Washington State Economic Outlook€¦ · 23-10-2017 · Washington State Economic Outlook...

WASHINGTON STATE

ECONOMIC AND REVENUE FORECAST COUNCIL

Washington State Economic Outlook

Presented toWashington Lodging Convention

Eric SwensonSenior Economist

October 23, 2017Tulalip, Washington

WA Economic OutlookOctober 23, 2017

Slide 1 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL

Summary

• The national economy is growing steadily if not spectacularly

• Steady growth is also expected of the world economy

• Washington has been growing considerably faster than the U.S. as a whole and is expected to continue to do so

• There are considerable downside risks to the national and world forecasts



NATIONAL ECONOMY



The stock market continues to grow

0

500

1000

1500

2000

2500

3000

1990 1994 1998 2002 2006 2010 2014

S&P 500

Source: Yahoo! Finance, monthly data through October 1, 2017



U.S. Leading Economic Index (LEI) continues to trend up

80

90

100

110

120

130

140

2005 2007 2009 2011 2013 2015 2017

In

dex,

20

10

= 1

00

Source: Conference Board, data through September 2017

The LEI is an index of economic indicators that tend to indicate the direction of economic growth



Consumer confidence is above pre-recession levels

0

25

50

75

100

125

2005 2007 2009 2011 2013 2015 2017

Index

Mich: 1966Q1 = 100, SAConf Board: 1985 =100, SA

U. Michigan Conf Board

Sources: University of Michigan, Conference Board; data through Sept. 2017 plus UofM Oct. preliminary



Small business optimism and sales expectations have decreased from December but remain high

70

75

80

85

90

95

100

105

110

-40

-30

-20

-10

0

10

20

30

40

2006 2008 2010 2012 2014 2016

Op

tim

ism

In

dex,

19

86

=1

00

3 m

on

th s

ale

s g

ro

wth

exp

ecta

tion

,

percen

t

NFIB Small Business Optimism Index

Sales Expectations Optimism Index

Source: National Federation of Independent Business; data through August 2017



Oil prices are expected to stay relatively low

25

35

45

55

65

75

85

95

105

115

125

2007 2009 2011 2013 2015 2017 2019 2021

Do

llars P

er B

arrel

Average Price of Crude Oil

September Forecast

Source: DOE, ERFC September 2017 forecast; historical data through Q2 2017



Second quarter 2017 U.S. GDP growth of 3.1% is the highest growth since early 2015

-2

-1

0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015 2016 2017

Percen

tReal Quarterly U.S. GDP Growth, SAAR

Source: U.S. Bureau of Economic Analysis, data through 2017 Q2



Real GDP is forecasted to continue growing

14,000

14,500

15,000

15,500

16,000

16,500

17,000

17,500

18,000

18,500

19,000

2007 2009 2011 2013 2015 2017 2019 2021

Billio

ns o

f 2

00

9 D

ollars

Real GDP

September forecast

Real GDP annual growth forecast:

2017: 1.9%

2018: 2.4%

2019: 2.3%

2020: 2.0%

2021: 2.0%

Source: ERFC September 2017 forecast; data through Q2 2017



U.S. nonfarm payroll employment growth is expected to slow

125

130

135

140

145

150

155

2007 2009 2011 2013 2015 2017 2019 2021

Millio

ns

U.S. Nonfarm Payroll Employment

September Forecast

Source: ERFC September 2017 forecast; data through Q2 2017

Employment annual growth forecast:

2017: 1.5%

2018: 1.2%

2019: 1.0%

2020: 0.8%

2021: 0.6%



Global GDP growth is expected to improve gradually

-1

0

1

2

3

4

5

6

2005 2008 2011 2014 2017 2020

Percen

tReal global GDP growth

Source: International Monetary Fund, World Economic Outlook, Oct. 2017; historic data through 2016



The dollar has increased in value relative to currencies of U.S. trading partners and is expected to stay high

80

85

90

95

100

105

110

115

120

125

2008 2011 2014 2017 2020

Trade-weighted Dollar, 2009 = 100

Forecast

Source: Federal Reserve Board, rebased by IHS Markit. ERFC forecast 2017Q3 onward.



National forecast risks

Upside

• Elevated consumer, business confidence could translate into stronger growth

• Stock market gains could translate into faster household consumption growth

• Housing construction accelerates to meet demand

• Stronger global economic growth

Downside

• Stagnant labor productivity inhibits wage growth

• Geopolitical risks: North Korea, Russia

• International trade policy uncertainty



STATE AND LOCAL ECONOMIES



From 2010 Q1 to 2017 Q1, the U.S. population has grown 5.2% while the WA population has grown 9.7%

1

1.02

1.04

1.06

1.08

1.1

2010 2011 2012 2013 2014 2015 2016 2017

In

dex,

20

10

Q1

= 1

.0

U.S. WA

Source: U.S Bureau of Economic Analysis, data through 2017 Q1



Year over year population growth: U.S., CA, WA, OR, ID

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2016 Q2 2016 Q3 2016 Q4 2017 Q1

U.S. CA WA OR ID

Source: U.S. Bureau of Economic Analysis



Washington employment will grow faster than the U.S. through 2021

-1%

0%

1%

2%

3%

4%

5%

Average annual growth, 2017-2021

U.S. WA

Avg. total nonfarm growth, 2017-21:

U.S. = 0.9%WA = 1.6%

Source: ERFC September 2017 forecast



Over 54% of 2016 statewide employment growth was in the Seattle metro area

0% 10% 20% 30% 40% 50% 60%

Longview

Walla Walla

Mount Vernon

Bremerton

Wenatchee

Yakima

Bellingham

Tri Cities

Olympia

Spokane

Tacoma

Non-metro

Seattle

Share of statewide nonfarm employment growth, 2016

Source: WA Employment Security Dept., U.S. Bureau of Labor Statistics



Employment growth varied widely across state metro areas

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2016 employment growth by metro area

Source: WA State Employment Security Department



Top six Washington industries by employment – July 2017

0

50

100

150

200

250

300

350

400

450

Th

ou

san

ds

Source: ERFC, Employment Security Dept.



Personal income growing faster in WA than in the U.S. as a whole

1

1.2

1.4

1.6

1.8

2

2.22

00

5Q

1 =

1.0

Growth in WA, U.S. personal income since 2005Q1

WA U.S.

Source: U.S. Bureau of Economic Analysis, data through 2017 Q2, September 2017 ERFC forecast

Forecast



Year over year personal income growth: U.S., CA, WA, OR, ID

0%

1%

2%

3%

4%

5%

6%

2016 Q2 2016 Q3 2016 Q4 2017 Q1

U.S. CA WA OR ID

Source: U.S. Bureau of Economic Analysis



WA accommodation and food services growth is expected to continue

2,500

3,000

3,500

4,000

4,500

5,000

5,500

2007 2009 2011 2013 2015 2017 2019 2021

$M

illio

ns,

SA

WA Taxable Activity: Accommodation and Food Service

September Forecast

Source: ERFC September 2017 forecast; quarterly data through Q2 2017

Annual growth forecast:

2017: 5.9%

2018: 4.6%

2019: 4.6%

2020: 4.1%

2021: 3.9%

Growth in the segment is expected to be faster than growth in retail sales tax as a whole

Forecast



WA accommodation and food services taxable activity history by area

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

0

50

100

150

200

250

300

350

400

450

2000 2002 2004 2006 2008 2010 2012 2014 2016

$M

illio

ns,

SA

Taxable Activity: Accommodation and Food Service

Pierce County Snohomish County Spokane County

Clark County King County



WA accommodation and food services taxable activity history by area

0

20

40

60

80

100

120

140

2000 2002 2004 2006 2008 2010 2012 2014 2016

$M

illio

ns,

SA

Taxable Activity: Accommodation and Food Service

Tri Cities Thurston County Yakima County

Chelan County Whatcom County



Questions

Economic & Revenue Forecast CouncilPO BOX 40912Olympia WA 98504-0912

www.erfc.wa.gov360-534-1560

Washington State Economic Outlook€¦ · 23-10-2017 · Washington State Economic Outlook...

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