Mike Salsbury/The Olympian
Customers' vehicles fill the parking lot of Ruby Tuesday restaurant in Lacey during the dinner hour last week. The restaurant opened this year in the Hawks Prairie area, which is experiencing rapid growth, thanks in part to the new freeway interchange on Marvin Road.

Raging economy finally lost its breath in 2001

Boeing, tech losses stagger state; South Sound hangs on

SCOTT WYLAND, THE OLYMPIAN

Originally published December 27, 2001

THURSTON COUNTY -- Like much of the nation, South Sound cruised into 2001 with a zesty confidence.

The economy was humming, jobs were bountiful and the Y2K bugaboo had been dispelled.

The new millennium seemed vanquished before it really began.

So it seemed.

In a flash, dot-coms toppled and the stock market plunged. South Sound felt the rumble of an earthquake and the reverberations of attacks on the East Coast.

What had seemed like a bedrock of economic security gave way, as Boeing laid off thousands of workers and the state forecast an $1.25 billion budget shortfall that imperils many government jobs.

2001 was a year South Sound's economy got a serious reality check.

The nearly decade-long boom had led some analysts to question whether a recession could be avoided entirely -- even whether the notion of up-and-down economic cycles was outdated.

"There were some speculations you could keep booms moving forth," said Paul Turek, labor economist for the state Employment Security. "You had the technology."

Internet dreams

Many people believed the Internet would be an eternal wellspring for commerce, but they overestimated how quickly consumers would embrace this medium, Turek said.

So they overinvested.

"Instead of being a revolution, it became a bubble that burst," Turek said. "When it burst, we went into a downward cycle."

Washington's economy was teetering on the brink of recession in late summer and was pushed over the precipice by the Sept. 11 attacks, Turek said.

The attacks caused commercial airlines to cut flights and, in turn, cancel orders for new aircraft, Turek said.

That clobbered an already ailing Boeing, Turek said.

Washington is now slipping into the worst recession since the early 1980s, Turek said.

The state's jobless rate crept to 7 percent in November, the second worst in the country. Oregon has the highest at 7.4 percent.

Forecasters said the state's jobless rate could exceed 8 percent in 2002, and that the state's job growth will be a languid 0.5 percent for the year.

Thurston County, normally armored by state government, is feeling the bite as well. Its jobless rate rose to 5.9 percent in November.

Still, consumer confidence in South Sound appears high, despite a jump in unemployment.

Merchants reported holiday shoppers flocking to stores in downtown Olympia and at shopping centers.

Businesses struggle

Throughout Thursday County, some businesses have closed while others have opened. Some have struggled while others have expanded.

"It really has been a mixed bag," said Dennis Matson, executive director for the Economic Development Council of Thurston County. "It's a hard economy to get a handle on."

South Sound's high-tech sector tossed and turned this year.

Illuminet, the county's largest high-tech employer, is no longer based in Lacey.

VeriSign, based in California, bought Illuminet two weeks ago for $1.3 billion in stock.

No one could say whether any of Illuminet's 250 jobs in Lacey would eventually be affected.

Meanwhile, Westar Financial Services has filed for Chapter 11 bankruptcy protection, making the future of its 100 Tumwater jobs uncertain.

Illuminet and Westar are two of the county's three publicly traded companies. The third is Heritage Bank.

Westar's stock was hurt by the Chapter 11 filing.

The stock closed Wednesday at 21 cents a share. It had sold on Nasdaq for as much as $22.75 a share in the previous 52 weeks.

Miller hits snag

Miller Brewing Co., another Tumwater employer, moved ahead with plans to disconnect from the LOTT Wastewater Alliance system and build its own treatment plant.

But Miller hit a snag when the Department of Ecology denied its request to discharge 1.5 million gallons of wastewater daily into the Deschutes River.

The brewery must also secure permits to build the treatment plant. Miller employs 365 workers and is one of the county's few manufacturers.

In Lacey, about 30 manufacturing jobs were lost when Giles Paper & Packaging's plant closed after a California company bought Giles. But overall, Hawks Prairie continues to grow.

Lacey's bright spot

Hawks Prairie has been a hotbed of development, thanks in part to the new freeway interchange on Marvin Road.

Hawk's Prairie Casino and Ruby Tuesday restaurant opened in the area this year.

Target has begun work on a 1.5 million-square-foot import distribution center, and Home Depot plans to break ground in 2002 on a 500,000-square-foot import center nearby.

Together, the two will employ an estimated 500 workers.

Wal-Mart announced plans to build a retail store off Marvin Road, near I-5. It also plans a second store about five miles away, on Yelm Highway.

Galaxy Theatres hopes to begin building a 12-screen cineplex within a couple months. It would be next to the Wal-Mart in Hawks Prairie.

Galaxy executives say they wanted to start the project in September, but they hadn't expected Wal-Mart to build a store so close to the theater site. Now they must adjust the entire plan to allow for more congested traffic flow.

Downtown comeback

In Olympia, downtown merchants spent several months recovering from a Feb. 28 earthquake.

The earthquake damaged the Fourth Avenue bridge and Deschutes Parkway, two vital connectors to downtown.

Through the summer, store owners reported as much as a 40 percent drop in sales because of diminished traffic.

But after a temporary trestle was installed, pedestrian and car traffic increased noticeably, said Kerry McHugh, president of the Olympia Downtown Association.

"Many people, especially during the holidays, are coming downtown," McHugh said. "It's feeling very positive."

One lingering problem is the damage done to historic buildings.

Many of these buildings remain unrepaired. Property owners and city officials complain that the federal government was tight-fisted with disaster aid.

As a result, some historic buildings could lose their original character because the owners can't or won't spend the money needed to fully restore them.

Overall, Washington might take longer to recover than the rest of the country because the state's economy is heavily tied to the ailing airline industry, Turek said.

In many counties, wood and metal products drive the local economies, Turek said. These industries have been taking a beating in the past year.

However, Turek said he's seeing encouraging signs that the state might rebound sooner than anticipated.

For one, layoffs aren't nearly as widespread as they were in previous recessions, he said. And public spirit seems to be holding up, despite recent events.

"It's down, but it's certainly not in the gutter," Turek said.

The Olympian Copyright 2001

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