The facial expressions of the Economic and Revenue Forecast Council's members were varied in one sense Friday afternoon – some dour, some glum, some a bit distracted or anxious. Why the festivity? State revenue forecaster Arun Raha was giving his quarterly report on the state economy.
Washington is still 180,000 jobs shy of its peak when the recession began in late 2007, according to Raha, executive director of the council. "We won’t regain all of the lost jobs until September 2013. That is, not until the next biennium," he said.
Raha did say economic activity is growing, personal incomes are up and state tax collections are up year over year (not as high as he predicted in November). Meanwhile, job growth is slow (despite news on Tuesday that the state economy added 11,000 jobs in January) and construction employment is a drag on the economic recovery.
In fact, the housing market won't see real recovery until 2012. And throwing great uncertainty into the mix, oil-price shocks endanger the recovery if unrest in the Mideast persists.
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Although housing construction often leads an economy out of recession, Raha and Republican Rep. Ed Orcutt of Kalama suggested said the reverse is true this time around. Another drag on the economy is falling home prices.
Raha said there are some good signs. The falling apartment vacancy rate could drive up rents and also make home-purchasing more economically appealing.
State budget director Marty Brown sat with the other council members and soaked up the gloom. He said he expects the March 17 revenue forecast from Raha "will be worse" than previously expected. So the forecast likely adds to the $4.6 billion to $5 billion shortfall predicted for the two-year budget cycle that begins July 1.
"I don't have a guesstimate or hard numbers, but I think it will be down," Brown said, describing a complicated economic reality. "It's just the uncertainty. There is so much uncertainty."
A caseload forecast also is due for publication on Friday [March 11]. It might add to the deficit by adding costs to the government's bill – if more children than expected are in public schools, more people are receiving Medicaid and more are in prison. Raha's report noted a strong in-migration of residents from outside the state.
Orcutt said he is worried about housing and thinks revenues will come in "a little below target."
Raha's report concludes with a note on risks, which "are still elevated as in November, and outweigh upside risks." Oil prices are the single biggest threat.