Economic Forecast Overview
27 Feb 2020
Snohomish County is a Desirable Location
Economic Alliance Snohomish County hosted its 2020 Economic Forecast presented by Banner Bank. The forecast featured Edward Alden from Western Washington University (WWU), economist Dr. Bill Conerly, a panel discussion about real estate development, and Gabrielle Kouchacji of Boeings’ HorizonX accelerator/venture fund. Our panelists and presenters shared their expertise and insights on local and regional economic projections.
Edward Alden, adjunct professor at WWU and Senior Fellow at the Council on Foreign Relations, suggested that Washington State will be hit the hardest by international trade issues as we are the most trade-dependent of the states. Alden outlined concerns regarding trade, including creating a new trade agreement between Britain and the United States. The United Kingdom will first have to outline their trade agreement with the European Union, which will be a difficult conversation. The US-Mexico-Canada Agreement (USMCA) is substantially the same as NAFTA with a few modifications.
Alden was concerned with the dismantling of the World Trade Organization (WTO), moving away from binding rules for trade to case-by-case rulings, thus changing the global power structure. The China/US trade war continues to cause unease with fear of espionage from China making it difficult to trade certain goods and technology. There was a positive turn with China committing to purchase an additional $200 billion in U.S. farm, energy services and manufactured goods over the next two years. Whether this actually happens remains to be seen.
A theme throughout the morning was the impact of the Coronavirus (COVID-19) which continues to spread to other countries causing considerable disruption. U.S. exports to China accounted for 7.2% of total exports in 2018. However, global supply chains will result in US exports to other markets being reduced as these markets reduce trade with China. The impact of the virus will slow in warmer months; it is not clear if this will be an on-going problem.
Dr. Conerly provided a self-described “boring” economic overview. Boring is good for the world economy; certain aspects of life, like an airplane flight, should be boring. The economy saw strong growth in 2018, but job creation is slower than previously seen.
There has never been a better time to be in the job market. The savings rate is creeping up and overall the consumer side of the economy is on solid ground. U.S. Population growth is the lowest it has been in 100 years at .5% growth.
Conerly stated that 26% of economists in a recent survey expected a recession; this figure is higher than his personal assessment. He advised companies to create a recession plan. He commented that, in previous recessions, the surviving companies had a plan and could act quickly.
People want to be in Snohomish County, which is evident by the steady population growth from in-migration and low unemployment at 2.4%. The biggest barrier to entering Snohomish County is housing; accommodating growth will be one of the county’s biggest issues in coming years. It is estimated that 40 housing units need to be built per 100 residents to accommodate growth. The last two years Snohomish County did not meet this level.
Following Dr. Conerly, a panel discussion addressed real estate development. The panel included moderator Andrea Newton/Urban Land Institute Northwest, Jamas Gwilliam/Merlone Geier, Philip Wood/Dermody Properties, and Joe Ollis/Smartcap. The industrial market in Snohomish County is tight, with vacancy at 3.5%.
In order of panelist:
- Lynnwood City Center redevelopment is seriously underway in anticipation of the arrival of lightrail
- Traffic congestion and the lack of developable land in the south end are bringing distribution warehouses to the county to meet the “last mile” of the e-commerce distribution chain
- Opportunity Zones, a federal tax deferral/exemption program, are investing their capital in Snohomish County
The panel emphasized the importance of working with economic development teams.
Gabrielle Kouchacji introduced Boeings’ HorizonX Ventures. This initiative looks at disruptive technologies, market development, and innovative start-ups. Their business interests are grouped as: Mobility Transformation, Space and Connectivity, Industry 4.0 and Digital Acceleration. HorizonX has a global footprint including four venture accelerators located in the UK, India, UAE and Australia; China is in the future.
Key takeaways from our presenters:
- Light rail is changing the landscape in the Lynnwood City Center
- The “last mile” in the delivery chain has a significant impact on real estate demand
- The economy saw strong growth in 2018, but job creation is slower than previously seen
- Population growth is the lowest it has been in 100 years
- Economists forecast a 26% risk of a recession, making it vital for your company to have a recession plan in place
- Snohomish County is a desirable location with steady population growth from in-migration and low unemployment at 2.4%
- Accommodating forecasted growth is one of the biggest issues facing Snohomish County