The state's top economic forecaster said Friday that he believes the "Great Recession of 2007-09" is over.
Arun Raha, executive director of the Economic and Revenue Forecast Council, also warned that jobless rates should keep climbing to a peak of 9.8 percent by March. And regional bank failures could set the recovery back.
“It appears the recession is over. My guess is it ended last month. But the recovery is still fragile and fraught with risk. The economy has just been through the wringer, and it means it will take time to heal,” Raha said in a meeting with lawmakers, state budget director Victor Moore and other members of the forecast council in Olympia.
Raha issued a 34-page quarterly report, which he’ll follow up on Sept. 17 with a formal two-year revenue forecast for lawmakers and Gov. Chris Gregoire. The bad economy led to $4 billion in budget cuts earlier this year.
Raha said the threat of regional bank failures is tied to the still-struggling commercial real estate sector around the country.
His written report also said he expects jobless rates to grow, hitting a peak of 9.8 percent, which his report says is “significantly lower” than a 10.5 percent peak predicted in June.
The statewide jobless rate was 9.1 percent in July, up from 5.3 percent just one year before.
Moore, the budget director for Gregoire, said he was “a little encouraged” by the new job numbers. Moore said housing prices have begun to rise but people need to see that companies are hiring again.
Raha declined to say when he expects state revenues to show an increase on a year-over-year basis, but he’ll have more to say on that topic when he delivers his revenue forecast in two weeks.
Raha did say that “month over month, seasonably adjusted we are starting to see things leveling off.”
A drastic fall in revenues contributed to an $8 billion shortfall in this year’s budgeting, which led to deep cuts of more than $4 billion in state programs and spending, including education and health care programs.
Raha credited the international stimulus efforts with turning around the global economies. He noted that just $62 billion in U.S. tax cuts and $85 billion in U.S. stimulus dollars have been spent, with most of the $787 billion stimulus package in the pipeline.
He said there already are signs of increased trade through Washington ports, which feed markets inside and outside the country.
He also said manufacturing “is coming back to life” in 11 of 18 sectors measured in a recent report, which shows this is more than a Cash for Clunkers effect.
Raha said there also are signs a decline in single-family housing permits is stabilizing, that auto sales were showing signs of recovery even before the Cash for Clunkers credits for buyers, and the employment growth forecast is “mildly” stronger than in June.
His report said Washington job creation lagged the nation but will recover faster, just as personal income growth will outpace the nation’s rate.
But personal income growth for Washington is weaker than predicted in June for the near term; the drop in business-occupation taxable activity continues; and the outlook for nonresidential construction is weak.
Recovery, he said, depends on consumers having confidence they will have jobs and then spending.
From the economy’s peak to the employment bottom expected in early next year, the state will have lost 136,000 jobs, of which 126,000 have been lost so far, his report said.
State Sen. Craig Pridemore, D-Vancouver, chairman of the council, said the jobless news was about what he’d expected all along – a peak at around 10 percent in the beginning of 2010.
On the down side, he said: “I’m hearing about commercial real estate continuing to struggle. I’m not hearing about the residential housing coming back.”
Brad Shannon: 360-753-1688
• For a copy of Raha’s report, go to http://www.erfc.wa.gov/pubs/ec20090904b&w.pdf.