Forecaster: State economy weaker than expected

The Governor's Council of Economic Advisers is expected to meet Sept. 3 and go over the economic outlook for Washington in some detail. In the meantime, the state's top economic forecaster, Arun Raha, says the economy is weaker than what he believed at the time of his June revenue forecast, which doesn't bode well for those hoping Gov. Chris Gregoire decides not to order across-the-board spending cuts.

Raha's preliminary forecast memo for September says the national recovery in jobs "has slowed to a crawl," with private-sector gains nearly erased by cuts in state and local-government workers. He also says Washington's overall employment in March "was about 18,000 jobs (0.7 %) lower than we knew in June" and wages in the first three months of the year were lower than previously believed.

He went on to note that the private sector added 6,000 jobs in Washington since the mid-June revenue forecast, which beat the national growth rate. But this was less than he'd predicted in June. And, Raha noted, the private-sector gains were offset by the loss of almost 4,000 state and local-government jobs.

His report also notes the national housing slump, which has dragged down financial markets in recent days, continues in Washington after the expiration of federal tax credits for home buyers.

Action in Congress earlier this month assured Washington of about $338 million in federal aid for Medicaid and more than $200 million for public schools, but budget cuts are considered likely anyway, if the economy keeps cooling.

Gregoire is waiting on the quarterly revenue forecast due Sept. 16 before announcing cuts that would take effect as soon as October.