The 2009-2010 Pierce County Economic Index (PCEI) was presented today by Drs. Doug Goodman and Bruce Mann, University of Puget Sound, at the Horizons 2010 economic forecast event of the Tacoma-Pierce County Chamber.
PCEI EXECUTIVE SUMMARY:
The Pierce County economy did withstand some of the negative effects from the national recession for much of 2008. But growth did slow. Pierce County’s slower growth was significantly better than the national experience principally due to Pierce County’s military and health care sectors.
The slowing Pierce County economy in late 2008 indicated more problems on the horizon. The Pierce County slowdown became a recession in 2009. Economic activity in Pierce County will continue downward, but more moderately as this year comes to a close.
The recession in Pierce County will continue through the first half of 2010. It will come to an end during the third quarter of the year. The current recession then, will be the deepest, longest and most severe in the past forty years.
A recovering U.S. economy combined with expansionary fiscal and monetary programs will help the local economy. Most of Pierce County’s trading partners will be growing again, helping the trade sector. But a stronger dollar will offset some of those gains. Single-family housing activity will improve during the year, as mortgage markets recover and credit becomes available. However, commercial and industrial real estate activity will be depressed for most of 2010. The local health care and military sectors will continue to fuel economic activity, but at a slower rate.
The benefits of the national recovery, increased trade flows, some new military construction spending and a recovering housing market will be enough to offset the negative effects of Russell Investments moving out of the area.
The recovery will strengthen in the fourth quarter of 2010, with the PCEI increasing at an annualized rate of 2.6% providing a solid foundation for the Pierce County economy as 2010 comes to a close.
A feature unique to this recession has been the drop in non-labor market income for Pierce County residents. This significant source of county residents’ personal income will be stagnant in 2010.
The annual average 2009 unemployment rate in Pierce County will be 9.3%. This year-over-year increase will be the largest on record. A difference in this recession is that usually the county rate exceeds the state and national rates and moves up more rapidly. In the 2009-10 recession the Pierce County unemployment rate started below the national and state rates, and then moved up more slowly than they did. Employment conditions in Pierce County remained stronger for longer than they have been in the past
After nearly two years of declining jobs in Pierce County, the economy will begin to generate new employment opportunities in the second half of 2010. Job growth will begin in the third quarter; this growth rate will almost double to 1% in the fourth quarter.
The turnaround in the second half of the year, though, will not offset the job losses in the first half. The net job loss in 2010 will mark the third consecutive annual decline in Pierce County.
All three retail sales drivers (income, confidence and credit) became worse during the current recession. It is no surprise that retail spending growth in Pierce County turned negative, and that spending fell below last year’s forecast.
For 2009, retail spending in Pierce County will drop by 7.5%, a loss of $415 million dollars from 2008. When adjusted for inflation, real retail sales in 2009 will be down by about 7.5%. For 2010, dollar retail volume will exceed 2009 by 2%. A total of $5.2 billion will be spent in the county during 2010 – up by $100 million from 2009.
As the Pierce County recovery takes hold, total personal income will begin increasing in 2010. Total personal income in Pierce County will increase by 5.7% in 2010, a gain of $1.5 billion. However, much of the added purchasing power will be eroded by inflation. In 2010 income growth will exceed the population increase, so per capita income will rise. The average resident’s income will move up to $34,700, a gain of 3.7% from 2009.
The First Time Home Buyer tax credit, a recovering local economy, attractive financing options and bargain-priced units will continue to push up single-family housing activity in 2010. For this forecast horizon, the multi-family housing market will remain fairly flat.
The commercial real estate outlook for this forecast horizon is mixed. The most significant challenge will be competition from the north. Local owners will have to be willing to make concessions.
Both in absolute terms and relative to the region, the industrial real estate market in Pierce County was strong through 2009. However, new demand is likely to be soft at best, during this forecast horizon.
2010 will see a further decline in volume for the Port’s international container business, as the major carrier and service string adjustments made in 2009 will now be felt over an entire year. For 2010, container volume will decline an additional 15.4% from 2009 levels, due solely to international trade declines. Domestic volume will be flat. The Port’s breakbulk and auto lines of business are projected to have little or a very low 1% growth in 2010.
At both the beginning and the end of the program, emcee and sponsor Jonathan Hensley, Pres., Regence BlueShield, asked attendees to determine if their glass was half-full or half-empty, and how to make it that way.