Northwest Growth Leads Nation

Overall forecast for region is bright despite poor jet sales, drought, and Alaska's oil slump

THE Northwestern United States will continue to outperform the nation as a whole economically in the coming year, according to a recent forecast by two economists who follow the region.

Though stressing that optimistic note, they do not predict smooth sledding from the Yukon to Yakima in the year ahead.

In Washington State, the region's largest, declining orders for new jets from the Boeing Company have brought the Seattle area's buoyant growth to a halt. Yakima County and other agricultural areas east of the state's damp coast have been hurt by a severe drought.

Alaska's oil-based economy is "awaiting the next resource boom" after the Bush administration failed to open parts of the Arctic National Wildlife Refuge to oil exploration, says John Mitchell, chief economist for US Bancorp of Portland, Ore.

The good news is that Idaho and Montana, the region's smallest states, are expected to continue their strong growth, and Oregon promises to recover some of its vigor, according to Dr. Mitchell and co-author Paul Sommers, who is research director at the University of Washington's Northwest Policy Center in Seattle.

This report is the fourth annual "Northwest Portrait" by the two economists, assessing the past year and projecting job growth in the year ahead. The highlights, on a state-by-state basis, include:

Alaska. After adding jobs at a 5 to 6 percent annual rate in 1989 and 1990, "Alaska has really slowed down dramatically," Mitchell says, with 0.4 percent job growth in the year ended in August and a rise of less than 1 percent expected again next year. Three key industries - seafood processing, oil, and forest products - have either declined or leveled off.

The report notes a modest rise in tourism this year, and suggests that the mining industry may expand if Echo Bay Mines reopens the Alaska Juneau Gold Mine, closed in 1944.

Idaho. The Gem State is ranked first in the nation in employment growth in 1991, at 3.3 percent, and second in the year ended this August with 2.6 percent growth. Next year should see job growth of about 3 percent, according to the report.

The rapid expansion of activity in Boise over the past few years reflects the appeal of small, inland cities as places to locate businesses, Mitchell says. These areas often have less congestion, lower real estate costs, and easier access to the outdoors than big coastal cities.

The boom is not just in the state capital. Harpers Office Furniture, for example, announced in September that it would relocate from Southern California to Post Falls. Construction activity in the state has been setting annual records since 1988.

The drought's impact on Idaho farmers was eased somewhat by price increases and careful management of water and crops.

Montana. This state appears poised to continue its job growth, the economists predict, building on its recent annual rate of 1.7 percent increase in employment to perhaps 2 percent next year.

Medium-size cities such as Missoula, Kalispell, Bozeman, and Great Falls are attracting "amenity-conscious businesses, retirees, and vacation-home buyers" to western Montana, the report says.

North-south trade is expanding due to the 1989 Free Trade Agreement between the US and Canada, aided by lively growth in neighboring Alberta.

Oregon. The state's main industry - timber - was hit with a 12-percent drop in employment in 1991, due to supply restrictions and a weak construction market. This caused a 0.1 percent drop in overall job growth. But the state came back this year with a 1 percent rise in employment through August.

Mitchell and Dr. Sommers expect that recovery to continue to employment growth of about 2.5 percent in the coming year. Growth in service sector and high-tech firms, many of which are based near Portland, promises to remain strong.

Oregon wood-products employment has fallen from 70,000 in 1988 to about 52,000 today. The loss is partly due to efforts to protect endangered species such as the northern spotted owl and marbled murrelet. More than 35 mills have closed this year.

Washington. Employing almost as many people as the other four Northwest states combined, Washington is likely to lag behind its smaller neighbors in the coming year. Through August this year, job growth was a scant 0.1 percent, and the study predicts 1.5 percent growth next year.

That growth, if it comes, will likely stem from high-tech and service activity, rather than the traditional expansion sectors of aerospace, timber, and trade.

Sommers says more layoffs are likely at Boeing as it slows production of new commercial aircraft. "I think it's going to be more than the 2,000 [layoffs] they've already announced and less than the 6,500 in '92."

The company, which employs 99,000 people in Washington alone, has a large backlog of orders. However, new orders have virtually stalled due to cutthroat competition among US airlines, many of which are losing money.

"We're going to continue to have a slow economy in the Seattle area," Sommers says. Each Boeing job lost is thought to cost the state another 3.8 jobs. This effect occurs over several years, as Boeing's suppliers are effected and consumer spending in the area drops.

The state's banks have also been consolidating, shedding more jobs. Among the mergers underway: Seafirst-Security Pacific, Key Bank-Puget Sound Bank, and Washington Mutual-Pacific First.

As in Oregon, the wood-products business has been decimated, with employment falling from 41,000 in 1990 to about 35,000 today.

All this helped drive Washington's unemployment rate to 6.9 percent in October, up from 6.2 percent in September and higher than the national average of 6.8 percent.

The report's optimism for the coming year is based on the fact that beyond Seattle, other cities see employment rising, including Spokane in the east and Bellingham near the Canadian border.

Although the drought hurt grain harvests, fruit crops here and in Oregon were helped by the mild winter a year ago. This year could see the first billion-dollar apple crop in Washington State history.

A looming uncertainty is the global economy. Japan reported recently that its economy shrank at a 1.6 percent annual rate in the quarter ending in September and Germany also posted a decline in output.

The US Treasury Department predicts that this slowdown abroad will weaken exports. The ports of Seattle and Tacoma have prominent rolls in Pacific Rim trade and thus stand to lose some business.

Mitchell says the nascent US economic expansion could be slowed but not stopped if Japan and Germany fail to recover. He adds that many smaller Asian economies are still growing smartly. Closer to home, a weaker economy in western Canada has hurt cross-border shopping in areas such as Bellingham.

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