When you see bad news from the second quarter economic reports, don't panic, Arun Raha, Washington's chief economist, told AWB members this morning.
Things will improve by the third quarter and especially by the fourth quarter of the year, he said. That is provided there isn't another high-impact, low-probability shock to the system along the lines of this spring's Middle East unrest and the earthquake, tsunami and nuclear crisis in Japan.
"Right now, we're still recovering but at a slowing pace," he said.
Some positive signs:
- For the second month in a row, home prices rose in Seattle. (Raha quipped that he doesn't care about home prices in Seattle, just New York -- where he still has a house for sale.)
- Auto sales, which were recovering before the supply chain interruption in Japan led to a drop, should bounce back when the supply recovers. Americans are driving older cars on average than they have in years, and there is growing pent-up demand. "We are driving around in old cars," Raha said. "That, historically, has always corrected itself as us going out and buying new cars."
- Employment is poised to pick up as labor productivity growth begins to decline. "We've squeezed everything we can out of our existing workforce," Raha said.
Even though the economy is at a point where it ready to break free, it's being held back by weak consumer confidence. "Demand has come back really slowly," Raha said.
The recent decision by the Obama administration to release oil from the Strategic Petroleum Reserve will "help a little" in the short-term, Raha added, and he continues to believe that inflation is not a problem, despite higher oil and food prices.
Regarding housing, Raha said single-family home sales will need about a year or 18 months to work off the inventory from foreclosures, but he expects the market to improve. Multi-family home permits are gradually improving already, and rental vacancy rates are declining.
Boeing and software publishing are bright spots in the state economy, Raha said. Boeing has seven years of commercial orders on the books and the company has hired back roughly 4,300 of the 6,000 workers laid off during the recession.
Exports are strong as well, and will help Washington out-perform the nation during the recovery, he said.
Still, Washington needs to add 150,000 jobs to get back to pre-recession employment -- a mark that Raha predicts will occur in December of 2013.
His parting message: Hang in there.