Unemployment Spikes Across the Northwest

Unemployment rates spiked in the final month of 2008, as jobless rates in Washington, Oregon and Idaho all went up up dramatically.

Just this week, Washington State reported a 0.8% increase in its December unemployment to 7.1%, just a tad below the 7.2% national rate. While still slightly better than many areas in the country, the worst is yet to come for the region. Oregon’s unemployment rate in December also shot up to 9.0%, a dramatic rise from year-earlier levels.

What a difference just a few months make! Last summer, the Seattle area maintained a 3.5% seasonally adjusted unemployment rate, and actually below jobless rates of late 2007. Today that rate is 6.2% (12/08 data). Not bad though, considering the unemployment rates for Washington (7.1%), Oregon (9.0%) and the U.S. (7.2%) are much worse off.

Oregon has been particularly hard hit. In the past year, unemployment has soared from 5.7% in November 2007 to 9.0% a bit over a year later. In the past year, only government, heath and education employment are up in Oregon. The next strongest is high tech, at -1.9% in job “growth.” Construction and manufacturing have taken a hard hit, down 12.1% and 14.5% respectively.

Idaho had been the employment shining star of the region at “only” 6.6%, but it has taken the hardest fall of the three northwest states on a percentage basis over the past year. At 6.6%, Idaho’s 12/08 unemployment rate is up from only 2.7% in December 2007! The current 6.6% rate is also a 15-year high in Idaho, so it has been hit hard, despite its seemingly overall low rate of joblessness.

And the worst is yet to come. Keep in mind the December figures don't even include a bevy of recently announced layoffs (Boeing, Microsoft, etc.), the 1/1/09 effective date of many of the WAMU layoffs, and the trickle-down impact of these and other jobs cuts in the past couple of months.

We at AHRS expect the employment picture to worsen for at a minimum several more months, and then to stay in recessionary territory for many months after the overall economy bottoms and starts to recover.

State and Local Unemployment Soars in December

Washington State's employment picture deteriorated quickly in December, as the state's unemployment rate took its biggest one-month jump in more than three decades.

The state jobless rate rose to 7.1% in December, up from 6.3% in November. That's the highest rate since March 2004, as the state was recovering from the 2001 - 2003 jobs slump.

The Seattle metro area's jobless rate also spiked from 5.4% in November to 6.2% in December.

The unemployment rate has nowhere to go but up in the coming months, as Boeing's recently announced layoffs (approximately 4,500) and the full effects of WAMU's collapse have yet to be reflected in the latest data.

To keep up on the latest layoff announcements, see the Seattle Times Layoff Ledger.

Seattle's Strengths Turning into Weaknesses?

Up until a few months ago, the Seattle area's labor market was stronger than in most of the rest of the nation, and stronger than just about anywhere else in the Pacific Northwest. But recently, a new shoe seemingly drops every week, signaling a serious deterioration in Puget Sound region's labor market in the first half of 2009, and quite likely beyond that.

Strengths Turning to a Weaknesses? Some examples:

• Washington Mutual, the largest employer and tenant in downtown Seattle is laying off the vast majority of its workforce (and vacating most of its office space) after its spectacular collapse in late 2008.
• Aerospace, an area of strength until mid-year 2008, is suddenly looking pretty weak in the knees. Last week Boeing announced the upcoming lay-off of thousands (up to 5,000, reportedly). Continued delays in the new 787, weakness in the airline industry and worldwide economy have all had impacts. In the past few months, several other aerospace suppliers in the area have announced and/or already implemented layoffs.
• Technology: until recently one of the last bastions of private-sector strength (other than healthcare), now looks to be a drag on the local economy and labor markets in 2009. In late 2008 Microsoft signaled a slowdown in hiring, and Google announced it was slowing down its regional growth plans as well. And just this week, the rumors of impending mass layoffs at Microsoft are working their way through the local and national media. When Microsoft and Google (two of the deepest-pocketed companies in the industry) are pulling back, you know you've got a serious slowdown happening. If the Microsoft rumors prove to be true, it will have a major impact on the area high-tech sector, as Microsoft is the largest tech employer in the area, by far.
  
• Government & Education: The only two areas of employment growing in the latest state labor market reports, now seem destined to fall. With a possible $6 billion dollar state budget deficit, the City of Seattle closing schools, and the state pulling back on education funding in general, two of the the last areas of strength will start heading south soon.
• Healthcare: maybe the last bastion of relative strength in this labor market. Word has it that many consumers are electing to forgo doctor visits and elective procedures. Still, nurses are in short supply, and healthcare will remain stronger than nearly all other industry sectors.
  

Employment is a lagging economic indicator, so even after the economy hits bottom and starts to climb its way back up, the labor market recovery will likely lag for at least a year or more beyond that. (Remember 2002 and early 2003? The last recession ended "officially" in late 2001, but the labor market didn't really start recovering until the second half of 2003).

I wish we had more upbeat news, but this looks to be the worst labor market in decades - including in the Puget Sound Region.

2008 - The Largest Job Loss Since WWII

Wow, what a year 2008 was, and not in a good way, especially for the American worker.

Today, the U.S. Labor Department reported that the U.S. economy lost 524,000 non-farm jobs in December, its 12th straight monthly decline. Now that the year's tentative final tally is in, the 2.6 million jobs lost in 2008 is the worst since 1945, the year WWII ended. Of course, the population and economy are a lot larger now, but that doesn't dampen the sobriety of the news, since the employment blood-letting is likely to continue well into 2009.

According the Labor Department's data, over 11 million workers are now unemployed, and the country's unemployment rate has jumped 2.2%, just since April.

Just a few months ago, many leading economists were projecting unemployment topping out in the 7% to 8% range, but now it's looking like these projections will end up being too optimistic, possibly by a long shot, as layoffs are accelerating, and several big layoffs announcements in the past month or so have not even worked their way into the data yet.

Lest some say this blog has gotten too morose, here is what today's Wall Street Journal has to say: "By some broader measures, labor-market conditions are even worse than the main numbers suggest. When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers reached 13.5% last month, up almost six percentage points from a year earlier." (WSJ 1/9/08, on-line edition).

On the positive side, a few areas are showing resilience, with increased employment in healthcare, education and government (seemingly nothing can stop the government from growing!).

Whatever your political persuasion may be, every American should be rooting for the incoming Obama administration to achieve many early successes on the economic front.

Latest Labor Market and Comp Trends Update

AHRS has just published its latest newsletter on comp and labor market trends, primarily focused on the Pacific Northwest region.

Since it's too lengthy for a blog posting, if you are interested in a copy, please email me directly at doug@appliedHRstrategies.com, or request a copy of the AHRS newsletter via our website at www.appliedhrstrategies.com/subscribe.php.

Let's hope 2009 is better than we think it's going to be!