State of the State Economy

1. State of the StateEconomy 2005 IPMA Executive SeminarOcean Shores, WASeptember 20, 2005 Greg Weeks, DirectorLabor Market and Economic AnalysisState of WashingtonEmployment Security Department

2. State Indicators

3. Employment has Increased Twelve Straight Months Monthly Employment Change, WA (000s) • Employment growth picked up in June and July, slowed in August • Gains are widespread by industry, but concentrated in urban centers • Evident in private and public sectors Source:Employment Security Department, Labor Market and Economic Analysis (LMEA)

7. Employment Growth, July 2004-July 2005 Source:Employment Security Department, LMEA

8. Employment Growth, July 2003-July 2004 Source:Employment Security Department, LMEA

9. Seattle Area Employment Now Leading State Employment index, 1st Quarter 2002=100 Balance of State Seattle • Recession steeper in Seattle area • Employment gains very strong in recent months • Rest of state still growing Q2 Source:Employment Security Department, LMEA

10. Seattle, Tacoma and Spokane hit harder by recession, all recoveringUnadjusted over the year percent change in employment Source: Employment Security Department, LMEA

11. Rural and urban unemployment rates converge. Source: Employment Security Department, LMEA

12. Over-the-Year Gains Widespread by Sector • August 2004- August 2005 (000s) • Construction +17.6 • Professional and business services +15.0 • Education and health services +10.2 • Leisure and hospitality + 9.4 • Manufacturing + 7.4 • Transportation equipment + 7.6 • Retail + 5.8 • Wholesale trade + 3.9 • Information + 3.4 • Government + 3.1 • Other services + 3.1 • Transportation, warehousing, and utilities + 2.7 • Financial activities + 2.6 • Natural resources and mining - 0.3 Total nonfarm +83.9 Source:Employment Security Department, LMEA

13. Construction Activity Boosted Employment Construction employment, WA (000s) Aug • Construction has had disproportionate impact on jobs • Year over year employment growth: 10.1% since last August • Most hiring by specialty trades contractors Source:Employment Security Department, LMEA

14. Housing Market Remains Robust Single-family building permits, WA (000s) • Home sales in Washington very strong • So too is home price appreciation • Residential building permits set to rise again in 2005 *2005 YTD through July Source:U.S. Bureau of the Census, LMEA

15. Manufacturing Employment Relatively Strong Manufacturing employment, WA (000s) • Nearly one in three mfg jobs disappeared during downturn • Output is picking up, orders are firm • WA Mfgers are hiring again, although U.S Mfgers are not Aug Source:Employment Security Department, LMEA

16. Washington Unemployment on Par with 2001 Percent Unemployed in Washington • Unemployment well below peak of 2002 • Increases in labor force keeping rate up • Declines in half of counties Aug Source:Employment Security Department, LMEA

17. Washington Job Recovery Outpacing U.S. Payroll employment (index, Nov. 2001=100) • Recession more pronounced in state • Job growth has outperformed nation since early 2003 • Manufacturing employment rising here, not so in U.S. Washington Aug U.S. Source:Employment Security Department, LMEA and U.S. Bureau of Labor Statistics

18. Unemployment Rates Converged Unemployment rates (percent) • Stronger job growth accompanied by lower unemployment rate • Near national average for first time in 7 years • Job growth encourages labor force participation Washington Aug U.S. Source:Employment Security Department, LMEA and U.S. Department of Labor

19. Employment Gains Lag Prior Recovery Employment index, trough=100 • Job growth atypically slow during recovery • Gap between two recoveries is narrowing • No job losses during early 90s recession Mar 1991=100 Nov. 2001=100 Months from trough Source:Employment Security Department, LMEA

20. …but Added Jobs Pay More • Meaningless to compare boom to recovery • Jobs today pay more in real wages than previous recovery • And gains are more widely distributed Source:Employment Security Department, LMEA

22. Employment by gender and age groupLocal Employment Dynamics Source: Employment Security Department, LMEA

23. Employment and wage data by specific geographic area Displays Census block groups from QCEW file, used to produce map with points representing commuters. Can best be used for mapping labor sheds, commute sheds, commuting patterns, transportation planning, land use planning, economic impact statements, homeland security, etc. Choose the area you want: -By freehand drawing -By county, city, WIB areas, zip codes layers. LED “On the Map”

24. 2003 Everett, WA Commute Shed“where folks work that live in area”

26. 2003 Everett, WA Labor Shed“where folks live that work in the area”

28. National Factors

29. Macroeconomic Data Mixed in 2005 ISM indexes (diffusion index, 50+ indicates expansion) • Economy firmed in June and July • Previous weakness concentrated in manufacturing • Hiring continued in August Non mfg Aug Mfg Source:The Institute for Supply Management

30. Spot Oil Prices Continue to Climb Aug • Oil prices continue to surprise on the upside • Strong worldwide demand will keep prices high • All energy more costly Source:U.S. Energy Information Administration

31. Core Inflation Still Low CPI • Headline prices up • Core prices still well contained • Energy more than just a measure Aug Core CPI Source:U.S. Bureau of Labor Statistics

32. Output remains solid Energy prices a big risk to consumer and business spending Job markets continue to improve Inflation still in check, but Fed Funds still well below neutral The Outlook

34. Labor Market and Economic Analysis Branch of the Employment Security Department • Online • Detail for Washington State http://www.workforceexplorer.com/ • Occupations of the Unemployed http://www.wilma.org/occinfo/ • Demand/Decline lists http://www.wilma.org/wdclists/ • Contacts • Greg Weeks, Director, LMEA gweeks@esd.wa.gov • Rick Kaglic, Chief Economics rkaglic@esd.wa.gov • Ivars Graudins, Area LMI igraudinss@esd.wa.gov • Dave Wallace, Occupational Analyst dbwallace@esd.wa.gov • Rick Lockhart, Industry Analysis rlockhart@esd.wa.gov

35. Questions/comments www.workforceexplorer.com