February 26, 2015

State economist: 'Washington seeing moderate growth'

By: Bobbi Cussins   Comments: 0
Steve Lerch, chief economist and executive director of the Washington State Economic and Revenue Forecast Council, addresses the Feb. 26, 2015, AWB Lobby Lunch.(Photo: Brian Mittge/AWB)
Washington's economy could do slightly better than the nation's if the current moderate growth trend continues, Steve Lerch, Ph.D., executive director and chief economist for the state Economic and Revenue Forecast Council, told this week's AWB Lobby Lunch crowd.

In all, he said, state revenue growth is steady -- an average of 4.5 percent each year, or roughly 9 percent every two-year budget cycle. The 2015-17 revenue forecast is $36.5 billion, or nearly $3 billion more than the 2013-15 state operating budget expenditures.

But, he buffered the positive news by telling attendees that the state is not out of the woods just yet.

The recovery from the Great Recession has yielded steady job growth, but there are still a lot of unemployed individuals. And, he said, overseas issues, such as the slowing Chinese economy that impacts Washington trade, could disrupt the upward economic trend in Washington.

Additionally, there could be long-term implications for state tax collections due to the port slowdown.

Lerch told the crowd that forecast models show a dip in exports in December 2014 compared to the same time in 2013. The real question, he said, is if the port slowdown will raise questions about the reliability of our Washington ports. Businesses that moved their shipments to other ports may not return if they believe their goods will not arrive or be shipped in a timely manner.

After a dropoff during the Great Recession, Washington state government's revenues have increased near the historical average of 4.5 percent each year, Steve Lerch, chief economist and executive director of the Economic and Revenue Forecast Council, told the AWB Lobby Lunch crowd.
That, he said, is something the council will get a better understanding of as more data is collected.

While not much has changed since the November 2014 quarterly revenue forecast at this point, one item Lerch noted is the change in the price of oil.

When oil prices go down, as they are now, it is good for consumers, he explained. But that also means less Business and Occupation Tax collections to the state, which will be felt in the state operating budget.

But, Lerch pointed out, a critical positive is that small businesses are feeling more optimistic and this could lead to more investment and job creation.

Even with such positive news and economic growth, Lerch said there is still reason to be cautious. He said his office will continue to watch the housing and construction markets, auto sales and other key economic drivers and adjust the forecast again mid-June.