Washington economic forecast shows possible recession

Wash. – The Washington State Economic and Income Forecasting Council creates four forecasts each quarter for the state’s economy and unemployment numbers. This includes a baseline forecast – which is most likely to happen – the pessimistic, optimistic forecast and a revenue forecast based on the Governor’s Office economic forecast.

The pessimistic forecast calls for a recession at the end of 2022 and into 2023. A recession is a national concern for economists as the Federal Reserve continues to adjust interest rates in an attempt to reduce inflation.

The council’s executive director and chief economist, Steve Lerch, said the June unemployment figures show jobs continuing to rise, which does not yet signal a recession. However, it has been difficult to create forecasts due to the impacts of the pandemic and the conflict between Russia and Ukraine which are impacting oil prices.

If a recession does come, Lerch said it shouldn’t be as severe as the previous one.

“I don’t think it would be anything like the 2007-09 recession,” he said. “We basically have to go back to the Great Depression for something like this.”

During this recession, unemployment in Washington reached 9.3%. If we enter a recession this year, the unemployment rate should slowly increase to around 6.5-6.6%.

Right now, Washington’s unemployment is at an all-time low at 3.9%

However, according to Lerch, some experts say the United States has already entered a recession because gross domestic product (GDP) was negative in the last quarter. He doesn’t think that’s the case.

“It’s kind of hard to see that as we continue to have job gains both nationally and here in Washington,” Lerch said.

Lerch thinks construction could be affected by a coming recession as housing demand begins to slow. He also said the hospitality industry could be hit again.

“In the hospitality industry, we’ve seen huge job gains, but it’s after that we’ve seen really, really huge declines,” Lerch said. “As we have this new Omicron variant and cases continue to increase, that’s something that could really impact those businesses.”

Meanwhile, baseline forecasts call for the economy to continue to grow, but at a slower pace. In Washington, the unemployment rate is expected to rise slightly to around 4.5%.

“We continue to see growth in economic activity both nationally and here in Washington,” Lerch said. “We believe Washington will continue to grow a little stronger than the nation as a whole.”

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