Local Economic Outlook

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Wendy Kennedy
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1 Local Economic Outlook Grant D. Forsyth, Ph.D. Department of Economics & Institute for Public Policy and Economic Analysis Eastern Washington University

2 Outlook Outline Regional Indicators and Forecasts Population Unemployment and Employment Incomes Taxable Retail Sales Regional Home and Stock Prices Industries of Interest Banking Sector Health Care Sector

3 Indicators and Forecasts

4 Population Growth, % 3.0% 3.0% 2.5% 2.8% 2.1% 2.5% 0.4% 2.0% 1.7% 2.0% 1.5% 1.0% 0.5% 0.0% Idaho Kootenai County Coeur d'alene 1.1% 0.9% 0.2% Washington Spokane County City of Spokane 1.5% 1.0% 0.5% 0.0% 2.4% Kootenai 0.3% 0.5% Spokane Source: U.S. Census and author s calculations.

5 OFM Population Growth Estimates for Spokane County, % 6.7% 6% 4% 2% 0% -2% -4% -6% 0.8% 0.7% 0.8% 4.1% 2.4% 0.0% 0.0% -0.3% -0.6% County Unincorp. Incorporated Liberty Lake Cheney Spokane Valley Airway Heights Spokane Deer Park Millwood Source: Office of Financial Management and author s calculations.

6 Source: Bureau of Labor Statistics

7 Unemployment Rates and Forecasts 9% Spokane Kootenai 8% 8.2% Range % 6% 5% 7.1% 6.9% 6.8% 6.5% 6.3% 5.8% 6.0% 5.7% 5.5% 5.3% F 2005F Nation Spokane Kootenai High 5.9% 6.1% 6.8% 7.5% Point 5.7% (6.8) 5.3% 6.5% (7.2) 6.3% Low 5.5% 4.5% 6.2% 6.1% Source: Bureau of Labor Statistics, the Forecast Council, and author s calculations.

8 US Employment Growth Year on Year Annual Growth 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% Months After Low Point of Recession (Black Line Ends September 2004) Nation 2001 Nation 1990/91 Source: Bureau of Labor Statistics and author s calculations.

9 Local Employment Growth Year on Year Annual Growth 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% Months After Low Point of Recession (Red Line Ends August 2004) Spokane + Kootenai 2001 Spokane + Kootenai 1990/91 Source: Bureau of Labor Statistics and author s calculations.

10 Real Per Capita Personal Income Growth and Forecasts 2.5% 2.0% 1.5% Spokane Kootenai Range % 0.5% High 2.7% 3.4% 3.0% 3.7% 0.0% -0.5% -1.0% -1.5% E 2004F 2005F Point 1.1% (1.1) 1.2% 1.1% (1.4) 1.3% -2.0% Nation Spokane Kootenai Low -0.2% -0.6% -0.2% -0.5% Source: Bureau of Economic Analysis, Bureau of Labor Statistics, the Forecast Council, and author s calculations.

11 Spokane County Taxable Retail Sales Growth and Forecasts 14% 12% 10% Range City of Spokane County w/o City % High 5.3% 6.7% 11.1% 11.5% 6% 4% 2% Point 2.0% (4.7) 1.7% 9.3% (2.9) 5.2% 0% H H F 2005F Low -1.0% -3.2% 3.6% 0.0% City of Spokane County w/o City Source: Department of Revenue and author s calculations.

12 County Real Taxable Retail Sales Growth, The Short-Run 10% Real Year on Year Growth 8% 6% 4% 2% 0% -2% -4% -6% Quarters After Low Point of Recession (Red Line Ends 2nd Quarter 2004) Spokane County 2001 Spokane County 1990/91 Source: Department of Revenue and author s calculations.

13 County Real Taxable Retail Sales Growth, The Long-Run $3,500,000 $3,000,000 (000s, = 100) $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500, County City of Spokane County w/o City Source: Department of Revenue and author s calculations.

14 Source of Taxable Retail Sales 70% 60% 63% 61% 55% 50% 40% 37% 39% 45% 30% 20% 10% 0% City of Spokane County w/o City Source: Department of Revenue and author s calculations.

15 Spokane MSA Existing Home Price Growth and Forecasts 16% 14% 12% Range % 8% 6% High 8.5% 10.8% 4% 2% 0% Point 7.1% (2.2) 5.9% Bellingham Bremerton Olympia Tacoma P-V S-B-E Spokane Yakima R-K-P Low 4.6% 1.1% H H 2004 Source: Office of Federal Housing Enterprise Oversight and author's calculations.

16 Regional Market Values by Firm Company % Change-Market Value 1/03-12/03 % Change-Market Value 1/04-10/04 S&P 500 Index +21% -1% Avista +55% -1% Potlach +47% +26% Sterling Financial +88% +21% American West Bancorp. +47% -7% Northwest Bancorp. +50% +1% Coeur d Alene Mines +323% -24% Hecla Mining +74% -15% Itron +1% +4% Key Tronics +75% +28% West Coast Hospitality -17% +8% Coldwater Creek +56% +178% Source: Standard and Poor's, SEC, Economagic.com, NASDAQ, and author's calculations.

17 Total Market Value, 1/ / /2/02 = Index /2/02 5/2/02 9/2/02 1/2/03 5/2/03 9/2/03 1/2/04 5/2/04 9/2/04 Rescaled S&P 500 Local Index of Market Values Source: Standard and Poor's, SEC, Economagic.com, NASDAQ, and author's calculations.

18 Regional Banking Sector

19 Loan Portfolio, 1994 Regional Loan Portfolio, 1994 (n = 17) National Loan Portfolio, 1994 (N = 12,603) to Indiv. 9% Other 1% C and I 15% Farm 3% to Indiv. 17% Other 8% C and I 20% Farm 1% Real Estate 72% Real Estate 54% Source: FDIC and author s calculations.

20 Loan Portfolio, 2004 Regional Loan Portfolio, 2004 (n = 16) National Loan Portfolio, 2004 (N = 9,079) to Indiv. 4% Other 0% C and I 26% to Indiv. 15% Other 9% C and I 16% Farm 1% Farm 5% Real Estate 65% Real Estate 59% Source: FDIC and author s calculations.

21 Real Estate, 1994 and 2004 Regional Real Estate Loan Portfolio, 1994 Farmland 1% Const. and Land Develop. 10% Comm. Real Estate 17% Regional Real Estate Loan Portfolio, Family Res. 31% Farmland 3% Const. and Land Develop. 25% 1-4 Family Res. 66% M-family Res. 6% M-family Res. 7% Comm. Real Estate 34% Source: FDIC and author s calculations.

22 Spokane County Healthcare Sector

23 Sector Employment Growth 3.5% 3.0% 2.9% 2.5% 2.0% 1.9% 2.2% 1.5% 1.0% 0.9% 0.5% 0.0% Health and Social Assistance NA Ambulatory Health Care Services NA Hospitals Spokane 1st 8 Months Kootenai 2003 Source: Employment Security Department, Idaho Department of Labor, and author s calculations

24 Operating Margins of Six Regional Hospitals, $10 $ $- $(5) Millions of Dollars $(10) $(15) Source: Washington State Department of Health and Patrick Jones, Ph.D.

25 Outlook Summary for 2005 Contingent on the national economy doing no worse: Lower unemployment rates in Real growth above 1% for personal income in Continued above average gains on the prices of existing residential homes, but lower than More robust growth in taxable retail sales for the balance of the county compared to the City of Spokane. City of Spokane returning to the slow growth rate of the last 10 years. Regional banks well positioned for commercial lending. Continued growth in health services employment, despite weak incomes at regional hospitals.

Local Economic Outlook

Local Economic Outlook Grant D. Forsyth, Ph.D. Department of Economics & Institute for Public Policy and Economic Analysis Eastern Washington University Outlook Outline Regional Indicators and Forecasts