The state’s economy is slowly climbing out of the recession, but it could slip back into it this fall if things don’t continue to improve.
That was the word in mid-January from Arun Raha, the chief economist for Washington, who was the keynote speaker for the annual breakfast of the Economic Development Council of Snohomish County.
Speaking at the Edward D. Hansen Conference Center in Everett, Raha said he believes the economy started to hit bottom in the state during the third quarter of 2009 and is now starting to climb out.
“A year ago, you’d get a check back from your bank marked insufficient funds and you’d have to call them to find out if they meant you or they meant them,” he told the group. “Now, we’re better off than that.”
Raha said there are some improving elements of the economy and some factors he’s still very concerned about.
He noted that after four quarters of declining growth, the gross domestic product, or GDP, charted a positive quarter last fall.
“It has to be sustained,” he added. “I’m worried about whether it will be sustained or not.”
Raha said the nation’s big banks are in better shape and are mostly back to normal in terms of lending money to customers with good credit.
But he said regional banks continue to struggle because they had so much invested in real estate and other sectors that were seriously hurt by the recession.
He noted that small businesses get their money from regional banks, so when they’re hurting so are small businesses.
That’s important, he said, because small businesses account for 64 percent of the new jobs in this country.
“Credit remains particularly tight for small businesses because they depend mostly on community banks,” Raha said, adding, “For growth we need private business spending to drive the recovery.”
He noted that if that doesn’t happen we might get a second recession.
“We’re not out of the woods yet,” he said. “We could get a double dip in the fourth quarter.”
He noted the unemployment remains high and he expects things to improve early this summer. “Recovery is slow, but (unemployment) is poised to improve,” he said.
Raha noted that both the stock and bond markets are betting on continued growth, a good sign for economic improvement.
But he said he’s not optimistic about the housing industry or about construction in general.
The economist noted the federal tax credit for home buyers has been a help, something he referred to as incentivized growth. But he said there are a lot of homes and a lot of commercial buildings that are vacant right now.
It will take at least a year for homes and longer for commercial buildings to be sold to the extent that they promote organic construction growth, he said.
Raha noted that 20 percent of state retail sales tax revenues come from construction.
“That’s why we love people who build something,” he added.
Raha said that auto sales have stabilized and only about 30 percent of the cars on the road are three years old or newer.
That means that the nation’s fleet is relatively old and that people should start buying at a higher rate.
“We postponed buying new cars,” he said. “I’m not worried about cars. I am worried about construction.”
Raha noted that many of the state’s trading partners appear to be emerging from recessions, too, and he said that will help Washington recover faster.
He said the state’s biggest employers, the Boeing Co. and Microsoft, are coming back.
“We didn’t know until December if it could fly,” Raha said of the 787. “Now we know it flies. That’s good news.”
Raha also noted that recessions cause people to rethink their business models and typically create companies like Microsoft that grow quickly.
“We always come out leaner and stronger,” he said.