What the Revenue Forecast tells us about 2015

illustration of a bar graph with a green arrow rising

Four times a year the non-partisan Economic and Revenue Forecast Council examines revenues that have been collected, looks at emerging economic trends, consults with other economists and ultimately comes up with an outlook for the State. The most recent economic forecast, presented to the Legislature on February 20, will become the basis for the two-year budget that the Legislature must adopt before adjourning on April 26. Our economic forecasters have shown a pretty remarkable ability to accurately predict where the economy is headed. The February forecast gives us a few insights into what to expect in the year ahead

Forecast Graph: Consumer Confidence is Improving

Happy Consumers

There are two surveys that economists look to when determining the mood of consumers. While both surveys take a slightly different approach both the University of Michigan and the Conference Board numbers tell us that consumers today are as confident in the economy as they have been at any time since the "Great Recession." Consumer confidence has been on the upswing since 2013, but the last year has brought a large upsurge in confidence according to both surveys. Confident consumers spend more money, put less money in savings (which is strangely good for the economy), and drive up the revenues that the state collects. We are seeing all of these elements here in Washington State, and there is little reason to believe that the year ahead will do much to dent that confidence.

Fill ‘er up

"Due to an abundance of domestic oil, and quite possibly some foreign oil market mischief, gas prices continue to be lower than consumers have seen for some time."
Forecast Graph: Oil Prices Dropped Even Further Than Expected in November

Another important factor in our improving economy is the low price of gas. Due to an abundance of domestic oil, and quite possibly some foreign oil market mischief, gas prices continue to be lower than consumers have seen for some time. The less money consumers pay to fill up their vehicles, the more expendable income they have to spend on other items. Additionally, low oil prices domestically tend to equate to a stronger dollar internationally, which then helps every industry that exports or imports any of their products or supplies. While we are getting ready to enter the time of year when gas prices rise, most economists do not believe we will see an increase that will harm the overall economy, rather, as you can see by the graph, even if prices increase by double their projection inexpensive gas is here to stay in the near term.

Job Creation

"Job creation in Washington State is outpacing the country."
Job Creation Continues to Strengthen

An old saying in REALTOR® association circles is that a home is where a job goes at night. Fortunately for both our economy and home sales, job creation in Washington State is outpacing the country. While unemployment numbers still hover around 6%, a little higher than the country as a whole, we are creating jobs at a good rate. Between November 2014 and January 2015 Washington State added 31,600 jobs to its rolls, almost double what the forecast had projected. Much of those job gains are in the construction and manufacturing industry. Housing permits continue to increase quarter after quarter and, with a mild winter, many expect the next forecast to show an even larger increase in construction jobs across our state.

Washington State Employment Forecast

Washington Employment Forecast Revised Up Slightly

All of this good news leads to a slightly higher revised employment forecast by the Forecast Council.

Inexpensive gas and other energy prices, increased consumer confidence, and an all-time high in exports in the fourth quarter of 2014 leads the Council to believe that the economy should continue to improve and employment numbers should continue to get better, albeit at a moderate rate.

While there is always the possibility of outside factors pushing our economy into another downturn, the numbers that the Economic and Revenue Forecast Council look at tell us that the economy should continue to strengthen in 2015.




Source for all charts:
Economic & Revenue Review, Washington State Economic Revenue Forecast Council
www.erfc.wa.gov - www.erfc.wa.gov/presentations/documents/AWB_20150226.pdf

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