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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

January 19, 2010 at 10:30 AM

Nowhere to go but up for the economy (maybe)

Top of the News: I sat in on the US Bank economic forecast breakfast for its business clients this morning. The speakers were in agreement that 2010 will be better if for no other reason than that last year was so bad.

Michael Parks, now editor emeritus of Marples Northwest Business Letter, said Washington state should come out better this year than the nation or other states in the region. Washington benefits from, among other things, a large and diverse tech sector, less of a housing bubble, an export-driven economy and hydropower.

He made the interesting point that the state economy has grown and diversified so much that Boeing now accounts for 2.9 percent of employment, vs. 10 percent in the 1960s. Nevertheless, these are the second-best paying jobs, behind software. Still, overall unemployment has now surpassed even the legendary “turn out the lights” level of 1969 for this point in a recession.

Parks argues that higher oil prices will be a good thing for the state because they signal a stronger world economy, hence more demand for Washington exports. I’d toss in a bit of caution here, though. At a certain point in the mid-$80 a barrel range, oil prices threaten to spin the national economy into a double-dip recession.

Economist John Mitchell made the point that 51 percent of today’s adult population has never been through such a bad recession. I’d add that none of the bankers is old enough to remember the Depression, hence their reckless gambles and swindles — but greed always trumps history.

Mitchell “thinks” the recession is over, but many unknowns remain. One is Ben Bernanke’s exit strategy from zero interest rates. Mitchell forecasts a slow tightening in the second half. I say again: Watch oil prices. And persistent unemployment ain’t chopped liver.

Parks offered some questions whose answers will determine much of the outlook: What will be the consequences of massive government spending (funny, nobody mentions spending for two wars); How does Bernanke “dismount” from the Fed’s expansionist policies, and whither the “Chimerica” economic partnership (and imbalances)?

Today’s Econ Haiku:

Two winners today?

Brown in Mass. and health-care stocks.

See a pattern here?

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