Published February 2003

A view of 2003 economy: better but not great

It’s no secret that the Pacific Northwest economy has been soft in many sectors, lagging behind a slowly recovering national economic climate. But Michael Parks, publisher of Marple’s Pacific Northwest Letter, expects to see improvement this year over 2002. Good news, however, is often balanced by bad news.

Here’s Parks’ outlook.

Due to a stronger tone in U.S. and world economies, Pacific Northwest states are expected to do better, seeing employment move into “positive territory” and unemployment rates drop somewhat. Still, even a slightly more positive year in the region won’t be anything spectacular, he expects. “Regional recovery will lag behind the U.S.,” he writes. “It will be … another tough year.”

A war in Iraq could trump all economic bets, of course, and change the whole global economy. But at this point, what happens in the Middle East remains to be seen.

Based on current events and trends, Parks predicts Boeing will continue a troubled year as it works to survive the “worst downturn in the history of commercial aviation.” While the state is more diversified than ever before, Boeing’s impact on the economy is still a significant one, whether the company is growing or shrinking.

Parks believes three things are needed to mark a true recovery: “The bleeding must stop at Boeing; the United States and world economies must grow at significantly higher rates than in the recent past; and high-tech industries must make a pronounced turnaround. … Don’t bet on any of them in ’03.”

He agrees with research and projections by Global Insight, an international economic consulting firm, that the U.S. economy will probably grow by 2.9 percent this year, up from 2.4 percent in 2002. Hiring is “likely to remain subdued until corporate profits recover,” he writes.

As for the rest of the economically developed world, growth will also be slow, he predicts, citing a study by Oxford Economic Consulting, London, that puts growth of advanced economies, other than the United States, at 2.3 percent this year, up from 0.5 percent in 2002.

The world’s second-largest economy, Japan, has a gross domestic product of $4.2 trillion (compared to the United States’ $10 trillion), but overall, its economy remains stressed. The European Union, Parks believes, will show better growth than Japan but “not by much.” Germany has a GDP of $1.9 trillion; the United Kingdom has $1.4 trillion; and France stands at around $1.3 trillion.

Asia should show the strongest economic growth, a positive development for the Northwest. China, the world’s fourth-largest manufacturing power after the United States, Japan and Germany, should grow by more than 7 percent.

“As for aerospace, Boeing employment in Washington won’t reach bottom until late 2004, if then. … The good news (in high-technology) is that the economy-wide investment in equipment and software has now risen for two quarters in a row after six consecutive quarters of decline,” Parks observes.

Not an economist himself, but a savvy, insightful journalist and observer of the Northwest economy for many years, Parks quotes U.S. Bank economist John Mitchell as saying that the region will “not get back to 3.5 to 4 percent annual growth anytime soon,” noting the exuberant growth “bubble” of the ’90s “distorts everything we look at now — including economic growth, the stock market and state government finances.”

In a recent newsletter, he also quotes Washington Employment Security Department’s senior economist, Gary Kamimura, who said: “We think of the unprecedented employment growth and low unemployment rates of the late ’90s as routine and normal, but it was an exceptional period we won’t soon see again.”

(Michael Parks will be the guest speaker at Frontier Bank’s economic forecast program, 7:30 to 9:30 a.m. Feb. 13, at Everett’s Performing Arts Center. Admission is free for those who reserve a space by calling 425-514-0714.)

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