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September 20, 2017

Economist: Growth not as high as expected, housing costs are hindrance to job growth

By: Bobbi Cussins   Comments: 0
National economic growth will be roughly 2 percent over the next year, not the 4-5 percent the federal administration thinks will happen. And, Washington state will follow suit.

That's according to economic expert, Matthew Gardner, chief economist at Windermere Real Estate, who gave the opening keynote address at Policy Summit today.

Gardner had a lot of good news to share, including that Washington state is nearing "full employment" across the state and tech is still booming in the central Puget Sound region.

But, he also had some words of caution, particularly regarding uncertainty over federal issues such as trade, contraction in manufacturing and rising housing costs and a shortage of buildable land.

"Washington will see a significant drop in trade with China and Canada," Gardner said, citing the ongoing discussion of trade deals at the federal level. "It's something to keep a very close eye on."

And, he said, in 2018, it is expected that manufacturing will contract, a development he called a "disturbing trend" because manufacturing is a mainstay of a healthy economy.

Among one of the most telling things impacting job growth, Gardner said, is the cost of housing.

"When companies decide where to locate, they look for two things: an educated workforce and wage requirements," Gardner said. "Those wage costs are largely dependent on housing costs."

In Washington, Gardner pointed to restrictions to buildable land in the Growth Management Act and the state Supreme Court's Hirst water rights ruling last year, which he called "huge issues."

"Whenever you put road blocks in front of our ability to grow, that's a bad thing," he said.

First-time home buyers are finding it hard to purchase a home - they're waiting longer and need more for a down payment, he said, adding that Washington state's zoning for high-density housing needs to be reworked to accommodate the population growth.

"Washington's employers can't attract talent if they can't afford to live where they work," Gardner said. "Land supply and zoning needs to change to accommodate the needs and embrace density."

Population growth in Washington is topping 1,000 people per week, in addition to the normal rate of growth, he said.

Beyond that, Gardner said that E-shopping growth will continue to impact traditional retail and that building and construction is slowing because of labor and material costs, and permitting and land costs.

He said to expect a "shallow recession" in 2019. "It's just time," he said, pointing out that we're now in the third longest period without a recession.