Washington’s economy continues to recover from historically high unemployment and revenue decreases earlier this year, though that recovery is inconsistent across industry sectors. The latest revenue forecast update from the state Economic and Revenue Forecast Council (ERFC) shows that the state unemployment rate is now at 7.8 percent – half of what it was in April but still above pre-pandemic levels.
At the same time, the new ERFC report now accounts for Boeing’s recent announcement that it will reduce employment, with an estimated 27,700 fewer aerospace jobs in the state by December 2021 than in January 2020. ERFC estimates that already the sector has lost 14,200 jobs. In fact, the new forecast predicts that the aerospace industry will drop to its lowest levels since at least 2007 for several years before increasing again. The future of Washington’s aerospace industry was the main topic during a recent meeting of the Senate Special Committee on Economic Recovery.
Conversely, the real estate market has grown considerably this year despite the pandemic. New homes sales in September increased by 32 percent compared to the same month in 2019, while existing home sales jumped by 21 percent compared to last year. After three months of decline, Seattle metro home prices increased in July and August and now are 8.5 percent higher than the same time last year and 106 percent above December 2011.
Consequently, the state real estate excise tax (REET) activity in September was among the highest ever for a single month, second only to December 2019 sales prompted by a new graduated tax rate. This is reflective of a nationwide trend in which the consumer confidence index equivalent for single family home builders is the highest since 1985.
“Homebuilders are looking at the low mortgage rate, the strong demand for single family homes and seeing this as very positive,” ERFC Executive Director Steve Lerch said at the council’s Nov. 3 meeting.
Although consumer confidence is still below pre-pandemic levels, Washington consumer spending has increased throughout most of 2020 compared to last year.
“As the labor market has started to heal to some extent, there are still some concerns among many people about jobs and holding onto their jobs,” Lerch said. “People obviously have big concerns about the economy.”
Despite the recession-level unemployment and the economic shutdown due to COVID 19 since March, the state is still expected to collect $3.9 billion more in the 2019-21 biennium compared to the prior two-year period; ERFC forecasts revenue will grow by $3.7 billion by the end of the 2021-23 biennium.
However, large increases in operating budget spending for this biennium has left the state with a budget deficit that has yet to be addressed despite calls by numerous state lawmakers for a special session to deal with the issue.
The next monthly revenue forecast will be released Nov. 17. ERFC’s next meeting will be Nov. 18.