994Q1
1993Q1
1992Q1
1991Q1
1990Q1
Thousands
Key Sectors Continue to Expand
120
100
80
60
40
20
$0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
$200
Billions
Average Annual Wage
$400
Aerospace
Software
$2
$0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Thousands
Aerospace and Software Wages
Total Wages
$12
$10
$300
$8
$6
$4
$100
Aerospace
Software
Employment Drivers in Context
Employment Compared to 2004Q2
60
50
30
20
10
0
-10
Construction
Aerospace
Software
2011Q1
2010Q1
2009Q1
2008Q1
2007Q1
2006Q1
2005Q1
2004Q1
2003Q1
2002Q1
2001Q1
2000Q1
-30
1999Q1
-20
1998Q1
Thousands
40
50
Seattle
U.S. Composite 10
2008M01
2007M01
2006M01
2005M01
2004M01
2003M01
2002M01
2001M01
2000M01
1999M01
1998M01
1997M01
1996M01
1995M01
1994M01
1993M01
1992M01
1991M01
1990M01
1989M01
1988M01
1987M01
January 2000=100
Case-Shiller Home Prices, SA
250
200
150
100
0.5
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2.0
1.5
Percent
3.0
2.5
1.0
U.S.
Washington (+/- 0.3)
2.0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Percent
Housing Vacancy Rates
Homeowner
Rental
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
U.S.
Washington (+/- 1.0)
$100
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
$400
$300
$200
Affordability Index
$500
Statewide
King County
160
9
140
8
120
7
100
6
80
60
Statewide (L)
King County (L)
Mortgage Rate (R)
5
4
Percent
Home Prices, SA
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
Thousands
Home Prices and Affordability
Affordability
0
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
7
6
5
4
3
2
1
Units Per 1000 Population
Single-Family
8
Washington (Permits)
U.S. (Starts)
0
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
Units Per 1000 Population
Housing Starts/Permits
Multi-Family
8
7
6
5
4
3
2
1
Washington (Permits)
U.S. (Starts)
Construction Employment
6000
120
110
5500
110
5000
100
5000
100
4500
90
4500
90
4000
80
4000
80
3500
70
3500
70
3000
60
3000
2500
50
2500
60
2008M01
2007M01
2006M01
2005M01
2004M01
2003M01
2002M01
United States (L)
Washington (R)
2001M01
2008M01
2007M01
2006M01
2005M01
2004M01
2003M01
2002M01
Washington (R)
2001M01
Thousands
5500
Thousands
120
United States (L)
Thousands
6000
All Other Construction
50
Thousands
Residential and Rel. Special Trades
7.0%
4.0%
1958Q1
1960Q1
1962Q1
1964Q1
1966Q1
1968Q1
1970Q1
1972Q1
1974Q1
1976Q1
1978Q1
1980Q1
1982Q1
1984Q1
1986Q1
1988Q1
1990Q1
1992Q1
1994Q1
1996Q1
1998Q1
2000Q1
2002Q1
2004Q1
2006Q1
2008Q1
2010Q1
Construction's Share of Total
Employment
7.5%
WA-SIC
WA-NAICS
U.S.
6.5%
6.0%
5.5%
5.0%
4.5%
2
Percent
Population
4
1
4
3
0
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2010
2005
2000
U.S.
1995
1990
1985
1980
1975
1970
Percent Change
Population/Labor Market
Unemployment Rate
8
Washington
7
3
6
5
U.S.
Washington
All Items CPI
8
U.S.
Seattle
4
3
7
6
2
2
1
1
0
0
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
5
Percent Change
7
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Percent Change
Inflation
Core CPI
8
U.S.
Seattle
6
5
4
3
Key Washington Economic
Variables
2006
2007
2008
2009
2010
2011
Nonfarm Payroll Employment, %Ch
3.0
2.5
1.2
1.4
1.8
1.7
Manufacturing Employment, %Ch
4.9
2.5
0.7
-1.1
0.5
1.5
11.9
9.0
4.9
0.3
0.0
0.0
Other Manufacturing Employment, %Ch
2.7
0.3
-0.9
-1.6
0.7
2.1
Software Employment, %Ch
8.4
6.6
4.0
4.8
4.7
4.4
Construction Employment, %Ch
9.9
6.3
-2.2
-1.3
0.5
0.2
Service-Producing, %Ch
2.2
2.2
1.6
2.0
2.0
1.9
Unemployment Rate
5.0
4.7
5.3
5.6
5.6
5.6
Real Personal Income, %Ch
5.4
4.8
2.8
3.6
4.0
4.2
Seattle CPI, %Ch
3.7
3.9
3.4
2.4
2.5
2.2
Population, %Ch
1.9
1.7
1.7
1.7
1.6
1.5
-5.6
-10.2
-14.0
16.8
5.1
3.0
Aerospace Employment, %Ch
Housing Units Authorized by Permit, %Ch
10000
2011Q1
2010Q1
2009Q1
2008Q1
125
2011Q1
2010Q1
2009Q1
2008Q1
Feb-08
2007Q1
Feb-08
2006Q1
13000
2005Q1
Real GDP
2004Q1
11500
Milions
May-08
2007Q1
2006Q1
2005Q1
2004Q1
Billions of Chained 2000 Dollars
U.S. Forecast Comparison
Payroll Employment
145
May-08
12500
140
12000
135
11000
130
10500
U.S. Forecast Comparison
Disp. Personal Income
CPI
13000
2.40
May-08
Feb-08
May-08
1982-84=1.00
11000
10000
9000
2.20
2.10
2.00
2011Q1
2010Q1
2009Q1
2008Q1
2007Q1
2006Q1
2005Q1
1.80
2004Q1
2011Q1
2010Q1
2009Q1
2008Q1
2007Q1
2006Q1
2005Q1
1.90
2004Q1
Billions of Dollars
12000
8000
Feb-08
2.30
Recent Economic Activity in
Washington
Employment
Unemployment Rate
3000
May-08
Feb-08
7.0
6.5
Percent
2850
2800
2750
6.0
5.5
5.0
2008M01
2007M07
2007M01
Feb-08
2006M07
2006M01
2005M07
May-08
2005M01
2008M01
2007M07
2007M01
2006M07
2006M01
4.0
2005M07
2600
2005M01
4.5
2004M07
2650
2004M07
2700
2004M01
Thousands
2900
2004M01
2950
7.5
195
200
190
195
2008M01
2007M07
200
2007M01
205
2006M07
210
2006M01
May-08
2005M07
Feb-08
2005M01
Seattle CPI (All Items)
2004M07
215
1982-84=100
225
2004M01
2008M01
2007M07
2007M01
2006M07
2006M01
May-08
2005M07
2005M01
2004M07
220
2004M01
1982-84=100
Recent Economic Activity in
Washington
Seattle CPI (Core)
225
Feb-08
220
215
210
205
Recent Economic Activity in
Washington
Personal Income*
Housing Permits
260
70
250
60
Thousands
230
220
210
40
2008M01
2007M07
2007M01
Feb-08
2006M07
2006M01
2005M07
2005M01
20
2004M07
* Excluding Information Wages
May-08
2004M01
2007Q3
2007Q1
50
30
Feb-08
2006Q1
2005Q3
2005Q1
2004Q3
190
May-08
2006Q3
200
2004Q1
Billions
240