By John Wolcott
Herald Business Journal Editor
SEATTLE — A panel of economists found common ground here Thursday, agreeing that the region should start to climb out of the recession later this year despite the massive Boeing layoffs.
But total recovery will take quite a while, they added.
Signs of the national rebound should be seen by midyear, although certain business sectors will see a slower resurgence, they said in morning presentations at the Seattle and King County Economic Council’s annual economic forecast gathering at the Westin Hotel.
Acknowledging the difficulty of forecasting economic trends in an environment still vulnerable to terrorism, uncertain aerospace markets and global wars, the economists made cautious predictions to the several hundred business people in attendance.
Wells Fargo Bank’s executive vice president and chief economist, Sung Won Sohn, said he expects a return to modest economic growth nationally during the next few months, spurred by government aid and monetary policies.
By summer, the country should respond to interest cuts, tax reductions and increased fiscal spending, returning the national economy to robust growth, he added.
"This will turn out to be one of the mildest economic recessions we’ve seen, with growth benefiting from the restructuring of companies," he said.
John Mitchell, Western region economist for U.S. Bancorp, predicted an end of the Northwest and central Puget Sound recession by the second half of the year, noting that glimmers of the hoped-for rebound are starting to emerge.
Economist Dick Conway, co-publisher of the Puget Sound Economic Forecaster, said the impact of the Sept. 11 terrorist attacks added uncertainty that made forecasting even more daunting than usual, but said there are already signs that the economy is recovering.
"The Puget Sound region, despite its reputation for volatility, has suffered only two recessions in the past 30 years (the 1970-71 Boeing bust and the 1981-82 recession), both marked by a concurrent national recession and a large number of Boeing layoffs," he said.
His regional forecast calls for the recession to be over by July. However, he believes the rebounding economy will not see total employment recover to the peak it reached in the first quarter of 2001 until early 2004, which will mean stagnant employment regionally for another two years.
Keynote speaker Peter Navarro, an associate professor of economics at the University of California at Irvine and author of "If It’s Raining in Brazil, Buy Starbucks," agreed recovery is on the way but cautioned that the new economy will be different from the pre-Sept. 11 economy.
"How will the worst terrorist attack in United States history ultimately affect Seattle? First, in the extended war on terrorism, government will dramatically shift from ‘butter’ — such as education, infrastructure and health care — to ‘guns,’ including missiles, planes and homeland security," he said.
Also, businesses will divert productive capital from new plants and equipment to more security guards, fences and protective technology, a "terrorist tax" that will deal a sharp blow to productivity and growth, he predicted.
And consumers will change their buying and traveling habits, seeking recreation closer to home, doing more Internet shopping and less air travel.
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