Frustration may cause you to wish for a downturn to take the froth off Seattle’s boom. It will come. But it won’t be beneficial.
“What this town needs is a good recession.”
I’ve heard this sentiment, or something like it, from a number of people, sometimes tongue partly in cheek, other times seriously. Maybe you have, too. Maybe you think the same.
The speakers are seeking a just, cleansing fire that burns those smug, overpaid techies — especially Amazonians — greedy developers, real-estate speculators and _______ (fill in the blank).
At its purest and most sentimental level, it’s a desire to return to a city with plenty of blue-collar workers, easy driving, fewer people — especially Californians — and single-family housing that the average middle-class family can afford.
Well, hang around. A recession will show up, perhaps sooner than you think.
The trouble is that it won’t dispense a biblical butt-whippin’ of the digerati, although some may be slapped. It will hurt the most vulnerable people worst. House prices would go down some, but bounce back and rise even higher. And it won’t return the Seattle of 1950, 1980 — pick your golden time.
To be sure, recessions are natural phenomena of human action in the market. The business cycle expands and contracts.
Since I became a business journalist in 1984, the United States has been through three official national recessions, along with plenty of region- and industry-specific downturns.
The National Bureau of Economic Research, a private, nonprofit organization, officially dates the events. It says a recession “is a significant decline in economic activity spread across the economy, lasting more than a few months.”
Economists like recessions. They clean out the system, wiping out the bad bets, imbalances and shaky enterprises that accumulate during an expansion, especially when it becomes a bubble. A recession is a necessary purification so the economy can return to health.
And economists are right, at least in theory (no wonder it’s called the dismal science). But they also tend to have secure jobs.
Until 2008, this professional dispassion was reinforced by the long-running “Great Moderation.” From the mid-1980s until the big crash, the U.S. economy was defined by steady growth, low inflation and mild recessions.
The situation is different now.
Nearly 8.6 million people lost their jobs nationally in the Great Recession. Nearly 134,000 jobs were vaporized in Washington state. It took five years to recover the lost employment, and even longer to reach the level of jobs that would have been created without the downturn and to meet the growth of the workforce.
The downturn mauled the household wealth of Americans. According to the Federal Reserve, most households had not fully recovered as of last year. Inequality rose. Those at the lowest level of income suffered the greatest harm.
Even in the mild recession of 2001, more than 2 million jobs were lost.
The characteristics of recoveries have also changed since the turn of the century. It takes longer to regain lost employment. One reason is China’s rise in the world economy. But another is that companies use recessions to re-engineer themselves, whether through offshoring or automating work, doing more with fewer people. Hence the “jobless recovery” has become commonplace.
Seattle is known by a couple of truisms. It’s a boom-and-bust town, going all the way back to the Klondike Gold Rush and its aftermath. And national recessions tend to arrive here later. It’s an open question whether these still apply, in what has become a prosperous world city with a diverse economy and a major technology hub.
We did go through one of the most famous local- and industry-specific crashes: The “Boeing Bust” of the late 1960s and much of the 1970s. When the region was much more dependent on one company, it faced severe pain from cancellation of the supersonic transport and slow 747 sales. This was when real-estate agents Bob McDonald and Jim Youngren put up the iconic billboard reading, “Will the last person leaving Seattle — Turn out the lights.”
This local recession preceded the national downturns of 1970 and 1974-75, which were largely caused by spikes in oil prices. Those, in turn, made the situation here worse.
The Seattle-Tacoma-Bellevue metropolitan area sidestepped the worst of the Great Recession. Most areas here weren’t overbuilt with spec subdivisions. Still, it took down our last large financial institution, Washington Mutual, and caused widespread layoffs elsewhere, including the first for Microsoft.
Our comeback was far above the national average. Powered by the tech sector, Seattle was one of the few cities to see stellar expansion in the recovery, one of the winners in the renewed popularity of urban cores.
Some of the results — population growth, traffic, widening of income gaps, disruption of once-stable middle-class neighborhoods, and loss of favorite shops — fuel the “what this town needs is a good recession” discontent among mossbacks.
We also have seen a dramatic increase in unsheltered people on the streets. Although it’s easy to blame this on Amazon and other tech companies, it’s more uncomfortable to ask whether this compassionate city is subsidizing and attracting the problem with its lavish spending.
A recession would sandbag that funding and much more. The booming economy, including fees from development, allowed the city to increase its budget dramatically — and perhaps unsustainably, according to the Municipal League Foundation.
The boom also allowed for experiments such as raising the minimum wage to $15 an hour. While the effects are still unclear, overall employment growth in low-wage sectors has continued. This trend would come under severe stress in a downturn. So would badly needed infrastructure improvements, including Sound Transit 3.
A minor downturn might be a speed bump here. A bigger obstacle would come if Amazon HQ2 became the only headquarters, significantly slowing growth in Seattle.
Widening the lens, the world economy faces growing asset bubbles, banking regulations set to be removed and an aging business cycle. Something more menacing might emerge. Such a crisis would confront an untested chairman of the Federal Reserve, with the central bank still rebuilding its anti-recession ammo expended fighting the last downturn.
A truly 21st century recession might not be triggered by conventional bubbles or financial mischief, but trouble in the technology sector. A digital black swan.
The sector is facing significant risks, from overvalued stocks to controversy about its power, security and interconnected vulnerabilities. And with two of the five Big Tech giants headquartered here, trouble would hit home hard.
None of these scenarios would bring back grunge, Ralph’s Grocery or happy motoring. There is no good recession.