If you woke up with a hangover New Year’s Day, you weren’t alone. The entire Puget Sound economy will spend much of 2004 dealing with the aftereffects of the recently concluded recession, a regional economist said.
The Puget Sound tech sector will finally start showing some strong job growth in 2004, Seattle-based state economist Roberta Pauer predicted. So will electronics manufacturing.
But while Snohomish County’s economic powerhouse, the Boeing Co., is sure to make a lot of headlines in the coming year, it won’t be for creating jobs. Two years of Boeing layoffs will continue to take their toll on businesses that have been reliant on Boeing worker paychecks.
The Puget Sound area will start to recover this year, but that recovery will lag the rest of the nation, Pauer said. "The overall outlook would be 2004 will be better than 2003, but not by a whole lot."
Some important things will happen for Boeing during the next few months.
"If this year was busy," said Mike Bair, senior vice president in charge of the Boeing’s 7E7 program, "next year will be twice as busy."
For Bair’s team, the immediate challenge will be finding launch customers who can turn the Dreamliner into reality. There is no shortage of rumored candidates; Emirates, Singapore Airlines, Cathay Pacific and Lufthansa all have been linked in various reports in recent weeks.
Boeing needs to sell the plane before the company’s board of directors formally agrees to launch it. However, it might not require a flood of orders before doing that, CEO Harry Stonecipher signaled at a recent press conference. Boeing launched the 777 with only a single order, he noted. That was a 16-jet deal with United Airlines in October 1990.
While the sales staff is out chasing leads, the supplier management team will be trying to work out contracts with the companies expected to build — and finance — large portions of the plane. Those contracts could be important to Everett’s aerospace workforce.
The supplier contracts should be completed sometime early in the second quarter. When the ink is dry, it is believed that some of those suppliers — including Fuji, Kawasaki and Mitsubishi heavy industries from Japan, Alenia Aeronautica of Italy and Vought Aircraft Industries of Texas — could end up setting up their own satellite plants near Boeing’s Everett factory.
A spokeswoman for Vought has said the company would come to Everett if Boeing wanted it here, but added that since the contracts have not been signed, it’s premature to predict when or if that will happen.
In the meantime, workers on Boeing’s 767 assembly line will continue awaiting the fate of the U.S. Air Force tanker deal.
Work has actually started on the first of 100 KC-767 tankers for the Air Force. However, federal investigations into the cozy relationship between Boeing executives and Pentagon weapons buyers have put the deal on hold, making it unclear what will happen to the plane once it’s built.
The investigations were triggered by Boeing’s firing of former chief financial officer Mike Sears, and eventually resulted in Condit’s resignation.
A quick resolution is important. Boeing is running out of 767s to build for airlines, and without the Air Force order, analysts speculate the company could decide to end the program, as it did with its sister plane, the 757, in 2003.
Snohomish County technology and biotechnology companies are looking forward to a better year ahead.
While the stock prices of most companies improved during the past year, finding venture capitalists willing to put money into tech-related firms still was difficult, and no local company attempted an initial public offering of stock during 2003.
Also, while layoffs slowed in the tech industry, there were few new jobs. Microsoft, AT&T Wireless and other big companies in the Puget Sound region sped up tech job exports to India and other lower-cost countries.
The good news is that analysts expect investments in new computers and equipment to grow as the economy gains steam, according to WSA, the state’s largest tech association. Most national forecasts predict a 4 percent to 6 percent increase in technology spending in 2004.
Given that, Pauer is forecasting modest to strong gains in electronics manufacturing, strong hiring in software publishing and computer system design, and "good employment growth" in business services, a sector that includes technology consulting.
The bad news is that more jobs will probably move overseas. Morgan Stanley estimates the number of U.S. jobs going to India will double to about 150,000 during the next three years.
That makes for more uncertain times for high-tech workers, said Marcus Courtney, president of the Washington Alliance of Technology Workers.
"There’s rising expectations among workers that the new year will bring new jobs," he said. "But all the indications are that 2004 will be very similar to the past year for local workers."
Tech companies also plan to be active in Olympia, pushing for the renewal of research and development tax credits. Extending the incentives is the top legislative priority for WSA, said Lewis McMurran, the association’s director of government and public affairs.
Everett-based Intermec Technologies Corp. hopes to gain from the growing momentum behind radio frequency identification and wireless technology. Wal-Mart and the Defense Department both plan to require their suppliers to begin using the radio-enabled tags by 2005 to improve inventory tracking.
And expect to hear much more about ICOS Corp., or more specifically, Cialis, in the coming year.
In late November, the Food and Drug Administration approved the erectile dysfunction drug developed by the Bothell biotech company. The first shipments to pharmacies went out last month, and a marketing blitz from ICOS and its partner in the drug, Eli Lilly &Co., is nearly ready.
"We expect the advertising to start in the first quarter," said ICOS spokeswoman Lacy Fitzpatrick. The advertising will include everything from TV commercials to sponsorship of PGA golf tournaments.
While analysts expect annual sales of the drug to eventually reach $1 billion or more, ICOS doesn’t expect to show a profit for a few years because of the high cost of marketing.
But while some sectors grow, a lingering malaise will dampen growth in other sectors, Pauer said.
The layoffs at Boeing and in the tech sector have by and large ended, but they’ll continue to be felt throughout 2004, she said. Just as the explosion of high-paying tech jobs sparked a regional boom in the 1990s, the loss of so many high-paying jobs has created its own ripple effect.
Companies in the three central Puget Sound area counties have eliminated 106,000 jobs since January 2001, Pauer said. So even if the immediate job losses are over, "the bulk of the ripple job losses are not over."
It will take a full two years for that ripple to work its way through the regional economy, Pauer said. "It’s like an echo job loss, or the long tail of the comet, or however you want to envisage it."
As a result, in the year to come, "it will still be a mixed economy," she said. "Various parts of the economy will be moving forward, sideways and back."
Bryan Corliss: 425-339-3454;corliss@heraldnet.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
