State’s top economist sees two more years of recession

Four lost years.

That’s what Washington’s Chief Economist Arun Raha is calling the recession brought on by the financial collapse of 2008.

Raha told a crowd at the Pullman Chamber of Commerce luncheon Tuesday that, while the recession has ended, the state’s economy will not return to its pre-collapse performance until 2012 at the earliest.

“We’re doing okay if we can get out in four or five years,” said Raha. “So, hang in there, and before you know it we’ll be better.”

The recession hit Washington’s economy hard and deep, making for a steep hill to return to pre-recession levels.

“We fell into a deeper hole and we are coming out of it slowly,” he said. “Doesn’t it cheer you up?”

In American recessions since WWII, the state averaged drops of 1.8 percent in gross domestic product, 2.6 percent in employement and have lasted an average of 10 months.

This recession has lasted 18 months and saw GDP fall 4.1 percent and employment drop 6.1 percent.

Though he called the state’s economy “fundamentally sound” Raha said a number of factors are limiting revenues to state government.

The rate at which people across the nation are saving money rose from an expected 3.1 percent in the first quarter of 2010 to 6.1 percent in the second quarter.

Raha said households are essentially recapitalizing their income after suffering big hits in their home equity and retirement funds. The recession dropped the country’s net worth $18 trillion.

“With a T,” he stressed.

Consumer confidence is also at an all-time low, as job market and retirement concerns hold people back from making purchases.

“It all depends on people spending money,” he told the chamber crowd. “Go out and spend the money somewhere in the state. Because we’ll get 6.5 percent, and that’s enough.”

Lagging, but trending upward, are non-residential construction, car sales and commercial lending.

As those sectors improve, so will the rest of the economy, he said.

While the state’s economy will continue to lag for a couple of years, said Raha, the economy on the Palouse should continue along its steady path.

Most sectors of the state’s economy were hit hard by the national recession, but agricultural exports, powered by wheat, felt little of that brunt.

“We’re still strong in ag exports, especially to Asia, where their economies are still going strong,” he said.

Strong Asian markets and a Russian drought that forced their government to close off wheat exports mean Palouse grain should have little trouble finding a marketplace.

“Wheat farmers should do very well,” he said.

He pointed specifically to Egypt. The world’s top wheat importer purchased large amounts of soft white wheat after Russia announced its export embargo.