A "Slow-Motion Recession"?

The above quote is from chief United States economist for Lehman Brothers, Ethan Harris. He was referring to what he sees as the "Chinese water torture" type of recession. In todays NY Times, he goes onto say: “In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we’re not getting the classic two or three negative quarters. Instead, we’re expecting two years of sub-par growth. Growth that’s not enough to generate jobs. It’s kind of a chronic rather than an acute pain.”

Let's hope he's not right, but I unfortunately we at AHRS believe he is. So far in the Puget Sound region we haven't gone into recession, but there is no doubt the economy and job markets have slowed. That said, here are some factors in the region that could have a long-term (>1 year) impact to our area:

• A weak real-estate market (but still way stronger than more major cities) that creeps its way into many areas of the economy: job losses, illiquid real estate assets, sliding home equity, increased foreclosures, etc.
  
• A weakened labor market. In the past few months technology and aerospace employers have continued to add jobs to the area economy, but alone these industries can't overcome the weakness of rest of the regional labor market. Aerospace may well drop off the list of net hiring in the near future.
  
• Troubles at WAMU (and now Starbucks) lead to even more layoffs and office vacancies, not to mention the investment losses.
• Record fuel prices and airline capacity reductions may well lead to slower and/or delayed orders at Boeing, which would have a rippling effect through the area.
• Local investors investing in the region (or anywhere) are hurting (check out recent stock prices for Boeing, WAMU, Blue Nile, Starbucks, etc.). People have shrinking investment accounts and feel less affluent, regardless if they hold onto their stock (only "paper" losses so far). As a result, of course, they spend less.
  

And these are just a few of the factors I can reel off the top of my head. I'm sure there are others. So, while I know I'm sounding glum, the sum total of what's happening in the economy and labor markets in the region are not pretty, even if it's less ugly than in many other parts of the country.

At least the weather has improved lately!