Local economists see slow-paced recovery for Pierce County

The good news from the Horizons 2012 economic report for Pierce County: the county’s economic rebound in 2011 was one of the strongest on record. Unemployment fell, retail spending rose, and home sales and office rentals started to edge up. The even better news: it is predicted that by the end of 2012, Pierce County’s economy will have regained all the losses from the “Great Recession,” and the Pierce County Economic Index, which measures local growth, will register an all-time high.

But before we get too cheerful, University of Puget Sound economists Bruce Mann and Douglas Goodman say, understand that we cannot keep up last year’s robust pace of growth.

“The economy will continue to improve throughout 2012, but the pace will slow,” the economists write in the Horizons 2012 Pierce County Economic Index Report. “Once firms add a little to their workforce, and consumers catch up with delayed purchases, caution sets back in.”

Mann and Goodman, who have been forecasting the Pierce County economy for 24 years, presented their research Friday morning at the annual Horizons event at the Greater Tacoma Convention and Trade Center. The event is organized by the Tacoma-Pierce County Chamber. Some of the major points in this year’s report include:

  • In 2011 the Pierce County economy grew 4.7 percent. This was stronger than expected—helped by high troop levels at nearby bases, Boeing’s stepped-up production, and health industry growth;
  • For 2012 the county’s economy is predicted to grow 2.25 percent more, giving two consecutive years of growth;
  • People seeking jobs still face hard times in 2012. “For the entire year, the average annual increase in Pierce County jobs will be just about one-half of one percent,” the report says. “This will be the weakest recovery rate of local job growth on record.” Mann and Goodman predict it will take three to six years to regain all the jobs lost during the Great Recession;
  • In terms of the unemployment rate, things look a little brighter. Pierce County unemployment peaked at 11.3 percent in early 2010. In 2011 it averaged 9.6 percent, and by the end of 2012 it will fall to 8.7 percent—a significant drop;
  • For many business people, 2012 should be a modest year of growth. Spending at retailers rose 7.5 percent in 2011 and will edge up 2.4 percent more in 2012. That will put $130 million extra in stores’ cash registers. However, much of that will be due to higher prices;
  • Apartment block owners will continue to enjoy low vacancy rates of five to seven percent, and perhaps a small rise in rents. Those leasing commercial, office, and industrial real estate will gain from falling vacancy rates, a trend that began in fall 2011;
  • Homeowners will continue to struggle. A brief rebound in home sales activity in late 2009 suddenly collapsed in fall 2010 and went on slipping until fall 2011. By the end of 2011, the Housing Index was down 30 percent from its 2006 peak. Recent modest growth will continue through 2012.

There is one more caution from Mann and Goodman: “There is more uncertainty and risk for this forecast than usual,” they write. This is due to several factors: the uncertain future of federal government spending, Europe’s rocking boat, emerging signs of slower growth in China and Japan, the overhang of foreclosed homes, and the unanswered question of whether consumers will spend or save.

The Pierce County Economic Index was the first index of its kind in the United States, and remains one of only a few econometrically based, local area forecasting models. The research by faculty and students is undertaken as part of University of Puget Sound’s Civic Scholarship Initiative, which partners the university with others in the community.

The keynote address at the Horizons 2012 breakfast was given by Arun Raha, chief economist for the State of Washington and executive director of the Economic and Revenue Forecast Council. Sponsors of the event include Comcast, Propel Insurance, Group Health Cooperative, Puget Sound Energy, Tacoma Public Utilities, AmericanWest Bank, Waste Connections, Business Examiner Media Group, Port of Tacoma, Targa Sound Terminal, and PJ Hummel & Company.

Business people and members of the public may obtain copies by contacting Gary Brackett at the Tacoma-Pierce County Chamber by e-mail at garyb@tacomachamber.org or by telephone at (253) 627-2175 Ext. 120.

University of Puget Sound economists Bruce Mann and Douglas Goodman. (PHOTOS COURTESY UNIVERSITY OF PUGET SOUND)