EVERETT — Snohomish County’s economy is showing signs of recovering from the 2008 recession, but economist Bill Conerly says the region may never return to the go-go days before the economy collapsed.
Conerly, author of “Businomics” and a consultant from Lake Oswego, Ore., spoke to several dozen local business leaders May 1 at the 2012 Snohomish County Economic Forum, hosted by Mountain Pacific Bank at the Everett Golf and Country Club.
With a series of charts and humorous anecdotes, Conerly showed how Snohomish County’s economy has recovered most of the ground it lost from its pre-recession high point in late 2007, “but it doesn’t feel like it,” he said. That’s because the U.S. gross domestic product is still falling short of its potential based on its 2007 trajectory, and is likely to stay on that trend through 2013.
“People ask me if this is a particularly hard time to forecast the economy,” Conerly said. “Well, yeah!”
Discretionary consumer spending is on an upward trend, but consumers are still being “pretty conservative” with their purchases and their spending is likely to match their pay raises. Americans are buying more new cars, but sales are still about a million units shy of a 2007 peak of 16 million vehicles.
The housing market is a mixed bag, he said.
“A 10 percent increase from diddly squat still leaves you with diddly squat,” Conerly said. “The national experiment of getting everyone to own a home failed.”
The steep decline in home values and sales prices seems to have bottomed out, he said, but another round of foreclosed and bank-owned homes poised to hit the market in the next year will keep prices low despite growing reports of well-priced homes getting multiple offers from buyers.
“Housing is slowly coming back,” he said. “There’s a big overhang of foreclosures coming to market. It’ll still be another year before it feels healthy, and you may never see a housing boom like we saw before 2006.”
The economy itself is another damper on housing. There’s less demand for housing because younger people aren’t moving, couples are delaying having kids because of the cost and unemployed 20-something adults are living at home, Conerly said.
“If there were more jobs for 20-somethings, they’d move out,” he said.
Conerly said he read a Wall Street Journal article about many couples who delay a divorce, or divorce and continue to live under the same roof because they can’t afford two households.
“It takes money in your pocket and optimism to move,” he said. “That’s bad news for Snohomish County and that cramps growth plans. It will be two or three years before healthy growth returns. They (consumers) need a little more confidence.”
Businesses are spending as much on new equipment as they did before the recession, but it’s not to increase capacity. It’s so they use can less energy or do the same amount of work with fewer employees, he said.
Corporate profits have exploded, but profits at small businesses are flat. Conerly speculates that’s because many small businesses are contractors tied to the listless housing construction sector.
Boeing remains a bright spot for Snohomish County and will continue to be so through 2013 with one caveat: Aerospace is a highly cyclical industry, he said. Boeing has gone through busts before and there’s bound to be another downturn.
The U.S. economy “doesn’t know” the government is running huge deficits, he said, but the deficits must be addressed with spending cuts and tax increases.
“My forecast: We will raise taxes on people in this room and reform entitlements,” Conerly said. “Those taxes will have a negative effect on small businesses.”
Looking ahead, Conerly doesn’t see much improvement in the economy “until attitudes improve.”
“It’s not the clowns in Olympia that are the problem. It’s the national economy that needs fixing,” he said.
“If we had six to nine months of strong economic growth like we had between mid-2009 and mid-2010, business would start to feel like it needs to add capacity and hire more workers,” Conerly said. “But we’re in a foul mood and it won’t improve until November” with the presidential election.
“The economy will feel better in two or three years, but not so giddy that we’re all drinking margaritas,” he said.
Kurt Batdorf: kbatdorf@heraldnet.com, 425-339-3102.
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