Maybe it’s plural. Unsure if the economy is headed for a recession in the new year? You’re not alone.
Reading three months of data-intensive reports from the Washington State Economic and Revenue Forecast Council (ERFC) I—not an economist—reviewed the accepted textbook definition of a recession, which turns out to be not so standard after all.
The whole rule of two straight quarters of falling real GDP (gross domestic product) is more like a shortcut. Instead, the White House Council of Economic Advisers writes that declaring a recession requires a “holistic” view of the labor market, consumer and business spending, manufactured products and incomes.
It is therefore not surprising that a holistic view of these clues confuses many observers today.
The job market is strong. ERFC reported a steady state unemployment rate of 3.7% in September, August and July, down from a record low set in 1976.
Unemployment in local counties – although not directly comparable to seasonally adjusted national numbers – also looked okay. Both Whatcom and Skagit saw unemployment rates fall from August to September; Whatcom rose to 4% from 4.8% and Skagit rose to 4.1% from 4.9%.
Washington state county unemployment rates for September 2022, not seasonally adjusted, show Whatcom at 4% and Skagit at 4.1%. (Source: Washington State Employment Security Department website)
Many companies in the region are still struggling to hire enough permanent employees. Average hourly wages, a pretty good indicator of the strength of a job market as companies pay more to fill jobs, continued to rise nationwide in October, at 4.7% a year.
But inflation, which stood at 7.7% nationwide in October, continues to boom at a faster rate than wage growth. In its preliminary economic forecast of November 2022, the ERFC found that “real personal income growth this year will be undermined by the surge in inflation and the withdrawal of the extraordinary stimulus of the last two years”.
When it comes to predicting a recession, “part of the problem is that the data is all over the map,” said Hart Hodges, co-director of Center for Economic and Business Research at Western Washington University.
In a November webinar hosted by the Western College of Business and Economics and the WWU Alumni Association, Hodges said that one reason economists failed to anticipate inflation movements earlier this year was a variety of unusual factors.
“Part of that was that we didn’t expect another wave of COVID. We didn’t expect severe lockdowns in China. We didn’t expect an invasion of Ukraine,” he said. In addition, some three million workers have not re-entered the labor market today and supply chain problems persist.
It might not be hard to believe that these factors are also breaking recession forecasts.
“We also have to keep in mind that we’re going to see a lot of changes in the data,” Hodges said, noting in particular the “incredible amounts of money” that have been pumped into the economy from pandemic relief funds. As individuals use up those dollars, spending at different companies, even in the same sector, can shift based on how frugal one is without COVID cash.
“I don’t think we should talk about it the economy or a recession,” said Hodges. “I almost think we’re going to have ongoing recessions in different sectors and people of different income levels are going to feel very differently about things.”
I don’t use the word unprecedented very often – someone is always setting a precedent. Unexplored might be a better term, however, as so many different global levers, some historically rare, flip the economic flipper in different directions.
When I asked Hodges what indicators he was closely monitoring through 2023, he focused on wages.
“A lot of small businesses don’t have the margins to pay much more, or the ability to raise prices a lot,” he said. “As such, we could see a decline in the number of small businesses in certain industries in the coming years.”
If inflation continues. When recessions come. All still – on this side of 2023 – if.
It’s amazing what a fresh coat of paint can do. That Partnership in downtown Bellingham (DBP) announced that three recipients of its 2022 Storefront Improvement Grants have completed the work, which is funded at up to $2,000 per project.
Easily noticed? HOSA hot sauce Plants placed and painted doors at 1111 N. State St. Ragfinery at 1421 N. Forest St. stylized windows with decals and paint. Stockton’s color at 1413 Railroad Ave. added a planter and painted color patterns on the sidewalk.
Stockton’s Paint at 1413 Railroad Ave. in Bellingham upon completion of the work with funds from the 2022 Storefront Improvement Grants. Color patterns painted on the sidewalk “are a new concept”. (Photo courtesy of Downtown Bellingham Partnership)
Even this common element of color can be creative.
“I would say Stockton’s sidewalk is a new concept,” said Lindsey Payne Johnstone, director of programming at DBP. “The focus is on quick and cheap but effective improvements,” including lighting. “A business improvement project can help improve an entire block.”
Normally only one scholarship is awarded at a time. But DBP said BEKU Support has enabled three grants to be awarded this cycle. Details on the next cycle will be announced in early 2023.
Places & Things
BBQ at home will take over Homepan‘s former space at 531 Kentucky St. in Bellingham’s Sunnyland neighborhood. HomeSkillet, which closed in May, announced on its Facebook page that it had “signed the lease paperwork with Homeschool BBQ” and is targeting a December 1 opening.
(You can find the latest Places & Things here throughout the week.)
Frank Catalano’s column appears on Wednesdays. email: firstname.lastname@example.org; Twitter @FrankCatalano.