Is Seattle in a Recession? Let’s Do the Numbers

A month ago, economist Mark Zandi at Moody’s Investors Service made waves by saying that 21 states, including Washington, were either in a recession or “on the precipice” of one.

I wonder if that’s right. A few caveats: I’m a journalist, not an economist, but even the economists are not weather forecasters. An economy is millions of people’s decisions about buying, selling, saving, and investing. In the mass, their decisions follow patterns. Predicting them is part theory (some of which is very good), part art, and part Ouija board.

Former Federal Reserve Chairman Alan Greenspan, an ultimate data wonk, found a recession indicator in the sales of men’s underwear — a purchase that people are quick to postpone when distracted by financial worry. A recent posting on Reddit finds tea-leaf wisdom in “the sheer number of pets being abandoned, rehomed, and stuck on shelters.”

Zandi is getting his name in the news. He’s marketing his company and also himself, especially if he turns out to be right. And he could be right. Recessions happen, and a forecaster who gets it right earns bragging rights.

It’s easy in economics to forecast the storm that never comes. I know about that. In 2022 I argued that the national economy was on the cusp of a recession because of several ominous signs. One was the burst of post-Covid inflation and the Fed’s determination to stamp it out by raising interest rates. I also thought the crash of cryptocurrency was a classic sign of the sort of investor nuttiness that often comes before a fall.

Then crypto came back. One Bitcoin is now worth more Federal Reserve Notes than it was before the crash. The Fed did raise short-term interest rates above interest rates on long-term bonds. That creates an inverted yield curve, the economists’ classic warning of recession. Unfortunately for believers in economics, sometimes the yield curve provides a false signal. From October 2022 to December 2024, interest rates did their inverted thing, and all that happened was a tiny decline in gross domestic product for one quarter — the first one of this year.

This tap on the brakes was followed in the second quarter by a burst of economic speed. What happened? American consumers decided to keep spending. Well, people can do that.

Compare this year’s tap on the brakes to the “Great Recession.” From December 2007 to June 2009, six consecutive quarters, the economy (GDP) fell 4.3 percent — 14 times as much as its stumble in the first quarter of this year. Back then, unemployment peaked at 10 percent for three months, and didn’t get back to 4.7 percent for seven years. We’re at 4.5 percent now. That’s not a recession.

And finally, what is the stock market saying to us? When investors feel the cold wind of an imminent recession, they sell. From October 2007 to March 2009, the Dow Jones Industrial Average plunged 54 percent. Right now the Dow is above 46,000, near its all-time high of 46,353. It could reverse any day, but so far it has not.

Closer to home are, however, several signs of a slowdown, if not a reversal. The latest two-year revenue forecast for state government, released in September, is down by $903 million since the budget passed in the spring. In a $78-billion budget, $903 million not a huge amount, and it’s a decline in the expected rate of growth. for state government, released in September, is down by $903 million since the budget passed in the spring. In a $78-billion budget, $903 million not a huge amount, and it’s a decline in the expected rate of growth. Revenue is still going up. Still, it’s not good news that every three months the two-year future has been looking less jolly.

Statewide, there are some parts of the economy that are in decline. Construction is off somewhat. Government employment is down, reflecting the Trump administration’s cuts in federal money. But employment in private-sector healthcare, which has been going up for decades, continues up, as does employment in private education.

The revenue forecast for Seattle city government is similar to the state’s. The city’s general-fund spending is about $2 billion a year. In September estimated future revenues were $150 million short of expectations. The three-year-old payroll tax, which was supposed to be for housing, is being used to fill budget holes. Lately it has been bringing in less than expected, but city officials are hoping voters in November will approve another business-tax increase.

Seattle’s economy has several weaknesses. Construction of housing is off, because interest rates have risen from rock-bottom levels during the Covid time, and because so many apartments have been built already. Zillow reports that the price of the median home, $847,975, is down for the year by 1.7 percent. House prices are still at record highs, but it’s notable that they haven’t been rising.

The Covid pandemic of 2020 emptied out much of Seattle’s downtown office buildings. Employers allowed their people to work from home, and employees liked it. Employers have been calling people back, but movement has been slow. Kidder Mathews recently estimated office vacancy in Seattle at 27 percent. That’s a big number, and suggests that it will be many more years before the city sees an office-building boom. Of the office market in Seattle and suburbs, the company says, “Due to the recent surge in new deliveries over the past few years, the development pipeline fell by 72% compared to last year and by 90% compared to 2023.” Companies that can afford it may continue building space for themselves, but the climate is not good for building on speculation.

President Trump’s push for big new tariffs, and his aggressive rhetoric generally, has had a chilling effect. Tourism from Canada, the presumptive “51^st state,” is down. Imports are down, especially from China. You can see the effect during the Mariners’ games, when drones above T-Mobile Park show Terminal 46 empty of shipping containers.

If Trump’s tariffs will become permanent, it will be bad news for our trade-dependent state and city. According to a report by the state’s Office of Financial Management, a high-tariff regime could reduce statewide employment in agriculture, food processing, and aerospace by tens of thousands of workers by 2029. It estimated that taxes on imports would push up retail prices of clothing and shoes by 7 percent, the price of food by 16 percent, and the price of used cars by 25 percent. Statewide, by 2028, production (GDP) could fall 2 percent behind where it would otherwise be, and state revenues lag by $2.2 billion.

These are more forecasts, but reality could be not so bad. It could be worse, but it’s not likely to be good.

President Trump also announced a $100,000 tax on future H1B visas for foreign workers. If that sticks, it’s bad news for a number of Seattle-area employers, most obviously for Amazon and Microsoft. A penalty for hiring foreign talent is supposed to be good for American workers, and some may benefit. But limiting the talent available to of our companies is almost certain to produce a net economic loss.

Trump’s tightening of immigration rules and crackdown on violators could do the same. Seventeen percent of Seatle-area residents are foreign-born. Among all U.S. counties, King County is 13^th highest in raw number of immigrants: 568,000 out of the total U.S immigrant population of 46 million. Besides the tech companies, immigrant workers are crucial for our healthcare, hotel, restaurant, and construction industries.

The economic pain from new federal taxes can be laid at the feet of our Republican government. At the state and local level, however, it’s the Democrats that have been jacking up taxes on business and threaten to raise them higher. Republicans have been raising an alarm that the Democrats were turning Washington, and Seattle especially, into a region hostile to business. Democrats dismissed this as partisan talk, which of course it was. In their turn, Republicans dismissed the Democrats’ alarm over Trump’s tariffs (which are taxes, too) as partisan talk. But that a statement is partisan doesn’t make it false. Both sides can be right that the other side is wrong.

Seattle is a national leader in imposing a high minimum wage. For companies of more than 500 employees, the city’s minimum is now $20.76 an hour, which is higher even than New York City’s ($16.50) or San Francisco’s ($19.18). Smaller companies pay Washington’s minimum, $16.66, which is the highest minimum wage of any of the 50 states. That’s good for employees who get raises and continue work, but not so good for employees who have their hours cut or applicants who can’t find work. A minimum wage set too high can also be a barrier.

Seattle restaurants have a lot of minimum-wage workers. Also, this year restaurant owners no longer have the tip credit, so they can’t count tips as part of the legal minimum. In addition, a shortage of servers and cooks has tended to push up market wages anyway. Restaurants are also squeezed by food costs and rent. In the past six months, according to a survey by the Seattle Restaurant Alliance, 89 percent of Seattle respondents have raised prices, 76 percent have reduced staffing hours, 43 percent have closed earlier and 44 percent have laid off employees.

The Seattle area has also had to absorb layoffs because of the new technology of artificial intelligence. As of early September, Microsoft had laid off 3,200 workers locally — 15,000 worldwide. Many of them are junior programmers and others replaced by AI. The company itself is not having a financial problem. In the quarter that ended in June, Microsoft’s revenue was up 18 percent from year earlier. Operating income was up 23 percent. Microsoft stock is trading above $500 a share.

All that’s a good thing; it would be much worse if Microsoft were in trouble, and laying off people because it couldn’t pay them. Still, a layoff is a layoff. The obvious value of AI suggests that in the years ahead, other people will lose their jobs, even as the expansion of AI creates new jobs for those who can push AI forward.

Finally, a note about auto sales. In June, statewide vehicle registrations were down 6.2 percent from the year earelier. The boom in sales of electric vehicles, which made Washington the No. 2 state, after California, in per-capita EV ownership, has been cooling off. On September 30, the federal government’s tax credit — $7,500 for new EVs, and up to $4,000 for used EVs — is set to expire. And again, the tariffs, if they stick, will raise the price of new cars. Even General Motors and Ford use foreign parts.

So — are we in a recession? After thinking of all the negatives, it’s tempting to say so. But Seattle’s principal industries — computer tech, aerospace, maritime, construction, education, life sciences, healthcare, wholesale and retail trade, law and government — have remarkable strengths.

Here is a statistic: A 2022 survey of labor productivity — average output per worker — found among all the states, Washington was second-highest ($106.09 per hour) to New York ($117.86). For reference, Delaware ($104.53) was No. 3, California ($103.30) was No. 4, and Massachusetts ($100.72) was No. 5. The federal Bureau of Labor Statistics says that in the growth of productivity 2019-1024, Washington ranked No. 1 among the 50 states, with 3.8 percent annual growth; from 2007-2024, we were also No. 1, with 3 percent annual growth. And — not coincidentally — from 2007 to 2024, Washington ranked No. 1 among the states in the growth of wages, 4.4 percent a year.

Business often bellyaches about the high pay around here. For some of them, it’s a problem. But for the community as a whole, high productivity and high pay are markers of economic strength. And that’s a really good thing.

Here’s another number to chew on. Of the top 373 counties in the United States, during the first quarter of 2025, King County had the seventh-highest average weekly wage: $2,675. Among those 373 counties, the only ones with average weekly wages higher than King County were the counties that include Boston, New York, and the part of Connecticut closest to New York, and San Francisco, San Mateo, and Santa Clara, California.

Compared with the rest of America, the Seattle area has some vulnerabilities to a recession — reliance on foreign trade and foreign workers — but we also have strengths. CNBC listed Washington as one of “the 10 states best prepared for a recession.”  CNBC says: “The Evergreen State is fertile ground for entrepreneurs. A new business starting up in Washington stands a better chance of survival than in any other state, according to an analysis of Bureau of Labor Statistics data by Simply Business, a national insurance marketplace.”

There you have it: strengths and weaknesses. Are we in a recession? I don’t think so, but I could be proved wrong at any time. I learn from the economists that the reason why most of them hedge their bets is because they don’t like to lose.