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70% of economists predict 2021 US recession - how will it impact Seattle?


A worker talks on a radio as he stands at the end of a high-rise construction crane with the iconic Space Needle in the background, in downtown Seattle, as viewed from the 66th floor of the Columbia Center. (AP File Photo/Ted S. Warren)
A worker talks on a radio as he stands at the end of a high-rise construction crane with the iconic Space Needle in the background, in downtown Seattle, as viewed from the 66th floor of the Columbia Center. (AP File Photo/Ted S. Warren)
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SEATTLE – Washington state’s job and real estate markets may be in question with a potentially looming U.S. recession – with more than 70% of economists predicting one in 2021, or even sooner.

“I think looking at the last two recessions can give a sense of possible impacts to Seattle and Washington should the U.S. slip into recession,” said Steve Lerch, executive director of the Washington State Economic and Revenue Forecast Council.

Jobs were hit particularly hard during the last two.

The Seattle Metro area lost about 95,000 jobs from December 2007 to June 2009 – with the overall state losing about 186,000 in the same time span, according to Lerch.

With the recession before that, from April to November 2001, the Seattle area lost about 95,000 jobs and the state nearly 86,000.

The construction sector lost about 12,000 jobs during and after the 2001 recession, aerospace 8,000, and retail about 11,000. Non-aerospace manufacturing lost about 30,000 jobs and everything from attorneys to architects to computer system design and employment services lost about 23,000 jobs.

Statewide employment continued to decline for another eight months after the 2009 recession – with unemployment rates reaching a high of 10.4%. In 2001, the employment rate reached 7.3%.

“A recession would result in a drop in consumer spending and business investment,” Lerch said. “Profits would decline for many businesses and an increase in business closures or bankruptcies would be likely. This would also mean lower tax revenues, making it more difficult to fund a variety of government services.”

But it doesn’t mean that these figures are necessarily representative of future recessions, Lerch said. He says it all depends on what triggers the next one.

Recessions happen not just when something terrible happens in the economy, but when those initial shocks are heightened by other factors.

The dot-com crash was emphasized by the September 11 terrorist attacks in 2001 and corporate scandals. The 2007 housing crash turned into a global financial crisis a year later when banks worldwide had huge losses on mortgage debt.

Now, there may be a new culprit: Trade policy, a stock market correction – a decline of 10% or more in the price of a security, asset or a financial market – or a geopolitical crisis (foreign policy), according to a survey sponsored by Zillow.

“Trade restrictions could trigger a recession by hitting consumers with higher prices and shrinking the market for American goods as retaliatory tariffs pop up, according Zillow economist Jeff Tucker. “[While] a stock market correction would cause a big negative shock to Americans' wealth, making them less likely to buy or invest, and it would generally undermine the confidence of consumers and businesses.”

If there were a recession – with the Zillow sponsored survey slating one as early as 2020 – it won’t be because of a housing slowdown, even though housing demand will decrease.

Tucker predicts it will take longer to sell homes and home price increases would slow down. As for how much of a slowdown depends on “the depth and cause of the recession, and especially on whether foreclosures become widespread,” Tucker said.

“There are reasons to think foreclosures would be limited,” Tucker added. “Lending standards have remained high, homeowners have a great deal of equity in their homes, and fixed rate loans are much more common than 13 years ago.

But, there may be some upsides. Future buyers would benefit from more inventory and less competition when looking to buy. This includes homeowners who are looking to sell and move to a larger or better located home, since a less hectic market would give them more time and options, according to Tucker.

“Without a crystal ball, it's hard to say what the severity or duration of the next recession will be,” Tucker said.


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