King County Vital Signs

These charts provide snapshots of the current state of the King County economy and how we fit into the larger US economy.  Single-click on any chart to enlarge it.   The data is current through February 3, 2012.  Gray areas indicate official recession dates.

How Does Unemployment in King County Compare to the Rest of the US?  Aerospace, software and health are stable employers that have helped keep the King County rate of unemployment below the national rate. The rate is projected to come down only gradually for several reasons: discouraged workers coming back to the job market, new graduates on the job market for the first time, and an influx of unemployed from surrounding areas with higher unemployment.  Forecasts are from Global Insight and Puget Sound Economic Forecaster.

Job Growth to Get Back on Track in 2011.  King County lost 85,000 jobs as a result of the recession.  The Census hiring gave us a temporary boost in early 2010, but then gave most of them back up.  We should see steady job growth in 2011.  But as the next chart shows, it will be 2014 before all the jobs are made back.

How Bad is this Recession Compared to Previous Ones?  This chart shows the percent loss in King County jobs from the previous peak for the last 6 recessions, including the current one.  When the percent loss gets to 0% then all the lost jobs have been made back.  The current recession has resulted in a greater loss of jobs, percentage-wise, than any since the "Boeing Bust" of 1970.  Current projections are that the time until all the jobs lost since 2008 are made back will be 25 quarters from the start in 2008. That would be some time in 2014.  Only the "Dot-Com Bust" of 2000 was as long.  (Forecasts are from the Puget Sound Economic Forecaster)

Construction is the Most Volatile Employment Sector in the Region.  Forecasts from the Puget Sound Economic Forecaster do not anticipate positive growth in construction employment until mid 2011.  The Puget Sound Region includes King, Pierce, and Snohomish counties.

Long Term Unemployment is a Worrisome Trend in King County.  The whole household tightens its belt when someone in the household is out of work for a long period of time, cutting back spending in the local economy.  It also can mean that the household will run through its savings, increasing foreclosures.  The longer someone is out of the workforce, the more difficult it can be to reconnect. The State has two Federally funded programs for those whose standard unemployment benefits have been exhausted after 26 weeks.  One is the Emergency Unemployment Compensation (EUC) program that extends benefits for another 27 weeks beyond the initial 26 weeks of benefits.  The other is the Extended Benefits (EB) program that adds another 20 weeks of benefits if needed beyond the 53 weeks covered by standard unemployment and EUC.  The number of claimants on both programs has decreased in recent months. The worry is that a portion of those no longer on the EB program have not found jobs, but rather became a "99-er" - someone who has been out of work for more than 99 weeks and whose benefits have completely run out.   Statewide, the number of "99-ers" are increasing by 1,000 per week.

House Prices Are Marching Back in Time.  Seattle house prices are where they were back in September 2004.  We expect them to get back to April 2004 (another 5% drop) before bottoming out sometime this year.  Don't expect a sharp rebound in prices right away, however. The large shadow inventory in houses means that as soon as prices edge up a little, another bunch of properties will come on the market and knock prices back down; then when prices edge up again, more inventory will appear and knock prices down again, and so forth.  We expect this sawtooth pattern in house prices to persist for 2-3 years, until all the excess inventory is wrung out of the market.  Note: Case-Shiller "Seattle" is actually the three counties of King, Pierce, and Snohomish.  Pierce and Snohomish Counties have been hit harder than King County.

Housing Permits Have Stabilized at Historically Low Levels: a third of the pace before the bubble burst.  A return to "normal" levels of new housing activity is not expected until 2014-15.

A Third Peak in Foreclosures to Come?  Notices of Trustee Sale (NTS) are issued to property owners who have fallen behind in mortgage or loan payments by more than 90 days.  Some of these properties may avoid foreclosure, but most will not.  The "shadow inventory" of properties being held back by banks and other creditors will stop accumulating once this indicator gets back to pre-recession levels. Source: King County Assessor database, adjusted for duplicates and other items.

The Other End of Consumption.  The Cedar Hills facility receives solid waste from all cities and unincorporated areas in King County, except Seattle. It is mostly household and commercial waste, but not construction waste. This is the other end of consumption, as people and businesses get rid of the old to make way for the new.  It moves in tandem with sales of durable goods (goods with a life longer than a year).  When this indicator starts to move back up it will be a confirmation that households and businesses are spending again on durable goods.

Turmoil in the Middle East.  There has been a sudden upsurge in gas prices since the pro-democracy movement has spread across the region.  A worst-case scenario would be if gas prices go up to 2008 levels and stay there.  That could cause another recession.  However, see the next chart.

Double-Dip Recession Watch. The spread between the 10 year and 3 month Treasury yields usually turns negative just before a recession.  So far, there is no sign of a "double-dip."

Is High Inflation Just Around the Corner? We hear a wide range of opinion about what effect "quantitative easing" might have on inflation.  In the bond market, investors have to put their money where their mouth is.  The difference between the yield on a 10 year Treasury note and a 10 year Treasury Inflation Protected Security (TIPS) is called "break even inflation" because it is the rate of inflation that would make investing in either bond produce the same yield after inflation.  When quantitative easng was initiated at the end of November, break even inflation moved slightly above 2%, still well within the Fed's target range.

Is a New Credit Crisis Coming?  The "TED Spread" is a canary in the banking coal mine.  It is the difference between the interest charged by large US banks to lend to each other (Libor) and the interest charged by the Treasury.  The larger it is, the larger is the lack of liquidity in the banking system.  It is also an early warning sign of panic.  We can see huge jumps around the time of the sub-prime and Lehman crises.  The current European crisis has, so far, not had much impact on confidence in the US financial system.  This is one to watch closely for signs of contagion as the drama across the pond continues to unfold.