Legislators hear optimistic economic forecast

Though unemployment and consumer uncertainty remain high, Washington State Economic and Revenue Forecast Council officials told legislators Wednesday they felt optimistic a brighter economic future is on its way to Washington.

Steve Lerch, the council’s executive director, said he expects tax revenue will exceed November 2020 estimates by $593 million.

Most consumers still have reservations about going out, Lerch said, but major tax sources, such as utilities and tobacco, brought in more in January 2021 than in January 2020.

Sen. Lynda Wilson, R-Vancouver, said the forecast strengthened the Republican argument against a controversial Democratic-led capital gains tax, saying there is no need for it. SB 5096 is scheduled for a Senate floor vote.

“We don’t need another tax. We’re doing fine,” Wilson said.

The council expects 2.2% employment growth by mid-2021, Lerch said. Washington state’s unemployment rate sits at 7.1%, according to December 2020 data from the state Employment Security Department.

Lerch said economists also expect the gross domestic product to make a turn for the better. The GDP is expected to hit pre-pandemic levels and could even be stronger by mid- to late 2021.

Construction and housing in Washington saw a better year than expected, Lerch said. Housing permits and large commercial real estate transactions went up, as did construction projects. After a slowdown in 2019, Seattle home prices remain high, Lerch said.

Industrial production continues to improve in the U.S., Lerch said, but it remains almost 2% lower than its January 2020 level.

About 1 of 4 Washington households reported difficulty in paying usual expenses, according to data from the U.S. Census Bureau Household Pulse Survey collected Feb. 3-15. This is slightly lower than the national average: About 1 in 3 Americans reported difficulty in meeting their usual expenses.

People are also saving their money at “unusually high” levels, Lerch said.