The year ahead: Boeing, biotechs and banking

The Boeing Co.'s newest jetliner rolled out for its world debut, the hot housing market cooled, and Snohomish County lost one of its largest companies in 2007.

The county's economy roared throughout the year, making it one of the best job-producing areas of the nation. But now the questions are: Will that continue throughout 2008? Will Boeing keep hiring?

Here's a look at what we do know as the new year makes its entrance.

Aerospace

The coming year will see the first 787 Dreamliner take to the skies, if all goes according to plan. Boeing's under pressure to get the new plane ready for its test flights so it can begin delivering the jet.

The world's two leading jet makers -- Airbus and Boeing -- have received about 1,000 commercial airplane orders each of the past three years. The unprecedented pace has left many wondering when the market for jets will cool.

In mid-December, the director of International Air Transport Association, Giovanni Bisignani, predicted an industry downturn in the new year.

"The challenges get tougher in 2008," Bisignani said. "A favorable economic environment and effective efficiency measures helped mitigate the impact of high fuel prices and underpinned profitability improvements. With the credit crunch, that is changing. The peak of the business cycle is over."

Executives at Airbus and Boeing, however, suggest that while 2008 may not see as many orders, there still is a segment of the industry that has been silent during the orders rush.

Major U.S. carriers such as United and American haven't placed significant orders over the past three years. These airlines have fleets of aircraft that will need to be replaced soon. With lead times out as far as 2016 to get new fuel-efficient jets such as the Boeing 787 Dreamliner or an Airbus A350, these legacy carriers can't wait much longer to place orders, especially if fuel costs continue to rise, Boeing and Airbus officials say.

Many aerospace companies in Snohomish County benefit from orders for jets from Airbus and Boeing. Even a slowdown could take a while to filter down to suppliers, considering both jet builders each have backlogs of more than 3,000 orders.



Job outlook

For much of 2007, Snohomish County's job growth rate led the state.

As of November, the county had added 21,300 jobs over the year for an annual growth rate of 8.7 percent. That was triple the state average of 2.8 percent, said Donna Thompson, who studies the county's economy for the state Employment Security Department.

At year's end, the county's jobless rate was 4.2 percent, considered full employment.

The biggest source of jobs has been Boeing and related aerospace businesses, which hired 200 to 300 new people each month. Aerospace companies added 600 jobs in November as Boeing rushed to work on the new 787. While Boeing doesn't provide specifics about its jobs, things look good for 2008. Most of the wide-bodied jets built in Everett have strong backorders.

Economist Bill Conerly of Oregon said the county's economy should continue to do well in 2008 barring a national recession.

Problems in the housing market have cut jobs in the local financial industry and in the forests and local mills. But other aspects of the economy have remained strong.



Real estate

The heady days of homes appreciating at double-digit rates are finished for county homeowners for the moment, but that's a sign the local real estate market will return to normal in 2008, not collapse.

Most homeowners will likely see the values of their homes drop in the short term. How much depends on which expert is talking.

Vern Holden, a Windermere broker in Mill Creek, expects most area home prices to drop as the market stabilizes.

With more homes for sale, sellers shouldn't expect their home to sell for the price it would have six months ago. However, a strong economy, low interest rates and a steady stream of newcomers could keep the local real estate market from taking the nose dive other parts of the country are experiencing, he said.

Steve Tytler, real estate columnist for The Herald and a mortgage broker, said homes close to urban job centers such as Everett should fare better than those farther away.

The abundance of new homes for sale is expected to decrease as builders sell off their excess inventory and adjust to the market, said Todd Britsch of New Home Trends.

Retail

With the mortgage meltdown and the high cost of fuel, retailers nationwide kept an eye on consumer spending at the holidays, expecting to see signs of an economic slowdown.

Spending in the county hasn't been as affected, however, local retailers said. A few days before Christmas, Julie Tennyson, Everett Mall's spokeswoman, noted that spending continued to be strong during the holiday season. Thanks to a good year in the aerospace industry, stores at the mall expected the 2007 holiday season to be just as strong as the last, if not stronger.

The mall, which added a new mix of small and big retailers last year, hopes to continue to attract consumers with the addition of more stores in 2008. Meanwhile, Macy's plans to expand its Alderwood mall store in Lynnwood.

Wal-Mart has postponed construction of supercenters in Marysville and Arlington from next year until 2009, but retail development won't stand still. In the next month or so, Fred Meyer will become the first big store to open at the new Snohomish Station shopping center on Bickford Avenue. Home Depot and Kohl's are among the retailers also building there.

Port of Everett

This was a hectic year for the Port of Everett, and 2008 is not expected to be much different.

Ship visits and the amount of cargo increased in 2007 and should do so next year, although a little more slowly, said John Mohr, executive director. He said the port has established a niche and a reputation for oversize cargo with its careful handling of aircraft parts.

That could mean some additional business in handling giant wind turbines as the wind energy industry expands significantly in 2008, Mohr said, noting the most of the giant turbines are made in Japan and in Europe and will be used in areas such as Montana.

Changes continue at the port itself, with construction of condominiums delayed until 2008 because of financing problems. Mohr said the port will get started on infrastructure for the condos, which are expected to start rising in June.

A key issue for 2008 will also be cleanup of contaminated soil. The port has been doing a lot of voluntary cleanup as part of its $400 million redevelopment project, but the work will accelerate next year. Gov. Chris Gregoire's Puget Sound initiative means state Department of Ecology officials will be heavily involved in overseeing the cleanup work, including dealing with arsenic contamination at the port's Riverside Business Park.

One project that should be finished next year is the new barge pier near Mukilteo, which will be used mostly to handle oversize containers with jet parts destined for Everett's Boeing plant.

Biotechnology

Last year began with the $2.3 billion buyout of Bothell's ICOS Corp., the largest biotech firm based in Washington, by Eli Lilly & Co. The subsequent closure of ICOS's offices and labs here resulted in hundreds of employees being laid off. This month, however, the story got a happy footnote.

Denmark-based CMC Biopharmaceuticals announced it would buy the former ICOS contract-manufacturing facility in Bothell and retain all 127 employees. The plant had been expected to close its doors soon if it wasn't sold.

Instead, CMC plans to invest an estimated $50 million and will add employees to allow the plant to produce late-stage and even commercial-stage biotech drugs for others. New jobs could be added in the coming months.

Meanwhile, progress continues on a $70-million-plus biotech manufacturing plant near 164th Street SW in Lynnwood. Bayer HealthCare, which is building the state's first large-scale drug plant, hopes to submit an application during 2008 for regulatory approval for the facility. Once approved in the coming years, the plant is expected to produce Leukine, an artificial form of a naturally occurring growth protein that fights off infections in cancer patients.

Sonus Pharmaceuticals and Nastech, both in Bothell, start the new year hoping for better times. Both hit key setbacks this fall, resulting in huge stock drops and layoffs. On the other hand, other biotech firms and medical device makers in Bothell grew last year and seem destined for another solid year ahead.

Technology

Intermec Inc. began 2007 with fresh layoffs and falling sales. It enters 2008 with better hopes and a new chief executive.

Patrick Byrne, a former Agilent executive, took over as president and chief executive officer during the third quarter from the retiring Larry Brady. The Everett-based maker of rugged handheld computers and inventory-tracking technology ended that quarter with revenue growth of 5 percent, ending a year of sales declines.

Meanwhile, 2008 will continue to see companies battle to provide local residents with technology links. Verizon is continuing to expand its fiber-to-the-home network called FiOS in parts of Snohomish County, while Comcast is touting its expansion of high-definition TV, digital phone and Internet services. Clearwire also is expanding its wireless high-speed Internet access in the county.

Banking

Banks thrived when mortgage lending peaked in recent years, but the meltdown of that industry has hurt some of the nation's biggest banks and thrifts. Washington Mutual enters the year with big layoffs under way and under scrutiny from regulators. Locally, however, most banks aren't as affected.

"I would label it as a year of uncertainty going forward," said Mike Deller, president and chief executive officer of the Bank of Everett, which saw growth in 2007, its first full year of operation.

If the mortgage meltdown and worries in credit markets expand and make businesses and consumers nervous about spending, banks everywhere will feel it. But with a solid job market and a more mild downturn in the housing market here, banks in Snohomish County shouldn't hit big problems.

"As I look around other markets around the country, we certainly have a lot going on that others don't," Deller said. "I'm glad I'm not a banker in Michigan."

Reporters Michelle Dunlop, Debra Smith and Mike Benbow contributed to this article.