WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL Washington State Economic Outlook Presented to Washington Lodging Convention Eric Swenson Senior Economist October 23, 2017 Tulalip, Washington
WASHINGTON STATE
ECONOMIC AND REVENUE FORECAST COUNCIL
Washington State Economic Outlook
Presented toWashington Lodging Convention
Eric SwensonSenior Economist
October 23, 2017Tulalip, Washington
WA Economic OutlookOctober 23, 2017
Slide 1 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Summary
• The national economy is growing steadily if not spectacularly
• Steady growth is also expected of the world economy
• Washington has been growing considerably faster than the U.S. as a whole and is expected to continue to do so
• There are considerable downside risks to the national and world forecasts
WA Economic OutlookOctober 23, 2017
Slide 2 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
NATIONAL ECONOMY
WA Economic OutlookOctober 23, 2017
Slide 3 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
The stock market continues to grow
0
500
1000
1500
2000
2500
3000
1990 1994 1998 2002 2006 2010 2014
S&P 500
Source: Yahoo! Finance, monthly data through October 1, 2017
WA Economic OutlookOctober 23, 2017
Slide 4 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
U.S. Leading Economic Index (LEI) continues to trend up
80
90
100
110
120
130
140
2005 2007 2009 2011 2013 2015 2017
In
dex,
20
10
= 1
00
Source: Conference Board, data through September 2017
The LEI is an index of economic indicators that tend to indicate the direction of economic growth
WA Economic OutlookOctober 23, 2017
Slide 5 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Consumer confidence is above pre-recession levels
0
25
50
75
100
125
2005 2007 2009 2011 2013 2015 2017
Index
Mich: 1966Q1 = 100, SAConf Board: 1985 =100, SA
U. Michigan Conf Board
Sources: University of Michigan, Conference Board; data through Sept. 2017 plus UofM Oct. preliminary
WA Economic OutlookOctober 23, 2017
Slide 6 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Small business optimism and sales expectations have decreased from December but remain high
70
75
80
85
90
95
100
105
110
-40
-30
-20
-10
0
10
20
30
40
2006 2008 2010 2012 2014 2016
Op
tim
ism
In
dex,
19
86
=1
00
3 m
on
th s
ale
s g
ro
wth
exp
ecta
tion
,
percen
t
NFIB Small Business Optimism Index
Sales Expectations Optimism Index
Source: National Federation of Independent Business; data through August 2017
WA Economic OutlookOctober 23, 2017
Slide 7 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Oil prices are expected to stay relatively low
25
35
45
55
65
75
85
95
105
115
125
2007 2009 2011 2013 2015 2017 2019 2021
Do
llars P
er B
arrel
Average Price of Crude Oil
September Forecast
Source: DOE, ERFC September 2017 forecast; historical data through Q2 2017
WA Economic OutlookOctober 23, 2017
Slide 8 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Second quarter 2017 U.S. GDP growth of 3.1% is the highest growth since early 2015
-2
-1
0
1
2
3
4
5
6
2010 2011 2012 2013 2014 2015 2016 2017
Percen
tReal Quarterly U.S. GDP Growth, SAAR
Source: U.S. Bureau of Economic Analysis, data through 2017 Q2
WA Economic OutlookOctober 23, 2017
Slide 9 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Real GDP is forecasted to continue growing
14,000
14,500
15,000
15,500
16,000
16,500
17,000
17,500
18,000
18,500
19,000
2007 2009 2011 2013 2015 2017 2019 2021
Billio
ns o
f 2
00
9 D
ollars
Real GDP
September forecast
Real GDP annual growth forecast:
2017: 1.9%
2018: 2.4%
2019: 2.3%
2020: 2.0%
2021: 2.0%
Source: ERFC September 2017 forecast; data through Q2 2017
WA Economic OutlookOctober 23, 2017
Slide 10 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
U.S. nonfarm payroll employment growth is expected to slow
125
130
135
140
145
150
155
2007 2009 2011 2013 2015 2017 2019 2021
Millio
ns
U.S. Nonfarm Payroll Employment
September Forecast
Source: ERFC September 2017 forecast; data through Q2 2017
Employment annual growth forecast:
2017: 1.5%
2018: 1.2%
2019: 1.0%
2020: 0.8%
2021: 0.6%
WA Economic OutlookOctober 23, 2017
Slide 11 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Global GDP growth is expected to improve gradually
-1
0
1
2
3
4
5
6
2005 2008 2011 2014 2017 2020
Percen
tReal global GDP growth
Source: International Monetary Fund, World Economic Outlook, Oct. 2017; historic data through 2016
WA Economic OutlookOctober 23, 2017
Slide 12 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
The dollar has increased in value relative to currencies of U.S. trading partners and is expected to stay high
80
85
90
95
100
105
110
115
120
125
2008 2011 2014 2017 2020
Trade-weighted Dollar, 2009 = 100
Forecast
Source: Federal Reserve Board, rebased by IHS Markit. ERFC forecast 2017Q3 onward.
WA Economic OutlookOctober 23, 2017
Slide 13 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
National forecast risks
Upside
• Elevated consumer, business confidence could translate into stronger growth
• Stock market gains could translate into faster household consumption growth
• Housing construction accelerates to meet demand
• Stronger global economic growth
Downside
• Stagnant labor productivity inhibits wage growth
• Geopolitical risks: North Korea, Russia
• International trade policy uncertainty
WA Economic OutlookOctober 23, 2017
Slide 14 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
STATE AND LOCAL ECONOMIES
WA Economic OutlookOctober 23, 2017
Slide 15 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
From 2010 Q1 to 2017 Q1, the U.S. population has grown 5.2% while the WA population has grown 9.7%
1
1.02
1.04
1.06
1.08
1.1
2010 2011 2012 2013 2014 2015 2016 2017
In
dex,
20
10
Q1
= 1
.0
U.S. WA
Source: U.S Bureau of Economic Analysis, data through 2017 Q1
WA Economic OutlookOctober 23, 2017
Slide 16 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Year over year population growth: U.S., CA, WA, OR, ID
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
2016 Q2 2016 Q3 2016 Q4 2017 Q1
U.S. CA WA OR ID
Source: U.S. Bureau of Economic Analysis
WA Economic OutlookOctober 23, 2017
Slide 17 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Washington employment will grow faster than the U.S. through 2021
-1%
0%
1%
2%
3%
4%
5%
Average annual growth, 2017-2021
U.S. WA
Avg. total nonfarm growth, 2017-21:
U.S. = 0.9%WA = 1.6%
Source: ERFC September 2017 forecast
WA Economic OutlookOctober 23, 2017
Slide 18 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Over 54% of 2016 statewide employment growth was in the Seattle metro area
0% 10% 20% 30% 40% 50% 60%
Longview
Walla Walla
Mount Vernon
Bremerton
Wenatchee
Yakima
Bellingham
Tri Cities
Olympia
Spokane
Tacoma
Non-metro
Seattle
Share of statewide nonfarm employment growth, 2016
Source: WA Employment Security Dept., U.S. Bureau of Labor Statistics
WA Economic OutlookOctober 23, 2017
Slide 19 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Employment growth varied widely across state metro areas
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
2016 employment growth by metro area
Source: WA State Employment Security Department
WA Economic OutlookOctober 23, 2017
Slide 20 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Top six Washington industries by employment – July 2017
0
50
100
150
200
250
300
350
400
450
Th
ou
san
ds
Source: ERFC, Employment Security Dept.
WA Economic OutlookOctober 23, 2017
Slide 21 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Personal income growing faster in WA than in the U.S. as a whole
1
1.2
1.4
1.6
1.8
2
2.22
00
5Q
1 =
1.0
Growth in WA, U.S. personal income since 2005Q1
WA U.S.
Source: U.S. Bureau of Economic Analysis, data through 2017 Q2, September 2017 ERFC forecast
Forecast
WA Economic OutlookOctober 23, 2017
Slide 22 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Year over year personal income growth: U.S., CA, WA, OR, ID
0%
1%
2%
3%
4%
5%
6%
2016 Q2 2016 Q3 2016 Q4 2017 Q1
U.S. CA WA OR ID
Source: U.S. Bureau of Economic Analysis
WA Economic OutlookOctober 23, 2017
Slide 23 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
WA accommodation and food services growth is expected to continue
2,500
3,000
3,500
4,000
4,500
5,000
5,500
2007 2009 2011 2013 2015 2017 2019 2021
$M
illio
ns,
SA
WA Taxable Activity: Accommodation and Food Service
September Forecast
Source: ERFC September 2017 forecast; quarterly data through Q2 2017
Annual growth forecast:
2017: 5.9%
2018: 4.6%
2019: 4.6%
2020: 4.1%
2021: 3.9%
Growth in the segment is expected to be faster than growth in retail sales tax as a whole
Forecast
WA Economic OutlookOctober 23, 2017
Slide 24 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
WA accommodation and food services taxable activity history by area
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
0
50
100
150
200
250
300
350
400
450
2000 2002 2004 2006 2008 2010 2012 2014 2016
$M
illio
ns,
SA
Taxable Activity: Accommodation and Food Service
Pierce County Snohomish County Spokane County
Clark County King County
WA Economic OutlookOctober 23, 2017
Slide 25 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
WA accommodation and food services taxable activity history by area
0
20
40
60
80
100
120
140
2000 2002 2004 2006 2008 2010 2012 2014 2016
$M
illio
ns,
SA
Taxable Activity: Accommodation and Food Service
Tri Cities Thurston County Yakima County
Chelan County Whatcom County
WA Economic OutlookOctober 23, 2017
Slide 26 WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL
Questions
Economic & Revenue Forecast CouncilPO BOX 40912Olympia WA 98504-0912
www.erfc.wa.gov360-534-1560