Economic Revenue and Forecast Council provides updated state forecast

OLYMPIA — Dave Reich, executive director of the Washington Economic Revenue and Forecast Council, provided an updated economic forecast for the state during the council’s regular Feb. 14 revenue review meeting in Olympia. 

“I think that's probably the main message, is it's not a recession,” Reich said. “That's not part of our base case, but just a slowly growing economy.”

Reich elaborated on what it means to forecast a slow-growth economy.

“Nationally that means slow employment growth, it means inflation will continue to trend down slowly from where it is now and it means GDP, or economic growth, will just be slower, sort of in the 1%-2% range,” Reich said. “For Washington, we are also expecting the same to happen here, slower employment growth, but also not a huge spike in unemployment, just fewer job ads pretty much. We also expect, of course, inflation will fall here.”

The last revenue review meeting and forecast was in November, Reich said. 

“The Washington outlook is mostly good, a little bit mixed. We had slightly lower personal income coming in in 2023, which reduced our forecast for the near term, but employment is still holding up, so looking okay in the state,” he said. “Overall the revenue change from what we presented in November is about a $337 million or two-tenths of 1% increase over the next two bienniums.”

Both U.S. and Washington employment are up.

“U.S. employment continued to grow by nearly 900,000 jobs, and the last couple of months in particular have been pretty strong. Washington employment has been up … about 17,200 (jobs in November and December),” Reich said. “The unemployment rate is about 4.2%, which is very low for us, so so far so good. And revenue collections have been above forecast so far since November, so we were about $70 million to the plus on revenues.”

Reich also mentioned some negatives since November’s forecast.

“Despite the fact that higher revenues have come in, revenue collection growth is slowed,” he said. “It's not a forecast risk, just the fact that in general revenues are growing quite slowly.”

The report described some of the primary risk factors for the forecasted economy.

“The major risks to the U.S. and Washington economies are the impact of elevated interest rates, the Ukraine-Russia and Middle East conflicts, and slower consumer spending,” the report said. 

Reich said inflation is still elevated but is going in the right direction. 

“Our projection now is it will start to see interest rates drop sooner and not go as high as we thought they would in November … In general (we’re) forecasting slightly lower oil prices than we did back in November, so that's good news overall.”

The agenda memo containing the written economic forecast provided specifics on the forecast for Washington’s employment numbers. 

“The February forecast calls for a 1.4% increase in Washington employment this year, up from the 1.1% growth rate expected in the November forecast. We expect slower growth during the remainder of the forecast as the U.S. economy slows,” the report said. “The forecast has employment growth averaging 0.9% per year in 2025 through 2029. We assume the 4.0% unemployment rate in 2023 was the trough. Going forward, we expect the unemployment rate to increase to 4.4% this year and then average 4.4% from 2025 through 2029.”

The state’s total revenue is also forecast to increase.

“All in all the adjustments are, I would say, pretty modest; about two-tenths of 1% for 23-25 (biennium) and three-tenths for 25-27,” Reich said. “As required by law we've provided the alternative forecasts for you to look at. This is the 23-25 biennium; you can see our forecast at the top at $67,005,000,000. The optimistic forecast would come in about $2.8 billion higher and the pessimistic about $3.4 billion lower … Overall total state revenues are expected to grow about 3.5% between the 21-23 (biennium) and 23-25, and another 7% between 23-25 and 25-27.”

Council member Rep. Timm Ormsby, D-Spokane, provided a brief analysis of the significance of the forecast. 

“I would characterize this forecast as a modest improvement to a strong economy,” he said. “I think our base is solid, I think the budgets are solid, and it's a modest improvement. 

Gabriel Davis may be reached at gdavis@columbiabasinherald.com. Download the Columbia Basin Herald app on iOS and Android.

    Washington’s capitol building in Olympia. Dave Reich, executive director of the Washington Economic Revenue and Forecast Council, provided an economic forecast for Washington state during the Feb. 14 council meeting, which forecasted a slow-growth economy in the next several years.