Washington's unemployment rate hit 7.1 percent in December, its highest level since December 2003.

Share story

The national recession slammed into Washington last month with the force of a Pacific storm, throwing tens of thousands of people out of work and sending the state unemployment rate to its biggest one-month rise in more than three decades.

And, state officials warned, the jobs picture is likely to get worse before it gets any better.

Washington’s jobless rate, adjusted for seasonal variations, hit 7.1 percent in December, up from 6.3 percent in November. That’s the highest the rate has been since December 2003, when the state was emerging from recession following the dot-com collapse.

Employers in nearly every corner of the economy cut 22,200 nonfarm payroll jobs in December, evidence of how much the contagion from the mortgage meltdown and the banking crisis has spread. All told, 251,700 Washingtonians reported being out of work last month, 29,200 more than in November.

“If people are too frightened to buy, too frightened to build or too frightened to invest, that makes growth more difficult,” said Desiree Phair, the state’s regional labor economist for King County.

Locally, the picture was only a bit better. Unemployment in the Seattle metro area (defined as King and Snohomish counties) spiked to 6.2 percent in December, from 5.4 percent a month earlier.

Wednesday’s report — a day after Oregon said its jobless rate jumped a full percentage point in December, to 9 percent — confirmed that the Northwest has fully joined in what appears to be the steepest U.S. downturn in decades.

“No state is immune to the effect of a national recession,” said Mary Ayala, chief economist for the state Employment Security Department.

Further evidence that the state economy is slowing sharply comes from new claims for unemployment insurance, which have soared.

In the four-week period that ended Jan. 10, an average 21,040 Washingtonians a week filed new claims for jobless benefits — nearly twice as many as in the equivalent period a year ago.

(The official jobless rate is derived from a survey of the general population — not, as is sometimes thought, from counting how many people get unemployment benefits.)

In response to the rapid rise in unemployment applications, the Employment Security Department said it’s increased the capacity of its phone system and doubled the number of staff answering phones at its call centers. Another 35 staffers are in training, Commissioner Karen Lee said in a statement.

“Like every state in the country, the workload has strained our systems and we’re working very hard to catch up,” she said.

Nonfarm payrolls, which many economists consider the best gauge of the overall employment, peaked in February 2008 at nearly 2.97 million jobs. Since then, Washington employers have cut 62,900 jobs — virtually all of them in the past four months, since the financial crisis turned acute.

The state’s heaviest job losses have occurred, not surprisingly, in the sectors closest to the real-estate and financial sectors. Construction has shed 22,000 jobs since the February peak, 4,200 of them last month. Financial services lost 700 jobs last month and 4,400 since the peak.

Retailers cut 1,400 jobs in December and 12,200 jobs since the peak; much consumer spending in recent years has been fueled by rising home values and credit cards.

Employment services, a category that includes temporary-help agencies and often is a harbinger of near-term economic conditions, cut 5,700 jobs last month and is off 10,900 since February.

Aerospace was a rare bright spot last month, recording a 400-job gain. But that may prove illusory. Boeing earlier this month said it plans to cut 4,500 workers this year, more than 3,800 of them in Washington, as the global airline business goes into yet another wrenching downturn.

And the full impact of JPMorgan Chase’s decision to lay off 3,400 former Washington Mutual workers has yet to be felt.

The drip, drip, drip from smaller cuts also continues. One example: This week on Tuesday, Philips Electronics disclosed it was laying off 96 workers at its supply center in Auburn, effective March 20.

Gov. Chris Gregoire used Wednesday’s report to tout her proposed $1.2 billion package of construction and transportation projects, temporary increases in jobless benefits and temporary cuts in unemployment taxes.

Economist Ayala offered one ray of hope: that the stimulus plans considered at the state and federal levels, along with moves by the Federal Reserve to get credit flowing again, will shorten the downturn.

During the last recession, Washington lost jobs nearly every month from January 2001 to March 2002, with unemployment hitting a high of 7.7 percent in April 2002. The subsequent recovery was excruciatingly slow: Not until October 2004 did the state regain all its lost jobs.

John Mitchell, a Portland-based economist and consultant, said the consensus is the U.S. economy will bottom out sometime this summer or fall, and that the hundreds of billions in fiscal and monetary stimulus steps on the way could make for a surprisingly rapid recovery.

But, he warned, even after growth resumes, “employment is going to lag that, and the public perception is going to lag that.”

Mitchell noted that Washington held up longer than either Oregon or Idaho, and that its technology-oriented economy could be poised to benefit from the stimulus plans.

But as for whether the state will recover along with the nation or lag behind, as it did in 2001-04, Mitchell was blunt. “I’ll be honest with you: Nobody knows.”

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com