Written by: Steve Scranton
Spokane has seen 2014 start with a more consistent pattern of economic growth than the nation as a whole.
Unlike much of the Midwest and East Coast, Spokane didn’t suffer through the severe winter weather that hampered economic activity. The picture that emerges when reviewing the economic data for Spokane—comprising Spokane County, the city of Spokane, and the city of Spokane Valley—is one of cautious optimism that has translated into slow but steady improvement.
Jobs growth is the starting point in examining the economy since jobs create income and income creates spending. The most recent available data from the Bureau of Labor Statistics shows that in April, Spokane jobs grew by 0.6 percent compared to the same month last year. Nearly all industries showed positive year-over-year jobs growth, with the financial services industry posting the strongest rate of growth at 3.1 percent. The leisure and hospitality industry was the only exception to the broader trend and lost jobs, recording a minus 8.7 percent rate.
Spokane continues to show progress in reducing the number of jobless workers. The total unemployed fell from 17,381 in April 2013 to 13,808 in April 2014. Stepping back and taking a longer-term perspective, the number of unemployed has fallen just over 50 percent from its peak in February 2010, when 28,522 were without employment.
It’s evident that jobs growth has translated into positive increases in taxable sales for Spokane County as a whole. The Washington state Department of Revenue has published data for taxable sales through the fourth quarter of 2013, and Spokane County saw taxable sales increase 13.4 percent on a year-over-year basis. These figures exceeded the state average of 5.8 percent and placed Spokane County in the top half of the state’s 39 counties with a rank of 15. Anecdotal evidence indicates that taxable sales have continued to grow in 2014. Drive by stores and malls during most weekends, and observe full parking lots and shoppers returning to their cars laden with purchases.
Real estate is another sector that has shown evidence of steady improvement as the year has progressed, although home sales are slower than the same time last year. Based on data through May, the Spokane Association of Realtors reports that home sales steadily increased from 284 homes sold in January to 551 homes sold in May. May’s home sales were up 25 percent compared with April’s, but on a year-over-year basis, home sales were down 7 percent compared with May 2013. This trend is similar to what has been playing out nationally: last year was a good year for home sales, but the pace has slowed this year.
Though the mood is positive and economic activity is improving, caution remains in the air for many businesses. A national survey of small businesses, conducted by the National Federation of Independent Business, shows that the three major areas of concern for small business owners are taxes, poor sales, and government requirements and red tape.
From an anecdotal standpoint, the main areas of unease in terms of the government’s role in the small business landscape include the Affordable Care Act, minimum-wage discussions, and U.S. Environmental Protection Agency regulations. Small businesses are the backbone of Spokane’s economy, and conversations with many of the region’s small business owners reflect the same issues that have been voiced on a national level.
For consumers, the challenge remains wage growth versus spending growth. The national data for real wage growth shows that real wages showed no increase on a year-over-year basis as of April 2014. A real wage is income adjusted for inflation to determine purchasing power. As wages are the core source of consumer income, stagnation presents challenges for ramping up spending.
Examining national data from the NFIB provides some hints of what Spokane’s economic activity may look like for the rest of the year. Overall, the news remains one of positive growth being tempered by caution. The NFIB reported that, through May 2014, the organization’s business owners added jobs for eight consecutive months, which represents the best string of gains since 2006. In addition, NFIB’s April monthly survey of small business owners indicated that a favorable outlook is gaining traction, with the Small Business Optimism Index reaching a post-recession high. Among the subcomponents of the survey, it’s encouraging to see that hiring plans, capital expenditure plans, and expectations for a stronger economy all improved. However, these bright spots were tempered with reduced expectations for higher real sales.
Signs of improving economic activity in Spokane were evident in the first half of the year. The economy may not be booming, but it’s certainly not moribund. There’s work to do before economic activity returns to pre-recession levels, but encouraging progress continues. Jobs and wage growth remain key to continued strength in the economy, and the outlook for the second half of the year appears positive.
Steve Scranton is the chief investment officer for Spokane-based Washington Trust Bank and holds a Chartered Financial Analyst designation.
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