Forecasting Economic Weather in 2008 (Forex Hound)

January is usually the busiest month for bank economists, with so many outlook forums being held all over the place. Everyone wants to know what the New Year has in store, and this year is no exception. As a result, I am spending many nights in hotel rooms this month for speaking engagements. When I travel, I usually tune my hotel TV set to one of those financial news channels to stay abreast of the financial market and to catch economic data releases. That, unfortunately, often puts me in a sour mood. According to these channels, all sorts of economic calamities are about to happen, and it’s depressing to hear about them over and over.

January is usually the busiest month for bank economists, with so many outlook forums being held all over the place. Everyone wants to know what the New Year has in store, and this year is no exception. As a result, I am spending many nights in hotel rooms this month for speaking engagements. When I travel, I usually tune my hotel TV set to one of those financial news channels to stay abreast of the financial market and to catch economic data releases. That, unfortunately, often puts me in a sour mood. According to these channels, all sorts of economic calamities are about to happen, and it’s depressing to hear about them over and over.

 

I concluded some time ago that it’s not because newscasters and reporters necessarily think the U.S. economy will implode. The very data they quote do not
support such a view. I believe they are after controversy, because that’s what attracts viewers.

 

The Pacific Northwest remains an economic bright spot. At these January economic forums, I offer my own forecast for the national or local economy. Unlike the financial reporters on TV, I prefer to deliver good news rather than bad. This can be accomplished quite easily as long as I stay within my home turf along the Pacific Coast, because the West is where growth is occurring right now.

 

In 2006, Washington ranked 6th and Oregon 7th among 50 states in terms of real Gross Domestic Product growth. The top honor went to Idaho, followed by Utah in second place. California ranked 13th. The Pacific Northwest was one of the brightest spots in the U.S. economy then. This fact did not change in 2007.

 

Still, after very strong economic performance in recent years, both Oregon and Washington show signs of slowing down. (See the preceding chart.) As of November 2007 (the latest month for which state-level employment data are available), year-to-date average employment growth was 2.1% in Washington and 1.3% in Oregon, compared with the corresponding 11-month period in 2006. These rates are considerably lower than what both states achieved in 2005 and 2006. What changed since last year was that the building industry was no longer adding a large
number of jobs to the Pacific Northwest economy. The region’s construction sector slows. The deceleration was more pronounced in Oregon than in Washington. The November 2007 data show that construction employment in Oregon dropped 0.4% from a year earlier. While this decrease was small, it contrasts dramatically with the double-digit growth that the sector enjoyed between 2004 and 2006.

 

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Keitaro Matsuda, senior economist for Union Bank, provides regular commentary on the California, Pacific Northwest, and United States economies.