Is Spokane recovering from the economic downturn?

Chart of per-capita real GDP during the Great ...

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Is Spokane recovering from this economic downturn?

We will not know until after the recovery is well underway. Economic data is always looking backwards and takes months to a year or more to tell us where we were.

In the past, Spokane tended to benefit from recessions (and also) as national corporations saw Spokane as a low cost place to set up their business.

I noted a pattern in the relative wages of Spokane to the state and to the nation, in terms of how Spokane wages responded to a recession. That pattern ended a decade ago as corporations now move offshore rather than to low cost U.S. cities.

Last week, I republished this chart and I realized that it too shows a pattern relative to recessions:

Transfer payments are payments received without a corresponding contemporary product or service being delivered. Examples include retirement benefits, unemployment benefits, disability benefits and others. Almost all transfer payments are made by government agencies.

Look carefully at the chart around the years of past recessions in about 1973-1975, 1981-82, 1991, 2001 and then 2008 (the data is not yet available beyond that point).

Transfer payments climbed quickly as recessions took hold (probably due to large increases in unemployment benefits) but then dropped sharply in the years after the recession.

But look at what happened between 2000 and 2001? A sharp increase in transfer payments. But NO DROP in the years following. Spokane did not recover from the last recession.

The transfer payment chart ends at the start of the worst economic downturn since The Great Depression.

Here’s an actual employment chart that presents a different view of the situation as a count of total people employed (does not include the self employed, sole proprietors or active duty military):

The Spokane region has seen an unprecedented drop in employed people since the peak in 2007.

Will we now see a drop in the transfer payments into Spokane County or another permanent increase, as we did after the 2000-2001 downturn?

My hunch is that unemployment benefits will drop but that transfer payments will remain elevated and not drop like they did prior to 2000.  Many will take early retirement and some will magically go on disability.  A related concern is that the area lost high paying/high benefit jobs in the past ten years but will now see new employment mostly in low paying jobs: in the past week, the news ran stories about 1,200 people applying for some 200 seasonal, part-time jobs at Riverfront Park and that a hardware store chain would hire up to 300, part time, seasonal sales associates. These low paying, part time jobs were presented as great news for Spokane. But this trend of outsourcing high paying jobs and replacing them with low paid, low skilled jobs is not confined to Spokane.

Over the past decade many large, high paying employers closed or sharply cut back their Spokane operations. No similar sized firms with similar pay scales have opened up in Spokane.


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