The recession officially ended four years ago. Now as we head into summer, the most favorable economy since 2007 seems to be emerging.
King County’s jobless rate dropped to 4.4 percent in April, a level economists would consider full employment. Seattle house prices are up more than 10 percent for the year.
Construction is strong, with new apartments and even condos rising in Belltown. Amazon.com, whose growth is a massive driver in Seattle’s commercial real-estate rebound, is preparing to begin on the first of its skyscrapers. Eastside developer Kemper Freeman announced plans for a $1.2 billion mixed-use project in downtown Bellevue.
The 787 Dreamliner is flying again. Microsoft is rolling out Windows 8.1 to appease customers unhappy with the radical change of a tile interface, and with this move comes the chance to advance sales of the company’s flagship product. Almost all the region’s premier companies are doing well.
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Nationally, rising house sales and declining foreclosures point to healing at the epicenter of the worst crash since the Great Depression. Hiring, although still relatively slow, has risen this year to a higher average level than anytime before the recession.
The eurozone crisis seems at least contained. The Dow Jones industrial average has reached new highs, and many argue it has more room to grow. No wonder
consumer confidence has hit a five-year high.
Even though Americans are an optimistic lot, no one should assume happy days are here again.
The recession left deep wounds in the labor market, among small businesses and lost wealth among average households that continues to depress demand. Gross domestic product growth continues to be slow, especially in business investment.
The official U.S. unemployment rate was 7.5 percent in April, with 11.7 million still without jobs. During most of the post-World War II era, such a rate would have been considered a crisis.
While King County enjoyed its 4.4 percent jobless rate in April, Pierce County stood at 8.1 percent and most of the state was suffering relatively high joblessness. And these data don’t tell us the quality of jobs being created.
Some 23 million American households were on food stamps in February, the most recent data, including more than 590,000 in Washington, nearly 453,000 in Oregon and more than 99,000 in Idaho. Many are stuck in low-wage, part-time jobs.
In addition, changes in the economy and public policy over the past 30 years will make a recovery different, and more tenuous, than its predecessors in the postwar decades.
Inequality has grown to levels not seen since the 1920s, while wages have largely stagnated and economic mobility has slowed.
Among these long-term trends are globalization, offshoring of manufacturing, a greater role of finance, highly consolidated industries, the decline of unions and a broken tax system. Thus, household incomes in the middle have been stuck for decades.
Moreover, the banking system remains risky and several mini-bubbles are emerging, in commodities and student loans, for example.
When I was recently in Phoenix, which was devastated by the housing crash, veteran real-estate agents privately told me they were terrified the bad old habits were returning even though the market was improving on the surface.
Indeed, in some markets flipping of houses is back to 2005 levels. Consumer credit is rising again, too, back to historic levels.
The Puget Sound region continues to be a fortunate outlier in this and other areas. We avoided overbuilding in most areas, and if there’s a complaint it’s that the housing inventory is too small.
This summer we should be watching job creation to see if the relatively good news on this front continues. Other important markers will be whether Microsoft can lift its performance and Amazon continues its star turn, as well as signs about where Boeing might focus work for the 777X.
The cruise season is under way, a critical engine for the Port of Seattle and many small businesses. Tourism in general is the big summer business for Washington.
We’ll need to pay attention to Asia. Even if North Korea tensions have eased, worries about a slowdown and bubble in China, Washington’s biggest export partner, are real.
Nationally, the big question will be how the Federal Reserve handles a recovering economy. Stocks dropped suddenly last week when yields on Treasury notes rose. The fear is not inflation, but what happens when the central bank begins to withdraw its $85 billion a month securities purchasing program, which has helped buoy stocks.
Chairman Ben Bernanke and his colleagues have pledged to keep interest rates very low as long as unemployment remains above 6.5 percent. But easing off the mortgage-backed securities purchases and expansion of the money base will require the greatest finesse.
Federal cutbacks will continue to be a head wind, but how much? So far, the sequester has been many small bites.
Staffing cutbacks at the Federal Aviation Administration were quickly reversed — these were relatively well-off travelers and powerful airlines being inconvenienced.
The federal deficit is now just 4 percent of GDP, half of where it stood in 2009. But austerity continues to be the ruling dogma in the other Washington, even though history shows that’s not a path to prosperity.
Finally, much will depend on energy. In the Northwest, we’ll continue to debate whether export terminals for coal should be built at a time when climate change is getting worse. But the economic trigger to watch is oil prices.
If crude responds to rising demand by rising and staying in the high $90 range, the recovery could hit a ceiling.
If there’s “good” news in that regard, it’s that most of the world is not doing as well as the United States, so oil prices may stay manageable.
You may reach Jon Talton at firstname.lastname@example.org