IN the forested Pacific Northwest, wood chips are giving way to computer chips.
This region still has troubles in its traditional livelihoods - timber, fisheries, and aircraft - yet, the economic outlook is more upbeat here than in the United States overall, economists say.
Reasons range from technology to a population influx:
* Near Portland, Ore., semiconductor manufacturers are building plants that are adding to that area's sizable high-tech base. Players include Intel Corporation and Integrated Device Technology. Micron Technology, of Boise, Idaho, also wants to expand its memory-chip business.
* As the US gateway to Asia, the Northwest stands to gain from trade with a recovering Japanese economy and those of other Pacific Rim nations. Microsoft Corporation, of Redmond, Wash., and other local software firms will gain strengthened intellectual-property rights for exports under the new General Agreement on Tariffs and Trade treaty.
* The region's key salmon runs may be endangered, but an animated fish named ``Freddi'' is speeding upstream in a booming market for children's computer software. Humongous Entertainment, which has created Freddi's adventures, is one of several Seattle companies specializing in home-entertainment software.
* Construction is booming from Boise to the Oregon and Washington coasts, with out-of-staters and retirees feeding growth. Portland is building a $262 million arena for the Trailblazers basketball team, while Seattle is completing a more modest home for the SuperSonics.
None of this means that the Northwest will be free from the slower national economy the Federal Reserve is pushing for by raising interest rates. But Oregon and Idaho should remain above-average performers next year, reports a study by economists Paul Sommers of the University of Washington and John Mitchell of the US Bank in Portland.
Washington State, which has lagged behind the nation because of heavy layoffs at the Boeing Company, should do better next year, but don't expect anything spectacular, Mr. Sommers warns. Boeing's restructuring is nearly complete, and the commercial aircraft market appears to be in the early stages of a recovery.
Sommers notes one bright spot for Washington: In five previous Boeing downturns since World War II, the state was dragged into recession, but ``it didn't happen this time.'' The growing diversity of the economy, including food-processing, trade, and technology ventures, has allowed relatively flat performance despite 18,000 lost Boeing jobs.
Yet, the region faces challenges. Fishing and timber industries are now in court battles over how to manage their resources. Alaska's oil and gas industries are in a comparable state of uncertainty. Sen. Frank Murkowski (R), the Alaskan who will chair the Senate Energy and Resources Committee, hopes to lift a ban on oil exports. While Alaska has gained clout in the new Congress, Washington State has lost it. One question for the aluminum industry and other energy-intensive industries: Will federally subsidized hydropower escape budget cuts now that Washington's Tom Foley is no longer House Speaker?