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Home / Washington Business - July/August 2004 / End of Recession, Beginning of Opportunity |
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End of Recession, Beginning of Opportunity |
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Written On: July/August 2004 |
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Written By: By Richard S. Davis - President, Washington Research Council |
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Washington’s economic recovery has confounded the analysts. Since June 2003, employers have steadily increased their hiring. Sales and investment are up, fueling job creation and easing fiscal pressure on state and local governments.
A recent report for the Washington Alliance for a Competitive Economy (WashACE), prepared by the Washington Research Council states: “The recession has ended.” While we have regained about half of the jobs lost, and our unemployment rate has dropped from a high of 7.7 percent to 6.3 percent, the economic uptick offers state policymakers no reason to abandon efforts to improve Washington’s business climate.
The January-March 2004 edition of the Washington Labor Market Quarterly Review, published by the Employment Security Department, says, “In fact, the unemployment rate moved down so quickly in the first quarter of 2004 that state economists have been left scratching their heads trying to identify a reason.” Part of the credit goes to the national recovery, of course. The department’s analysts examine employment growth in various industries, finding some strengths – particularly in the end of manufacturing job losses – but no dominant sector to account for the drop in the unemployment rate. They conclude, “We are not yet at the point where the economy is creating enough jobs to put the unemployed back to work.”
There’s nothing in this apparent rebound to justify complacency. It simply means that this state now has the opportunity to compete for business without the extraordinary drag of a national recession.
The Hole is Deep
The hole is deep. In the Seattle metropolitan area, where more than half of the state’s employment is concentrated, over a 30-month period beginning in December 2000, 94,000 jobs were lost – including 69,000 high-wage manufacturing jobs. The Puget Sound regional economy is like Longfellow’s girl with the curl: when it’s good, it’s very good indeed, but when it’s bad it is horrid. Away from Seattle, the recession amounted to business as usual – and that’s not good. Income levels and unemployment rates remained high, particularly in some of the more rural counties, despite recent job creation in a few communities. At the present rate of growth, Washington won’t pass pre-recession peak employment levels until sometime next year.
Voters recognize the importance of having the right public policies in place to nurture economic growth. Sixty percent of the voters responding to a WashACE survey said they believed state and local government can take steps to improve the economy. Only 29 percent bought into the idea that the factors influencing economic growth are out of governments’ hands. (WashACE proprietary question inserted in The Elway Poll of 405 registered voters conducted May 6-9, 2004 with a 5 percent margin of error.)
Voters split on what government ought to do to accelerate growth. About 55 percent of those surveyed thought government needed to increase its investment in education, services, and public works; 39 percent wanted government to reduce taxes and ease regulation. The ambivalence continued when voters were asked to cite the “greatest threat” to the economy. The top three issues were high taxes, cited by 24 percent; an underfunded education system, 18 percent; and loss of jobs to foreign competitors, 16 percent.
Voters Want Low Taxes and Smart Spending
It’s easy to dismiss these findings by saying, “The voters want it all – low taxes and higher spending.” That would be a mistake. They’re saying something different – low taxes and smarter spending, directing the money to where it will do the most good.
The poll results confirm what WashACE has been hearing in focus groups and interviews with business leaders across the state. Manufacturers and executives in the knowledge industries express similar concern about the high cost of doing business in this state. Domestic and international competition affects service and manufacturing firms alike. These business leaders recognize the importance of strategic public investments in education, transportation and other infrastructure. But many of them tell us that challenging economic times require trade-offs, setting priorities within constraints.
The state business climate increasingly can be divided into microclimates, with some conditions better suiting one industry than another. There is understandably a temptation to ride the horse in the direction it’s going, to back the prevailing trend. Over time, Washington lost jobs in the timber, aluminum and aerospace industries, and gained in technology and information services. Yet in a dynamic environment, it is dangerous to assume the trends will continue. We should neither be too pessimistic about the fate of our manufacturing and natural resources industries, nor too optimistic about our information sector future.
Steady economic growth will provide the revenues government requires to make the investments in infrastructure and education voters and business leaders are demanding. Although the current expansion seems to mystify the economists, the candidates for state and local office this fall should be compelled to offer concrete plans to nurture this nascent recovery.
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