Washington’s economy continues to outperform the nation and pad state coffers – tade disputes between the U.S. and countries like China notwithstanding. The latest report from the state Economic and Revenue Forecast Council (ERFC) estimates that by the end of the current biennium revenue to the state’s general fund will have increased by 18 percent since 2015-17, and is expected to increase by 10.7 percent.
Meanwhile, personal incomes continue to rise, while ERFC Executive Director Steve Lerch told members at the June 25 meeting “we are showing slowing growth as we go forward, but no recession.”
While the state is still outperforming the nation in economic growth, the overall U.S. unemployment rate remains higher: 3.6 percent nationally compared to 4.7 percent for Washington.
As the most trade-dependent state in the country, the effect of trade disputes and retaliatory tariffs on Washington’s economy has been a repeated issue raised by ERFC members. Although the trade wars remain one of the “major threats” included in the forecast and create uncertainty for Washington’s agricultural exporters, they have yet to jeopardize the state’s performance. President Trump and Chinese President Xi Jinping are expected to discuss trade negotiations at the upcoming G-20 meeting.
Another unknown is the extent to which Boeing grounding its 737s due to faulty sensors will affect regional employment. Boeing is the state’s largest employer and last year hired an additional 8,500 workers.
The report also confirms observations that Seattle’s hot real estate market has begun to cool, with regional average home prices declining since May 2018. Seasonally adjusted home prices have remained stagnant since March after a mere .1 percent increase in February. However, the home prices remain 89 percent higher than they were in December 2011 and 31 percent higher than in May 2007. A part of that may be due to the higher than expected housing construction in 2019 so far, though it’s a drop from 2018.
Aside from trade issues, the possibility of a recession has weighed on some state officials’ minds. However, Lerch told ERFC members that the latest outlook by OECD indicates an economic slowdown in the U.S. as a whole, but no recession. The optimistic forecast shows a $1.9 billion increase in revenue, while the pessimistic sees a $2.3 billion drop in revenue.
Not included in the revenue forecast was money generated by a tiered new business and occupation (B&O) surcharge approved by lawmakers this session via ESSSB 2158 to fund higher education programs. While a partial fiscal note estimated that it would raise $1.2 billion through 2025, at the June 25 meeting ERFC voted to create a separate forecast for the new surcharge.