State's economic slump likely to persist

Boeing layoffs will continue into next year

SCOTT WYLAND THE OLYMPIAN

Originally published Monday, March 11, 2002

SOUTH SOUND -- Sept. 11 has taken much of the blame for the economic recession the state is facing: The attacks scored a direct hit on The Boeing Co., a major hub in the state's economy.

Images of jetliners ramming the World Trade Center coupled with security delays at airports also have discouraged many travelers from flying.

In response, airlines have cut flights and canceled orders on new aircraft, resulting in weaker sales for Boeing, which already was struggling after losing market share to rival Airbus Industrie.

Now, as the national economy shows signs of a quicker-than- expected recovery, Boeing's woes will probably help prolong Washington's economic slump, analysts say.

"I think we're in for a tougher slide," said Dennis Matson, executive director for the Economic Development Council of Thurston County. "I think it's fair to say we're going to deal with this for a while."

The state's economy had slowed by late last summer, following the national trend, then went into a full-bore tailspin after the Sept. 11 attacks, Matson said.

In December, Boeing eliminated 9,000 jobs and gave layoff notices to 1,287 workers in the Puget Sound area. At least 49 of the 380 Boeing workers who live in Mason and Thurston counties lost their jobs.

Jobless rates

The firings helped push Washington's jobless rate to 8.2 percent in January, the second-highest in the nation behind Oregon's 9.1 percent.

Thurston County's jobless rate rose to 6.4 percent, the highest in six years, but compared to other nearby counties, its stable government job base has kept unemployment in check, Matson said.

Mason County, which depends more on manufacturing, has been hit harder. The county's jobless rate in January jumped to 9.8 percent from 8.6 percent.

It ended 2001 with 1,900 manufacturing jobs, down from 2,150 jobs the previous year, said Paul Turek, regional economist for the state Employment Security Department.

In Shelton, Simpson Timber Co. laid off 69 people at its Olympic Plywood division and put the mill up for sale.

Simpson decided to scale back after clients postponed plywood orders for a high-rise building and two hotels.

The projects stalled after the Sept. 11 attacks hobbled the travel industry.

Washington's economic revival will depend on how quickly the high-tech industry makes a comeback and how soon people resuming traveling at previous levels, Matson said.

Recession or not?

Last week, U.S. Treasury Secretary Paul O'Neill remarked that a national recession might not have really taken place.

A standard yardstick for measuring a recession is the gross domestic product shrinking two quarters in a row. Real GDP declined at an annual rate of 1.3 percent in the third quarter of 2001, then grew by 1.4 percent in the fourth quarter.

Some economists challenge O'Neill's assertion, but most agree that this recession is shaping up to be one of the mildest in U.S. history.

Although economic forecasts are bleaker for Washington than most of the nation, Matson said he welcomes any encouraging news.

"If the national economy turns around more quickly than anticipated, that's got to be good news for Washington's economy," Matson said.

The state's economy will probably hit bottom by summer and hang there the rest of the year, said Chang Mook Sohn, an analyst with the state Office of the Forecast Council.

"The consolation is we're not going to bleed any more," Sohn said.

Although the worst of Boeing's job cuts will be over by midyear, the company will continue laying off workers at a slower pace through 2002 and part of 2003, he said.

Temporary rebound?

Sohn warned that this recession could follow a "W" pattern, in which the economy goes into a brief slump then rebounds then falls into a deeper valley. That's what happened in the early 1980s, he said.

"It's a possibility," Sohn said. "No one could rule out that possibility."

The projected $1.6 billion state budget shortfall is likely to hinder an economic rebound, both in the state and Thurston County, Matson said.

In 2003, when the national economy is expected to regain health, state budget cuts will be implemented and Boeing will have completed its 30,000 layoffs, Matson said.

The county's stable government job base usually insulates it from economic dips, he said. But next year, South Sound could lose hundreds of state jobs while the national economy improves.

"The way we're structured, we just won't react as quickly to a national upturn," Matson said.

Scott Wyland is a business reporter for The Olympian. He can be reached at 360-357-0748 or swyland@olympia. gannett.com.

The Olympian Copyright 2002

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