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Forecast cloudy for Puget Sound region's economy
The economy is tough and it will get worse before better — but with hard work and optimism, it will turn.
This was the message Jan. 13 at the 2009 Economic Forecast Breakfast, presented by the City of Federal Way, Metropolitan King County Council member Pete Von Reichbauer, Weyerhaeuser and Woodstone Credit Union.
"I look at my 401K, now it's a 201K... yeah, times are tough," said George Northcroft, King County director of business relations and economic development, joking with the breakfast crowd.
A review of real estate, transportation, the green sector, health care and Pierce and King county issues, as they pertain to 2008 and are forecasted to apply to 2009, were presented by a panel of experts.
Retailers closed down left and right in 2008, as approximately 8,000 businesses called it quits, said Jeff Lyon, chief executive officer of GVA Kidder Mathews. More will come in 2009 when an expected 16,000 retailers will go out of business, Lyon said. Large regional powerhouses, such as Weyerhaeuser and Boeing, are laying off employees.
Businesses that survived 2008 will need all the assistance they can get. Landlords will be smart to work with owners to help them in any way, Lyon said. A vacated storefront could stand that way for a few years to come if the retailer is forced to leave, he said. The success of the real estate market is driven by the capital market, Lyon said. When that improves, so too will the real estate market.
"I think we'll see some light at the end of the tunnel when the capital goes up," Lyon said.
Transportation saw breakthroughs and drawbacks in 2008.
Sound Transit's ST2, a mass transit plan that includes extending light rail and expanding bus services, was approved by voters this past November. Additionally, after years of waiting, Gov. Chris Gregoire finally announced a plan Tuesday for improving the Alaskan Way Viaduct. The Seattle-Tacoma International Airport saw the addition of a third runway and is doing favorably compared to other national airports, said Mark Reis, aviation director for the Port of Seattle.
Seaports will feel the economic impact as growing unemployment rates in China are expected to force the country to decrease its exports to the United States, Reis said. The Port of Seattle and Port of Tacoma both face competition in 2009 from new and expanded ports located closer to Asia, he said.
"I wish I could change the tone of the conversation from the somewhat negative to the positive, but I don't have a whole lot of good news," Reis said.
The Puget Sound region has embraced the green sector. Resources and desires to build the industry are abundant in the region. And with President-elect Barack Obama's stimulus package, the sector has the potential to grow substantially, said Steve Dunphy, vice president of strategy and communications for Cascade Land Conservancy.
The region is environmentally conscious. It even has the workforce, resources and technology to produce electric and environmentally friendly vehicles, Northcroft said.
"We have the capability of being the next Detroit if we want to be," he said.
But there are drawbacks. The green sector could follow the path of that blazed by the technology industry. It was proceeded with a lot of talk and support in the region, but did not produce as many jobs as predicted, Dunphy said.
The health care field is not exempt from the impacts of the recession, said Tony McLean, chief operating officer at St. Francis Hospital in Federal Way. Elective procedures have declined and the severely ill continue to seek medical attention. Hospitals lack money for operating and meeting growing needs, he said.
"My take-home message is, in health care, historically, the myth is we are recession proof. That is not true," McLean said.
On the upside, the industry is opening a large portion of regional jobs. Hospitals in the South Sound are operating at full capacity and the key to success will be finding ways to be more efficient and prepare for funding cuts, McLean said.
"The good news is we're creating a lot of jobs," he said. "The bad news is we spend a lot of money."
In Pierce County, economic activity, job growth and retail sales have all dropped, said Kevin Phelps, Pierce County's deputy executive. Unemployment rates jumped and annual income increased slightly. But approximately 5,000 military personnel are expected to make Puget Sound their home this year, he said. That will increase spending and help to improve the local economy.
Counties, businesses, local governments and communities working together will help offset the effects of the failing economy, Northcroft said. The region has experienced this kind of recession in the past. In fact, 2001-2002 brought skyrocketing unemployment rates, he said. King County has an excellent bond rating and county executive Ron Sims has direct access to the Obama team, Northcroft said.
Recovery from the current economic state will come, but it will not be evenly distributed, said Dick Davis, president of Washington Research Council. For the Puget Sound to get ahead, it will require direct action — driven by state and local governments, business owners, community leaders and residents.
"There's very little reason for us to be complacent," Davis said.