Though unemployment and consumer uncertainty remain high, the Washington State Economic and Revenue Forecast Council officials told legislators March 3 they felt optimistic a brighter economic future is on its way to Washington.
Steve Lerch, the council’s executive director, said he expects tax revenues will exceed November 2020 estimates by $593 million.
Lerch said U.S. retail and food service tax revenue went up by 5.3%, and Washington’s earnings trend closely with the national average. Most consumers still have reservations about going out, Lerch said, but major tax sources, such as utilities and tobacco, earned more in January 2021 than in January 2020.
Sen. Lynda Wilson, R-Vancouver, said the forecast strengthened the Republican argument against a controversial Democrat-led capital gains tax because it shows the lack of need for the excise tax. SB 5096 is scheduled for a Senate floor vote.
“We don’t need another tax. We’re doing fine,” Wilson said.
Although more people are unemployed now than in November, the council also expects 2.2% employment growth by mid-2021, Lerch said. Washington State still sits at a 7.1% unemployment rate, according to December 2020 data from the state Employment Security Department.
“It has certainly improved, but it’s still well below where we were prior to the pandemic,” Lerch said.
Lerch said economists also expect gross domestic product rates to make a turn for the better. The GDP is expected to hit pre-pandemic levels and could even be stronger by mid to late 2021.
Construction and housing in Washington also saw a better year than expected, Lerch said. Housing permits and large commercial real estate transactions went up, as did construction projects. After a slowdown in 2019, Seattle home prices remain high, Lerch said.
Oil prices are also higher when compared to November’s economic forecast. However, Lerch said these prices will gradually decline after mid-2021.
Industrial production continues to improve in the U.S., Lerch said, but remains almost 2% lower than its January 2020 level.
Around 1 in 4 Washington households reported difficulty in paying their usual expenses, according to data from the U.S. Census Bureau Household Pulse Survey collected from Feb. 3-15. This is slightly lower than the national average, where about 1 in 3 Americans reported difficulty in meeting their usual expenses.
People are also saving their money at “unusually high” levels, Lerch said.
Though not at pre-pandemic levels, Lerch said with stimulus packages at state and federal levels, as well as efficient COVID-19 vaccine rollouts, economists “are looking at the economy in a more positive light.”