All is not sunshine and rainbows in the local economy but at least the clouds are clearing.
The Tacoma-Pierce County Chamber’s annual Horizons Economic Forecast breakfast earlier this month gave local economy watchers a forecast of the year to come based on national and local business data. Those numbers show that employment numbers are improving, as are are wage and housing statistics. Inflation rates are still relatively low.
Senior Economic Outreach Economist in the Economic Education and Outreach Department of the Federal Reserve Bank of San Francisco Liz Laderman laid out her forecast of the national economy during her keynote address at the breakfast. Then business watchers heard the all-local economic picture from Pacific Lutheran University Economics Professor Martin Wum and Sound Resource Economics Analysist Neal Johnson, who presented their Pierce County Economic Index report.
The duo tabulates local business, employment, spending and income statistics gathered from various sources to develop an economic forecast of the year to come. They adopted and then modified the PCEI, which was first developed by former University of Puget Sound Economics professors Douglas Goodman and Bruce Mann. Goodman and Mann presented their forecasts for 25 years before handing over the process and presentation in 2013.
Overall, the PCEI forecasts that the numbers show Pierce County grew by 1.9 percent in 2015 and will add 1.8 percent by the end of 2016.
Total real personal income increased in 2015 about 2 percent to $34 billion, and real personal income per capita grew to about 2 percent to $40,387. For 2016, total income growth is expected to be about 2.6 percent over the year, while personal income per capita is estimated to increase by 1.2 percent.
That level of income growth trails most other parts of the state and much of the rest of America, largely because higher-income manufacturing and professional jobs in the county disappeared during the Great Recession and have been replaced by lower-wage jobs in service and hospitality industries, according to the analysis. Even the growth in those lower-wage jobs has been trailing the county’s historical average and lag behind the rest of the state.
Year-over-year job growth shows the economy added 10,000 jobs – from 285,000 in mid 2015 to 295,000 by mid 2015 – for a job-creation rate of 3.5 percent.
“Over 2016, average employment is expected to grow by about 3.4 percent for a total of 309,000 jobs by the end of 2016,” according to the report.
Declines in manufacturing and construction jobs were softened by the relatively solid employment found in government jobs, but those public jobs won’t add much to the local employment picture in the coming years. Much of the reason for that is that many Pierce County residents continue to commute to higher-paying jobs in King County rather than work locally.
“Labor force remains a source for concern,” according to the PCEI. “The area has about 388,000 workers in 2015 from a low of 383,000 in 2014. While the tide has turned, this still marks a substantial drop in light of population growth of over 4 percent. … Forecasting its future remains statistically difficult, but the implied average size of the labor force in 2016 will be 391,000.”
Pierce County is simply adding residents faster than it is adding jobs.
A bright spot on that front is that retail spending will likely grow in 2016 after relatively strong increases since 2013. Retail sales in 2016 are likely to grow to 5.1 percent, higher than the rate of inflation.
Another relative bright spot is that housing will largely remain affordable compared to the rest of Puget Sound. But some of that affordablility comes because many homes in Pierce County are still worth less than what homeowners purchased them for before the “housing bubble” that fed the Great Recession. Local homes are now 14.2 percent below their highest appraised value, compared to the statewide average of 10.6 percent negative equity.
Commercial properties are a different matter entirely.
“Pierce County’s strength continues to be the warehouse and distribution sector. New construction increased inventory by 2.1 million square feet, with vacancy at 7.1 percent expected to fall as tenants recently signing leases take occupancy,” according to the report.
And with that, the year has begun.