Regional Report: Good news, bad news – King County’s C-minus economy

First published Nov. 9, 2008

As we discussed last week, King County is one of the strongest links in the Washington state economy – perhaps even the nation. That doesn’t mean that things are booming.

The best news comes from the September state jobs report, which shows how much King County’s key industries have grown over the past year. Software companies have added 4,700 workers – growth of better than 10 percent. Aerospace companies added another 700, which represents a slowdown, but is still growth. And the professional services sector – lawyers, accountants and computer techs – also has shown very strong growth of 8.9 percent, representing 8,300 new jobs.

Pay in these sectors is high: Software employees, for example, are the state’s best-paid, making an average $96,000 a year, which was up 11.8 percent. We’re adding significant numbers of people at those wage levels, and that’s driving the local economy. Overall, King County added 36,900 jobs between September ‘07 and September ‘08, a healthy 3.1 percent growth rate.

That’s the good news. The bad news comes from the state’s taxable retail sales figures. Overall, total sales activity fell 1.4 percent in King County in the most-recent quarter – a fact that has statewide ramifications, given that roughly 40 percent of all sales taxes are collected in King County. Residents in some of east King County’s toniest software-dominated communities put the clamps on their spending during the second quarter. Sales tax collections were down 13.5 percent in Issaquah and 11.3 percent in Kirkland; Bellevue’s total was down 5.6 percent. (Seattle itself showed a 3.3 percent gain.)

Amid all this, the housing market is holding on. You probably heard that Smart Money magazine and the Urban Land Institute both rated Seattle’s real estate market the best in the nation. But the ULI gave Seattle a 6.15 score out of 9, which is basically a C-minus. Several built-on-spec buildings are coming online in Seattle with no tenants; that, combined with the pullback at Starbucks and demise of WaMu’s headquarters, will not be good for the commercial real estate market. But our most-recent statewide housing data shows that both home prices and housing starts are sliding, not collapsing. Home prices countywide slipped about 4.3 percent (to $450,000), while starts were down 5.3 percent. Construction employment actually inched up 1.4 percent (or 1,100 jobs). (I’ll talk more about this Tuesday on KCTS-TV’s “About The Money.” It starts at 7:30 p.m.)

Looking ahead, King County’s third-quarter numbers will be weak and the fourth-quarter might be worse. We saw some of that last week, when the Northwest Multiple Listing Service reported the median King County home price fell below $400,000 in October. No surprise – with the credit market freeze and the Boeing strike, it took a brave soul (with a good credit rating) to consider buying a house, and most of us are cutting spending.

King County will have to absorb the Weyerhaeuser and Alaska Airlines layoffs in the months ahead. Local government employment also will be down. But with Boeing’s Machinists back at work and the software industry holding steady, King County has two strong pillars supporting its economy. With the ramp-up on the Alaskan Way Viaduct and SR 520 bridge – and the Sound Transit expansion – we should see gains in construction. King County won’t be booming in 2009, not with the global economy in the tank, but things could be an awful lot worse.