Is Washington state barreling toward a recession?
A new report says there’s a chance Washington is headed for a recession sometime in the next year.
The report comes from the Washington State Economic and Revenue Forecast Council, calling for a 34.8 percent chance of a recession over the next 12 months. As SCC Insight’s Kevin Schofield points out, that’s “approximately the same level as before the 2007 recession.”
Unlike 2007’s housing crisis, though, the recession that some economists see on the horizon will take on a different tenor.
“I would expect housing to flat-line. Economic growth obviously slows,” said Windermere Chief Economist Matthew Gardner. “But quite frankly, right now we also have an administration governing by Tweet, and the problem with that is that businesses like stability, and we’re just not seeing it.”
That being so, Gardner expects us to see more of a business cycle recession than a housing crisis. That’s driven by an ongoing trade war with China, as well as fear from consumers in the face of an economic downturn.
“What we do when we’re worried? We become paralyzed. We do nothing. And that unto itself can cause an economic slowdown, because 70 percent of our economy is us buying stuff,” Gardner pointed out.
Closer to home here in Washington, the state Revenue Forecast Council’s own report lists a handful of factors that could contribute to a recession in the near future. Among those factors:
- A sharp 27.8 percent decline in Washington exports in the second quarter of 2019 compared to Q2 in 2018. That’s largely attributed to a 41.9 percent drop in transportation exports, “mostly Boeing planes” in the wake of the 737 MAX crisis.
- Consumer price inflation in the Greater Seattle Area “continued to outpace the national average in August.” Prices on products excluding food and energy increased 3.7 percent year-over-year in Seattle, compared to the national average of 2.4 percent over that period
- A slight decrease in housing construction across Washington state in the third quarter of 2019
Despite the negative implication, Gardner also notes this is all part of the normal ebb and flow of the economy.
“Business works in cycles,” he said. “America has had 47 recessions in its history; it’s going to have 47 more, and it’s going to be OK — it is a reset.”
So, when exactly can we expect this potential recession to hit? For Gardner, it’s a date that he’s had circled in his calendar for years now.
“Back in early 2018, I said by the end of 2020,” he predicted. “People were laughing at me back then, [saying] that I was just a stupid idiot English economist — now they’ve come around to it.”