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County’s economy gets mixed report

Snohomish County is showing signs of recovery, "but it doesn't feel like it," an economist tells business leaders.

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By Kurt Batdorf
Herald Business Journal
Published:
EVERETT -- Snohomish County's economy is showing signs of recovering from the 2008 recession, but economist Bill Conerly says the region may never return to the go-go days before the economy collapsed.
Conerly, author of "Businomics" and a consultant from Lake Oswego, Ore., spoke to several dozen local business leaders Tuesday at the 2012 Snohomish County Economic Forum, hosted by Mountain Pacific Bank.
With a series of charts and humorous anecdotes, Conerly showed how Snohomish County's economy has recovered the ground it lost from a pre-recession high point in late 2007, "but it doesn't feel like it," he said. That's because the U.S. gross domestic product is still falling short of its potential based on its 2007 trajectory and is likely to stay on that trend through 2013.
"People ask me if this is a particularly hard time to forecast the economy," Conerly said. "Well, yeah!"
Discretionary consumer spending is on an upward trend, but consumers are still being "pretty conservative" with their purchases, and their spending isn't likely to increase beyond pay raises. Americans are buying more new cars, but sales are still about a million units shy of a 2007 peak of 16 million vehicles.
The housing market is a mixed bag, he said.
"A 10 percent increase from diddly squat still leaves you with diddly squat," Conerly said.
The steep decline in home values and sales prices seems to have bottomed out, he said, but another round of foreclosed and bank-owned homes, poised to hit the market in the next year, will keep prices low.
"Housing is slowly coming back," he said. "There's a big overhang of foreclosures coming to market. It'll still be another year before it feels healthy, and you may never see a housing boom like we saw before 2006."
The economy itself is another damper on housing. There's less demand for housing because people aren't moving and younger couples are delaying having kids because of the cost, Conerly said. He read a Wall Street Journal article that described many couples who are putting off divorce -- or who divorce and continue to live under the same roof because they can't afford two households.
"It takes money in your pocket and optimism to move, and that's bad news for Snohomish County," he said.
Businesses are spending more money on equipment, but it's not to increase capacity. It's so they use less energy or can do the same amount of work with fewer employees, he said.
Boeing continues to be a bright spot for Snohomish County and will continue to be so through 2013, with one caveat: Aerospace is a highly cyclical industry. Boeing has gone through busts before, and there's bound to be another downturn.
Looking ahead, Conerly doesn't see much improvement in the economy "until attitudes improve."
"If we had six to nine months of strong economic growth like we had between mid-2009 and mid-2010, business would feel like it needs to add capacity and hire more workers," Conerly said. "But we're in a foul mood, and it won't improve until November" with the presidential election.

Kurt Batdorf: kbatdorf@heraldnet.com, 425-339-3102.
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