Published October 2003

Reports: Retail sales,
jobless rate diverge

By Bryan Corliss
Herald Business Writer

Record low interest rates earlier this year led to a local boom in housing and big jumps in retail spending — especially for items relating to the home — even as more people went on unemployment, economists said.

Snohomish County retail sales jumped 4 percent during the first quarter of 2003, compared to the previous year, according to a recently released report from the Washington Department of Revenue.

At the same time, sales of existing homes climbed more than 12 percent, and new construction starts were up nearly 16 percent, according to figures from the Washington Center for Real Estate Research at Washington State University. The increases came even as thousands of people lost their jobs.

Figures released by the Washington Department of Employment Security in September show that more than 5,000 Snohomish County residents were cut from the work force since August 2002.

Is this a reflection of the “jobless recovery” economists talk about on a national level? Not exactly, said Donna Thompson, a regional labor economist with the Employment Security Department.

Low interest rates during the first quarter sparked home sales by would-be buyers and refinancing and home equity loans by homeowners, Thompson said. The result was the surge in home sales, and in retail sales related to products for the home.

It was a good time to be in the home improvement business. Sales of building materials and hardware — a category that also includes paint, windows and garden supplies — leaped more than 30 percent in Snohomish County during the quarter, climbing from $71.7 million to $93.1 million.

Spending on furniture and furnishings also increased. Snohomish County stores in the category saw sales grow about 4 percent, to $98.9 million, the Revenue Department said.

With the surge in lending, banks and other financial companies have added 300 employees, Thompson said. In retail, building material and garden stores also added another 300 since last year. But those are almost the only sectors where companies have been hiring.

The manufacturing companies in the county continue to shed workers. About 5,200 people lost their jobs between August 2002 and August 2003, with 3,700 of them being aerospace workers.

The net result is a slow restructuring of the local economy from its traditional manufacturing base to one with more lower-paying service jobs, Thompson said.

That restructuring is cause for concern, said Paul Sommers, senior research fellow at the University of Washington’s Evans School of Public Affairs.

Traditional manufacturing jobs are going away, with nothing in sight to replace them. The biotechnology industry isn’t a major employer, he noted.

There won’t be a local business rebound until the national economy rights itself, Sommers said, and there are signs of a national economic recovery. But that recovery won’t come to the region until corporate spending increases, because the region’s major businesses — Boeing, Microsoft, Kenworth — don’t make consumer products.

Sommers said he expects slow growth in the months ahead. “There doesn’t seem to be anything that’s going to turn it around very quickly.”

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