No question mark required.The economic slowdown that contributed to a reduction in the November revenue forecast continues to concern the state's top economic forecaster. The Tri-Cities Herald reports the ChangMook Sohn expects the growth rate to slow to 2 percent a year.
"The last three years we've seen a 3 percent increase in employment each year, which is very strong growth," Chang Mook Sohn, director of the Washington Economic and Revenue Forecast Council, said at Washington State University's School of Economic Sciences Conference on Economic Issues and Outlook.
"We don't expect to see that same type of growth in 2008 and 2009," he said. "We expect it to be less than 2 percent each year."
As we've noted before, the state tax structure - heavily reliant on consumption, construction and real estate taxes - makes it particularly sensitive to the current economic sluggishness. Even without sliding into recession, state revenues could take a major hit if the slowdown continues.
Sohn said there were 186,000 new homes built in Washington in the past three years and a population increase of only 330,000, leaving the state's real estate market overbuilt by about 50,000 homes.
Sohn said he hasn't seen that large of a disparity between new homes and the population increase before.
Meanwhile, consumer retail spending is slowing as well.
Sohn said during the past 16 quarters, consumer spending steadily has outpaced personal income growth. But now, that trend has also slowed. ...
And when consumers spend less, fewer sales tax dollars trickle into the state coffers.
The governor's supplemental budget proposal is due in the next few weeks. The next official revenue forecast comes in February.
