Washington State has an economic lag but stays ahead of US level

While Mr. St. Helens was erupting during the spring of 1980, after nearly 125 years of dormancy, the Washington State economy was slowly cooling. Payroll employment plateaued early this year and declined in both April and May. It had risen 30 percent during the preceding four years.

The declines, though not large, reflected weakness in some manufacturing industries and in construction, retailing, and service sectors. Thanks to earlier growth, however, May employment in the state was still up 2.7 percent over the previous-year level, while overall US employment was only 1 percent higher.

"Some sectors are already showing signs of improvement, signaling a prompt return to growth, albeit likely to be more moderate than in the past couple of years," reports the Economic Research Department of Seattle-First National Bank in its second quarterly summary of Pacific Northwest industries.

Overall, the state's economy continues to be in better shape than that of the nation as a whole, the bank says. "Reminiscent of the situation during the mid- 1970s recession, the state is benefiting from the momentum of local demands accumulated during the past several years of rapid growth," it adds.

Relative insulation from several of the weaker sectors nationally -- auto production, for example -- also is a plus. Still, some industries and some communities are severely affected.

Regional lumber production, having already declined by 2 percent in 1978 and another 4 percent in 1979, was off more than 15 percent in 1980 through April, compared with the similar 1979 period.

Mighty as the Mt. St. Helens explosion was, its immediate impact on the region's forest products industry was small, compared with the effect of the national housing market collapse. Starts in May were at their nadir, the bank says, off almost 50 percent from a year earlier across the nation and down nearly 60 percent in the Western US. June fortunately brought some rebound.

With many mills closed or operating on curtailed schedules, wood products employment in May was down more than 16 percent from a year earlier in Washington and off 30 percent in Oregon. So when the volcano interrupted some logging and conversion activity in May and June, there were ample idle workers and facilities elsewhere to pick up the slack.

"It's not clear why the wood products slump was more severe in Oregon than in Washington," the bank economists comment. "Partly, it may be due to Oregon's greater reliance on plywood, the demand for which turned down earlier than for lumber. In part, it might also be due to greater log export activity in Washington."

The state's log exports held up "rather well" in the first quarter, with a 3 percent gain in volume from year-earlier levels. The marketing environment for logs softened in the spring, however, as reflected in lower prices, partly because of reduced competition for the timber from domestic purchasers, the economists say.

The housing slump has been hitting the plywood industry in the Pacific Northwest particularly hard. Seattle-First points out that rapid expansion in plywood capacity occurred in the South in the early 1970s, pressuring prices down to a level where Pacific Northwest mills had difficulty matching bids of sawmills and exporters for suitable timer.

As a result, plywood production in Washington never regained its 1973 peak during the late 1970s, and the current low level of production is below the 1975 through. Looking ahead, new competitive products that use stands of eastern hardwoods, especially aspen, are expected to erode demand further for Pacific Northwest plywood, the bank predicts.

Washington's employment buildup in aerospace has finally leveled off. Over the past three years, the industry averaged approximately 900 new hirings a month, pushing the total job count from a low of 44,000 at the end of 1976 to more than 77,000 at the close of 1979.

"This year, the hiring pace has slowed to a crawl," the bank notes. The latest three months ending in MAy were essentially flat, at 78,500 workers. This is the first time since 1976 the employment numbers have not climbed steadily, with the exception of a two-month strike in late 1977, and the first time since 1974 that the employment level has stabilized after a period of buildup.

Seattle-First says Boeing Company's beginning-of-the year forecast of a 6,000 to 7,000 net worker gain in 1980 was high. Boeing now expects little change beyond mid-year. The second half will likely show a slower rate of