Budget Outlook &
Economic Review
January 30, 2020

Washington State

Economic and Revenue Forecast Council

 This page left intentional/y blank.

WASHINGTON STATE

ECONOMIC AND REVENUE FORECAST COUNCIL

AGENDA
BUDGET OUTLOOK & ECONOMIC REVIEW
MEETING
January 30, 2020
10:00 a.m.



Approval of meeting minutes from November 20, 2019



Budget Outlook methodology review



Budget Outlook adoption



Presentation of economic outlook and revenue collection
experience

 This page left intentional/y blank.

STATE OF WASHINGTON

ECONOMIC AND REVENUE FORECAST COUNCIL
PO Box 40912

Olympia, Washington 98504-0912

(360) 534-1560

Meeting Minutes
Revenue Review & Budget Outlook
November 20, 2019
John L. O’Brien, Hearing Room C
Economic and Revenue Forecast Council
Members Present
Ed Orcutt, House of Representatives, ERFC Chair
Christine Rolfes, Senate
John Braun, Senate
Timm Ormsby, House of Representatives
Duane Davidson, Treasurer
David Schumacher, Office of Financial Management

Staff
Steve Lerch, Executive Director
Sarian Scott, Senate
Andy Toulon, House
Rachel Knutson, OFM

Call to Order
Representative Orcutt called the meeting to order at 10:03 a.m.
Motion
Representative Ormsby moved, seconded by Representative Orcutt, to adopt the November 4,
2019 meeting minutes. Motion passed at 10:04 a.m.
Forecast Presentation
Dr. Lerch presented information on the economic and revenue forecast. Dr. Lerch summarized
the forecast changes.
Motion
Director Schumacher moved, seconded by Representative Orcutt, to adopt the official state
economic and revenue forecasts, and the unofficial optimistic, pessimistic and alternative
forecasts. Council approved the motion unanimously at 10:22 a.m.
Budget Outlook Presentation
Sarian Scott, Andy Toulon, and Rachel Knutson presented information on the four-year budget
outlook. Discussion ensued regarding pension costs and extraordinary expenditures for fire
costs.
Motion
Representative Ormsby made a motion to adopt the budget outlook as presented, seconded by
Representative Orcutt. Council approved the motion unanimously at 10:39 a.m.
Adjournment
With no further business, the meeting adjourned at 10:40 a.m.

Economic and Revenue Forecast Council

1

 This page left intentional/y blank.

Economic & Revenue Forecast Council
State of Washington
Economic Review: January 30, 2020
Executive Summary

United States


This forecast is based on a modified version of IHS Markit's January 2020
Control forecast for the U.S. economy. As usual, we have adjusted real gross
domestic product (GDP) to match the Blue Chip “Consensus” GDP forecast.
The forecast for GDP growth in 2020 and 2021 is now 1.9% in both years
compared to 1.8% in both years in the November forecast. The Blue Chip
long-range forecast has not changed since November and calls for growth
rates of 1.9% and 2.0% in 2022 and 2023. February 2020 is our first forecast
for 2024 and 2025. We assume real GDP will grow 2.0% in each year as in
the latest Blue Chip long-range forecast.



Our oil price forecast reflects the futures markets, primarily the Brent (North
Sea) oil price but also the West Texas Intermediate (WTI) benchmark. This
forecast was based on the Friday, January 24, 2020 closing prices for Brent
and WTI futures. The latest futures prices indicate a slightly steeper decline in
oil prices than in the November forecast. As in November, the refiner
acquisition price of crude is $57 per barrel in the first quarter of 2020
however it now declines to $50 by the end of 2023 compared to $52 in the
November forecast.



China and the U.S. announced a tentative “phase one” trade agreement. The
forecast includes the suspension of 15% tariffs on $160 billion of Chinese
goods scheduled to go into effect on December 15th and the reduction, from
15% to 7.5%, of tariffs on $112 billion of goods that went into effect on
September 1st that were included in the phase one agreement. However, it
does not include the $200 billion increase in Chinese imports from the U.S.
that was part of the phase one agreement. We will increase the forecast of
net exports as we see evidence of stronger Chinese demand that is not offset
by shifts away from other U.S. export markets.



The U.S. economy added 145,000 net new jobs in December. Employment
data for October and November were revised down by 14,000 jobs. With
these revisions, average monthly employment gains in 2019 equaled 176,000
jobs. Sectors with notable employment gains in December included retail
trade (+41,000), health care (+28,000), accommodation and food service
(+25,000), construction (+20,000), amusement, gambling and recreation
(+14,000) and local government (+14,000). Sectors with net employment
declines in December included manufacturing (-12,000), couriers and
messengers (-9,000), support activities for mining (-8,000), state
government (-8,000) and services to buildings and dwellings (-6,000).



Two key measures of consumer confidence diverged yet again this month.
The University of Michigan (UM) consumer sentiment survey increased by 2.5
points to 99.3 in December. Most of the December gain in the index was
attributed to upper income households. The Conference Board index of

Economic and Revenue Forecast Council

3

 Executive Summary
Economic Review

January 30, 2020

consumer confidence declined slightly, falling 0.3 points in December to
126.5. A slightly stronger assessment of current economic conditions was
offset by a decline in the short-term outlook for jobs and financial prospects.


Initial claims for unemployment insurance increased by 6,000 to 211,000
(SA) in the week ending January 18th. The four-week moving average of
initial claims decreased by 3,250 to 213,250.



Industrial production in November increased by 1.1% (SA) compared to
October. This increase in part reflects the return to work of striking
automotive workers. Over the year, industrial production is down by 0.8%
(SA). New orders for core capital goods (i.e., durables excluding aircraft and
military), which is a proxy for business investment, increased by 0.2% (SA) in
November following a 1.0% increase in October according to U.S. Census
Bureau data.



Residential construction and new home sales data improved this month.
Housing units authorized by building permits in November were 1.4% (SA)
above their October level and 11.1% above their year-ago level. November
housing starts increased by 3.2% (SA) compared to October and were 13.6%
above their November 2018 level. New home sales in November increased by
1.3% (SA) compared to October and were 16.9% above their year-ago level.
Existing home sales in November decreased by 1.7% (SA) compared to
October but were up 2.7% compared to November 2018. The seasonally
adjusted Case-Shiller national home price index for October was 0.5% above
its September level and 3.3% above its year-ago level.



Major threats to the U.S. and Washington economies remain, including
concerns about international trade policy and geopolitical risks.

Washington


We have two months of new Washington employment data since the
November forecast was released. Total nonfarm payroll employment rose
13,700 (seasonally adjusted) in November and December, which was 500
more than expected in the November forecast. Private services-providing
sectors added 7,700 jobs in the two-month period. The manufacturing sector
added 1,700 jobs of which 900 were aerospace jobs. Construction
employment increased by 800 jobs and government employment rose by
3,600 jobs.



We have also incorporated another quarter of benchmark employment data
from the Quarterly Census of Employment and Wages (QCEW). The new
QCEW data and other revisions did not change the estimated level of total
employment in October 2019. December employment is 500 (0.0%) higher
than expected in the November forecast because of stronger growth from
October to December.



Washington’s unemployment rate declined to 4.3% in December from 4.4% in
November. The December unemployment rate was a new all-time low in the
series that dates back to 1974.



Boeing suspended production of the 737 MAX jet in January. We assume the
suspension continues through March. The effect of moving from slowdown to
suspension is to reduce first-quarter U.S GDP growth by 0.5 percentage point
while adding 0.25 percentage point to growth in both the second and third

Economic and Revenue Forecast Council

4

 Executive Summary
Economic Review

January 30, 2020

quarters. Boeing has indicated that affected employees will be reassigned and
that there will be no layoffs or furloughs due to the shutdown.


In December, after the forecast was complete, the U.S. Department of
Commerce, Bureau of Economic Analysis (BEA) released state personal
income estimates for the third quarter of 2019. According to these estimates,
Washington personal income rose from $493.1 billion (SAAR) in the second
quarter to $498.2 billion in the third quarter. The reported 4.2% growth rate
(SAAR) in Washington personal income was the 16th largest among the
states and District of Columbia and exceeded the 3.8% growth rate for the
U.S. as a whole. Washington personal income growth was boosted by strong
information earnings growth in the third quarter but was restrained by below
average farm earnings growth.



Washington housing permits increased from 48,000 units (SAAR) in the third
quarter of 2019 to 54,300 units in the fourth quarter. Fourth quarter permits
consisted of 26,600 single-family units and 27,600 multi-family units. The
November forecast assumed an average rate of 43,200 (SAAR) units for the
fourth quarter as a whole consisting of 22,500 single-family units and 20,700
multi-family units.



Seattle-area home prices rose over the year for a fourth consecutive month in
November following year-over-year declines in the previous four months.
According to the S&P/Case-Shiller Home Price Indices, seasonally adjusted
Seattle home prices increased 0.8% in November following monthly growth
rates of 0.5%, 0.6%, 0.8%, and 0.7% in July, August, September, and
October. Because of the strong growth in the last five months, November
Seattle home prices were up 3.3% over the year. In comparison, the
composite-20 index was up 2.5% over the year. Seattle home prices are up
95% since the December 2011 trough and exceed the May 2007 peak by
35%.



Seattle-area consumer price inflation slightly trailed the national average in
December despite above average shelter cost inflation. From December 2018
to December 2019, the Seattle CPI rose 2.2% compared to a 2.3% increase
in the U.S. City Average. Core prices, which exclude food and energy,
increased 2.4% over the year in Seattle compared to 2.2% for the U.S. City
Average. Over-the-year shelter-cost inflation in Seattle was 3.6% compared
to the national rate of 3.2%. Seattle inflation excluding shelter trailed the
national average at 1.3% compared to 1.8%.



Washington exports declined sharply over the year for the second consecutive
quarter. Year-over-year exports decreased 33.4% in the third quarter of 2019
following a 27.6% decline in the second quarter. The large declines were
mostly because of transportation equipment exports (mostly Boeing planes)
which fell 41.9% in the second quarter and 53.1% in the third quarter. Boeing
suspended deliveries of the 737 Max in March, which clearly affected second
and third quarter exports. However, third quarter exports of agricultural
products also declined 8.3% over the year and exports of all other
commodities (mostly manufacturing) declined 8.2% over the year.



The Institute of Supply Management - Western Washington Index (ISM-WW)
moved back into slightly positive territory in December after dipping into
negative territory in November. The index, which measures conditions in the
manufacturing sector, increased from 47.0 in November to 52.5 in December
(index values above 50 indicate growth while values below 50 indicate

Economic and Revenue Forecast Council

5

 Executive Summary
Economic Review

January 30, 2020

contraction). The production, orders, and deliveries components indicated
expansion in December while the employment and inventory components
indicated contraction.


Washington car and truck sales declined slightly in December. Seasonally
adjusted new vehicle registrations decreased 1.3% in December following a
0.8% decline in November. December sales were down 7.8% over the year
and 17.5% since the November 2017 post-recession peak. Monthly sales are
erratic but have been trending down since mid-2016.



We expect 1.8% Washington employment growth this year, up slightly from
the 1.6% rate in the November forecast. As in November, we expect growth
to continue to decelerate. We expect employment growth to average 1.0%
per year in 2021 through 2023, which is slightly faster than the 0.9% rate
expected in November. Our forecast for nominal personal income growth this
year is 4.4%, up from 3.9% in the November forecast. Our new forecast for
nominal personal income growth in 2021 through 2023 averages 4.5% per
year, which is down from the 4.7% rate expected in the November forecast.
While personal income growth is lower than in November, the level is higher
due to an upward revision to history.

Economic and Revenue Forecast Council

6

 Washington State Economic Outlook &
Revenue Collection Experience
Presented to the Economic and Revenue
Forecast Council

Steve Lerch
Executive Director
January 30, 2020
Olympia, Washington

 This page left intentional/y blank.

Summary
• The preliminary economic forecast for both the U.S.
and WA are very similar to the November forecast.
• Inflation remains tame.
• Boeing suspended production of the 737 MAX jet in
January; it is expected that it will be cleared to fly this
summer with production to resume in March. Boeing
has indicated that affected employees will be
reassigned and that there will be no layoffs or
furloughs due to the shutdown.
• Revenue collections since the November forecast are
$169 million above expectations; December REET
collections were $74 million above the forecast due to
a rush of sales ahead of a January 1 increase in tax
rates on sales worth more than $1.56 million.

Slide 1

Economic and Revenue Forecast Council

Forecast risks

Upside
• Consumer and business confidence have
dipped but remain at high levels
• U.S., WA labor markets slowed in 2019 but
remain strong

Downside
• International trade policy remains uncertain
• Geopolitical risks: Iran, North Korea, China,
Russia, Brexit
• Uncertainty regarding 737 MAX
• Maturing economic expansion

Slide 2

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

9

 Inflation remains moderate
Inflation, % change over the year
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
CPI - Seattle

CPI - U.S.

Source: U.S. Bureau of Labor Statistics, data through Dec. 2019

Slide 3

Economic and Revenue Forecast Council

Job growth below 2018 averages, remains healthy

500

10

450

9

400

8

350

7

300

6

250

5

200

4

150

3

100

2

50

1

0

Thousands

Thousands

Average monthly employment change

0
2011 2012 2013 2014 2015 2016 2017 2018 2019
U.S. (left)

WA (right)

Source: Bureau of Labor Statistics, Employment Security Dept.; data through Dec. 2019

Slide 4

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

10

 Wage growth by selected industries
Annual growth in average annual wages, 2001 - 2018

Adjusting
for
inflation,
annual
overall WA
wage
growth
averaged
1.3% over
this period

Leisure & hospitality
Educ & health services
Prof & business services
Financial activities
Information
Transp & warehousing
Retail trade
Manufacturing
Construction
Total
0%

1%
U.S.

2%

3%

4%

5%

6%

WA

Source: Bureau of Labor Statistics, Employment Security Dept.; data through 2018

Slide 5

Economic and Revenue Forecast Council

2019 WA exports to most countries have declined
WA exports, 2018 vs. 2019
40
35

$ Billions

30
25
20
15
10
5
0
China

Canada

Japan

Jan - Nov 2018

South
Korea

United
Kingdom

All other

Jan - Nov 2019

Source: WISERTrade, data through Nov. 2019

Slide 6

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

11

 WA exports down substantially in 2019
Annual growth, WA exports
Aerospace
exports for
Jan – Nov
2019 are
$15.2 billion
lower than
during the
same period
in 2018

10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
2016

2017
Transp Equip

2018
All other

2019 YTD
Total

Source: WISERTrade, data through Nov. 2019

Slide 7

Economic and Revenue Forecast Council

Boeing deliveries down this year, few new orders

350

# of aircraft

250
150
50
-50
-150
-250
737

737 MAX

2018 deliveries

777

2019 deliveries

787

747/767
Freighter

2019 net orders

Source: Boeing Company, data through Dec. 2019

Slide 8

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

12

 Recent economic expansions
Cumulative U.S. GDP growth, recent economic
expansions
The current
expansion is
the longest
on record
but growth
has been
slower than
in previous
expansions.

140%
130%
120%
110%
100%
90%
1

7

9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41
Calendar Quarters

1982-1990

1991-2001

2001-2007

2009-present

Source: U.S. Bureau of Economic Analysis, data through 2019 Q3

Slide 9

Economic and Revenue Forecast Council

WSJ: probability of recession in next 12 months
40

Recession probability, %

35
30
25
20
15
10
5
0

Source: Wall Street Journal Economic Forecasting Survey, data through Dec. 2019

Slide 10

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

13

 U.S. manufacturing has slowed in last 5 months
Institute for Supply Mgmt. Manufacturing Index: U.S., WA
80
Values
above 50
indicate
expansion,
below 50
indicate
contraction.

75
70
65
60
55
50
45
40
35
30
2000 2001 2003 2005 2007 2009 2011 2012 2014 2016 2018
U.S.

WA

Source: ISM, WA data through Dec. 2019

Slide 11

Economic and Revenue Forecast Council

GDP growth forecast
Annual real GDP growth
3.0%
GDP growth
is slightly
higher for
2020 and
2021
compared
to the
November
forecast

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%
2014

2016

2018

2020

February preliminary

2022

2024

November

Source: IHS Markit, ERFC February 2020 preliminary forecast; data through 2018

Slide 12

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

14

 Oil prices
120
110
100
Dollars Per Barrel

Oil prices
are slightly
lower than
in the
November
forecast

Forecast

90
80
70
60
50
40
30
20
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
February preliminary

November

Source: Energy Information Administration, IHS Markit, ERFC; data through Q4 2019
Note: Vertical black line indicates last actual

Slide 13

Economic and Revenue Forecast Council

U.S. nonfarm payroll employment
U.S. Nonfarm Payroll Employment
160
155
150
Millions

U.S.
nonfarm
payroll
employment
is close to
the
November
forecast

145
140
135
Forecast

130
125
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
February preliminary

November

Source: IHS Markit, ERFC; data through Q4 2019
Note: Vertical black line indicates last actual

Slide 14

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

15

 WA personal income forecast
Washington personal income
700
650
600
Billions of USD

Washington
personal
income
forecast is
slightly higher
than in
November but
with slightly
lower growth
rates

550
500
450
400

Forecast

350
300
2013

2015

2017

2019

February preliminary

2021

2023

2025

November

Source: ERFC February 2020 Preliminary forecast; historical data through 2018

Slide 15

Economic and Revenue Forecast Council

Washington employment forecast
Washington Nonfarm Payroll Employment
3,800

Washington
employment
forecast is
very close to
the November
forecast

3,700
3,600

Thousands

3,500
3,400
3,300
3,200
3,100
3,000
2,900

Forecast

2,800
2,700

2,600
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
February preliminary

November

Source: ERFC February 2020 Preliminary forecast; historical data through Q4 2019

Slide 16

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

16

 Housing permits forecast
Washington Housing Permits

45
40
Thousands

Washington
housing
permits
forecast is
slightly higher
than in
November

50

35
30
25
20
2013

2015

2017

2019

February preliminary

2021

2023

2025

November

Source: ERFC February 2020 Preliminary forecast; historical data through 2019

Slide 17

Economic and Revenue Forecast Council

Collections still growing faster than personal income
growing faster than personal income
Adjusted Rev Act
growth YOY:
18Q4:
19Q1:
19Q2:
19Q3:

7.5%
5.6%
8.1%
6.6%

February
preliminary
personal income
YOY growth
estimates:
18Q4:
19Q1:
19Q2:
19Q3:

6.5%
5.4%
6.2%
5.7%

10%

Year-Over-Year Rev Act* Growth Less State Personal
Income Growth

5%

0%

-5%

-10%

-15%
1984 1988 1991 1995 1998 2002 2005 2009 2012 2016 2019
YOY Rev Act Less Income Growth

Long-Term Average

*Adjusted for large one-time payments and refunds and payments under the amnesty program
Source: ERFC; Quarterly revenue data through Q3 2019, February 2019 preliminary income estimates

Slide 18

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

17

 Actual market value came in higher than anticipated
Washington Total Market Value Growth
25

November
forecast for
growth in
market value:
7.9%

Every 1.0
percentage
point increase
in market value
growth adds
around $40
million in
revenue per
year

15
Percent

Actual growth:
9.8%

20

10

$80 m
per year

5
0
-5
-10
2000

2003

2006

2009

2012

November Forecast

2015

2018

Actual

Source: ERFC November 2019 forecast; historical data through 2019

Slide 19

Economic and Revenue Forecast Council

Taxable real estate sales jumped in December

14
1st,

12
10
$ billions, SA

On Jan.
the real
estate excise
tax rate
changed from
1.28% to a
graduated
rate ranging
from 1.1% to
3.0%

8
6
4
2
0
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Source: ERFC, data through Dec. 2019 sales

Slide 20

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

18

 Collections through January 10th$169
million above the November forecast
Special factors:
$32.0 million in
net large onetime payments
for past due
taxes.
REET collections
jumped higher
than expected
ahead of the
January 1 rate
increase.
Adjusted for
both the special
factors and the
REET surplus,
collections are
$48.0 million
(1.0%) higher
than forecasted.

Cumulative collections as of January 10 compared to the November forecast
Thousands of dollars

Estimate

Department of Revenue-Total

Actual

Diff.

Pct.

$4,604,212

$4,772,574

$168,362

3.7%

Revenue Act

2,846,010

2,926,699

80,690

2.8%

Non-Revenue Act

1,758,203

1,845,874

87,672

5.0%

Liquor Sales/Liter

47,804

48,914

1,110

2.3%

Cigarette

55,456

55,155

(301)

-0.5%

Property (State School Levy)

1,439,556

1,422,494

(17,062)

-1.2%

Real Estate Excise

179,506

268,187

88,682

49.4%

Unclaimed Property

15,927

25,629

9,703

60.9%

Other

19,955

25,495

5,540

27.8%

11,189

11,482

294

2.6%

Administrative Office of the Courts
Total General Fund-State

$4,615,401

$4,784,056 $168,656

3.7%

Total Excluding Special Factors

$4,615,401

$4,752,060 $136,660

3.0%

Slide 21

Economic and Revenue Forecast Council

Conclusion
• The U.S. and Washington economic forecasts
are very similar to November, with slightly
stronger WA housing permits
• As has been the case for some time,
Washington’s economy is continuing to
outperform the nation
• Threats to economic expansion include
concerns about international trade policy,
geopolitical risks and a maturing expansion
• The next monthly revenue collection report will
be available on February 18th and the revenue
forecast will be presented on February 19th

Slide 22

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

19

 Questions?

Economic & Revenue Forecast Council
PO BOX 40912
Olympia WA 98504-0912
www.erfc.wa.gov
360-534-1560

Economic and Revenue Forecast Council

Economic and Revenue Forecast Council

20

 Table 1
U.S. Economic Forecast Comparison
January 2020
2019Q4 2020Q1 2020Q2 2020Q3
Real GDP, Percent Change, Annual
ERFC (February Preliminary)
IHS
Economy.com
Blue Chip Average*
Blue Chip Top 10*
Blue Chip Bottom 10*

Rate
1.8
1.8
2.2
2.0
2.6
1.4

Real Consumption, Percent Change, Annual
ERFC (February Preliminary)
2.3
IHS
2.3
Economy.com
2.1
Blue Chip Average*
2.2
Blue Chip Top 10*
2.8
Blue Chip Bottom 10*
1.7

2020

2021

2022

2023

2024

2025

1.7
1.7
1.5
1.6
2.3
1.0

2.0
2.4
2.2
1.9
2.6
1.1

1.9
2.5
1.5
1.8
2.3
1.3

1.9
2.1
1.8
1.9
2.3
1.8

1.9
2.1
2.0
1.9
2.3
1.5

1.9
1.7

2.0
1.5

2.0
1.8

2.0
2.2

1.9
2.3
1.6

2.0
2.4
1.6

2.0
2.3
1.6

2.0
2.2
1.7

Rate
2.0
2.9
1.4
2.1
2.7
1.3

2.1
2.7
1.5
2.1
2.6
1.5

2.0
2.8
1.1
2.0
2.5
1.4

2.4
2.8
1.9
2.4
2.7
1.9

2.1
2.7
1.4
2.1
2.5
1.7

2.0
2.3

2.2
2.2

2.1
2.2

2.1
2.4

2.0
2.4
1.7

2.2
2.7
1.7

2.1
2.5
1.8

2.1
2.3
1.9

Federal Funds Rate
ERFC (February Preliminary)
IHS
Economy.com

1.7
1.7
1.7

1.6
1.6
1.6

1.6
1.6
1.6

1.6
1.6
1.6

1.6
1.6
1.6

1.8
1.8
1.7

2.1
2.1

2.4
2.4

2.6
2.6

2.6
2.6

Three Month T-Bill Rate
ERFC (February Preliminary)
IHS
Blue Chip Average*
Blue Chip Top 10*
Blue Chip Bottom 10*

1.6
1.6
1.6
1.6
1.6

1.5
1.5
1.6
1.6
1.5

1.5
1.5
1.5
1.6
1.3

1.5
1.5
1.5
1.7
1.1

1.5
1.5
1.5
1.7
1.2

1.6
1.6
1.4
1.8
0.9

2.0
1.9
2.0
2.6
1.4

2.1
2.1
2.1
2.8
1.5

2.3
2.4
2.2
2.9
1.6

2.3
2.4
2.3
2.9
1.7

10-Yr. T-Note Yield
ERFC (February Preliminary)
IHS
Economy.com
Blue Chip Average*
Blue Chip Top 10*
Blue Chip Bottom 10*

1.8
1.8
1.8
1.8
1.8
1.8

2.0
2.0
2.1
1.8
2.0
1.7

2.2
2.1
2.2
1.9
2.2
1.6

2.3
2.3
2.2
1.9
2.3
1.6

2.2
2.2
2.2
1.9
2.2
1.6

2.7
2.7
2.7
2.1
2.6
1.6

3.0
2.9

2.9
3.0

2.9
3.0

2.9
3.1

2.6
3.3
1.8

2.8
3.4
2.1

2.9
3.6
2.2

3.0
3.7
2.3

1.5
1.6
1.9
2.1
2.6
1.6

1.5
1.1
2.4
2.0
2.5
1.3

1.9
1.8
2.3
2.2
2.5
1.8

1.8
1.7
2.4
2.0
2.5
1.6

2.2
2.5

2.2
2.6

2.2
2.5

2.2
2.4

2.2
2.5
1.9

2.2
2.5
1.9

2.2
2.5
1.9

2.2
2.4
1.9

Consumer Price Index, Percent Change, Annual Rate
ERFC (February Preliminary)
3.0
1.6
IHS
2.7
1.8
Economy.com
2.5
2.3
Blue Chip Average*
2.4
2.2
Blue Chip Top 10*
2.8
3.0
Blue Chip Bottom 10*
1.8
1.6
Payroll Employment, Millions
ERFC (February Preliminary)
Percent Change, Annual Rate
IHS
Percent Change, Annual Rate
Economy.com
Percent Change, Annual Rate

152.2
1.5
152.2
1.6
152.2
1.5

152.7
1.4
152.7
1.3
152.6
1.2

153.3
1.5
153.3
1.6
153.2
1.5

153.3
0.1
153.4
0.4
153.2
0.0

153.2
1.2
153.3
1.2
153.1
1.1

154.2
0.6
154.4
0.8
153.8
0.4

155.2
0.7
155.1
0.5

155.6
0.2
155.2
0.1

155.8
0.2
155.4
0.1

156.3
0.3
156.0
0.4

Unemployment Rate, Percent
ERFC (February Preliminary)
IHS
Economy.com
Blue Chip Average*
Blue Chip Top 10*
Blue Chip Bottom 10*

3.5
3.5
3.5
3.6
3.6
3.5

3.5
3.5
3.5
3.6
3.7
3.4

3.5
3.4
3.5
3.6
3.9
3.4

3.5
3.5
3.5
3.6
4.0
3.3

3.5
3.5
3.5
3.6
4.0
3.4

3.7
3.5
4.0
3.7
4.4
3.2

3.8
3.8

4.0
4.2

4.2
4.5

4.3
4.5

4.1
4.7
3.5

4.1
4.7
3.5

4.1
4.6
3.6

4.1
4.6
3.6

Percent Change, Annual Rate
1.6
2.1
1.5
1.8
1.8
2.3
1.9
2.5
2.1
2.2
2.0
1.9
2.9
2.7
2.8
2.5
1.3
1.5
1.3
1.3

1.9
2.2
2.1
2.6
1.6

2.0
2.6
2.0
2.5
1.5

2.1
2.2
2.0
2.4
1.5

1.8
2.0
2.0
2.5
1.5

1.9
2.2
2.0
2.5
1.5

2.3
2.5
2.0
2.4
1.6

53.7
52.7
60.2
#REF!

50.6
47.5
61.3
#REF!

49.5
52.4

49.4
58.1

49.8
62.1

50.4
66.4

#REF!

50.6

Real Disposable Personal Income,
ERFC (February Preliminary)
IHS
Blue Chip Average*
Blue Chip Top 10*
Blue Chip Bottom 10*

West Texas Intermediate
ERFC (February Preliminary)
57.0
55.4
IHS
56.7
56.9
Economy.com
56.9
60.1
CME Group (10/12/2016)
#REF!
#REF!
* Forecasts beyond 2021 are from the October 2019 Blue

Economic and Revenue Forecast Council

54.1
53.2
55.9
52.0
60.1
60.3
#REF!
#REF!
Chip Economic Indicators

21

 U.S. Forecast Comparison
2019Q4

2020Q1

2020Q2

2020Q3

19,290

19,385

19,474

2019

2020

2021

2022

2023

2024

2025

Real GDP (Billions of 2012 Dollars)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

19,208
1.8%

19,188

1.7%

19,271

1.6%

1.7%

2.0%

19,358
1.8%

1.9%

19,440
1.7%

19,069
2.3%

19,063
2.3%

19,429
1.9%

19,397
1.8%

19,801
1.9%

19,746
1.8%

20,177
1.9%

20,121
1.9%

20,581
2.0%

20,993
2.0%

21,412
2.0%

20,523
2.0%

Real Consumption (Billions of 2012 Dollars)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

13,430

13,496

2.3%

13,410

2.0%

13,479

2.0%

2.1%

13,564
2.1%

13,547
2.0%

13,632
2.0%

13,607
1.8%

13,284
2.6%

13,277
2.6%

13,600
2.4%

13,574
2.2%

13,886
2.1%

13,832
1.9%

14,164
2.0%

14,108
2.0%

14,475
2.2%

14,779
2.1%

15,090
2.1%

14,419
2.2%

PCE Price Index (2012=100)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

110.4

110.9

1.9%

1.5%

110.6

111.1

2.2%

2.0%

111.3
1.6%

111.6
1.9%

111.8
1.7%

112.2
1.9%

109.7
1.4%

109.7
1.5%

111.6
1.7%

111.9
2.0%

113.6
1.8%

114.0
1.9%

115.8
2.0%

116.3
2.0%

118.1
2.0%

120.4
2.0%

122.7
1.9%

118.6
2.0%

Real Personal Income (Billions of 2012 Dollars)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

17,104

17,194

1.8%

17,139

2.1%

17,219

1.5%

1.9%

17,262
1.6%

17,275
1.3%

17,340
1.8%

17,331
1.3%

16,983
3.1%

17,014
3.3%

17,304
1.9%

17,306
1.7%

17,661
2.1%

17,644
2.0%

18,061
2.3%

18,063
2.4%

18,438
2.1%

18,859
2.3%

19,326
2.5%

18,511
2.5%

Nonfarm Payroll Employment (Millions)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

152.2
1.5%

152.2
1.4%

152.7
1.4%

152.6

153.3
1.5%

153.1

153.3
0.1%

153.2

151.4
1.6%

151.4

153.2
1.2%

153.1

154.2
0.6%

154.0

155.2
0.7%

154.8

155.6
0.2%

155.8

156.3

0.2%

0.3%

155.4

1.1%

1.5%

0.3%

1.6%

1.1%

0.6%

0.5%

0.4%

3.5
3.5

3.5
3.5

3.5
3.5

3.5
3.5

3.7
3.7

3.5
3.5

3.7
3.7

3.8
3.9

4.0
4.1

4.2

4.3

58.1
56.7

56.6
57.1

54.5
55.8

53.2
54.8

59.4
59.0

54.1
55.4

50.9
53.0

50.0
52.3

50.0
52.3

50.5

51.1

4.6

4.6

2.3

2.3

Unemployment Rate (Percent of Labor Force)
February Forecast, Preliminary
November Forecast
Oil Price, Refiner's Acquisition
February Forecast, Preliminary
November Forecast

30 Year Fixed Mortgage Rate (Percent, average)
February Forecast, Preliminary

3.7

3.9

4.0

4.0

3.9

4.0

4.3

4.5

4.5

November Forecast

3.7

3.8

3.9

4.0

3.9

3.9

4.4

4.5

4.6

3 Month T-Bill Rate (Percent, average)
February Forecast, Preliminary

1.6

1.5

1.5

1.5

2.1

1.5

1.6

2.0

2.1

November Forecast

1.6

1.6

1.5

1.5

2.1

1.5

1.8

2.2

2.4

Economic and Revenue Forecast Council

22

 Washington Forecast Comparison
2019Q4

2020Q1

2020Q2

2020Q3

2019

2020

2021

2022

2023

2024

2025

Real Personal Income (Billions of 2012 Dollars)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

456.1
2.2%

451.1
1.7%

459.0
2.6%

452.8
1.5%

462.0
2.7%

455.4
2.3%

464.4
2.0%

457.1
1.5%

450.9
4.3%

447.7
3.6%

463.1
2.7%

456.1
1.9%

474.4
2.4%

466.9
2.3%

486.7
2.6%

479.4
2.7%

499.5
2.6%

514.2
2.9%

529.5
3.0%

493.8
3.0%

Personal Income (Billions of Dollars)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

503.7
4.2%

498.6
4.1%

508.9
4.2%

503.1
3.6%

514.3
4.3%

508.3
4.2%

519.1
3.7%

512.7
3.5%

494.6
5.8%

491.3
5.1%

516.6
4.4%

510.4
3.9%

538.9
4.3%

532.5
4.3%

563.7
4.6%

557.6
4.7%

589.9
4.6%

619.2
5.0%

650.0
5.0%

585.7
5.0%

Disposable Personal Income (Billions of Dollars)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

447.8
3.9%

444.5
4.3%

452.5
4.3%

448.7
3.9%

457.3
4.3%

453.4
4.2%

461.6
3.8%

457.5
3.6%

440.1
5.3%

437.7
4.8%

459.4
4.4%

455.4
4.0%

479.5
4.4%

475.7
4.5%

501.4
4.6%

498.2
4.7%

523.3
4.4%

547.5
4.6%

573.8
4.8%

522.2
4.8%

Nonfarm Payroll Employment (Thousands)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

3495
1.5%

3494
1.5%

3513
2.1%

3504

3533
2.3%

3524

3538
0.6%

3530

3470
1.9%

3470

3533
1.8%

3524

3572
1.1%

3561

3612
1.1%

3595

3636
0.7%

3658

3678

0.6%

0.6%

5.1

5.2

293.9

293.3

3623

1.2%

2.3%

0.7%

1.9%

1.6%

1.1%

1.0%

0.8%

Unemployment Rate (Percent of Labor Force)
February Forecast, Preliminary

4.4

4.3

4.2

4.3

4.6

4.3

4.5

4.7

4.9

November Forecast

4.5

4.5

4.5

4.5

4.6

4.5

4.7

4.9

5.1

294.3

293.2

291.5

293.5

292.4

289.9

291.5

293.2

Manufacturing Employment (Thousands)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

293.2
-1.4%

295.0
-1.3%

1.6%

295.2
0.2%

-1.6%

294.1
-1.4%

-2.3%

292.8
-1.9%

2.1%

294.5
2.4%

-0.4%

293.5
-0.3%

-0.8%

291.3
-0.8%

0.6%

293.0
0.6%

0.6%

0.2%

-0.2%

295.5
0.9%

Construction Employment (Thousands)
February Forecast, Preliminary
Percent Change

November Forecast
Percent Change

221.9
4.1%

221.4
3.5%

222.5
1.1%

219.7

222.2
-0.6%

218.8

220.8
-2.4%

217.6

-3.0%

-1.7%

-2.0%

219.1
2.7%

218.9
2.6%

221.3
1.0%

218.2

216.8
-2.1%

214.0

214.5
-1.1%

212.5

212.4
-1.0%

212.2
-0.1%

212.3
0.1%

211.8

-0.3%

-1.9%

-0.7%

-0.3%

44.6

43.3

43.1

42.7

42.0

41.3

-8.3%

-2.9%

-0.5%

-0.8%

-1.7%

-1.5%

Housing Permits (Thousands)
February Forecast, Preliminary

54.3

44.9

44.8

44.6

Percent Change

63.5%

-53.2%

-0.7%

-1.4%

November Forecast

43.2

43.9

43.8

43.5

45.9

43.6

42.5

42.2

41.6

Percent Change

-34.4%

-0.8%

-2.2%

-3.9%

-5.0%

-2.5%

-0.6%

-1.4%

Economic and Revenue Forecast Council

6.5%

48.6
1.9%

23

 U.S. Forecast Comparison

Fiscal Years
2020

2021

2022

2023

2024

2025

19,251

19,614

19,989

20,376

20,786

21,201

2.0%

1.9%

1.9%

1.9%

2.0%

2.0%

19,233

19,568

19,928

20,320

1.9%

1.7%

1.8%

2.0%

18

45

61

56

0.1%

0.1%

0.1%

0.0%

13,461

13,743

14,022

14,317

14,628

14,933

2.7%

2.1%

2.0%

2.1%

2.2%

2.1%

13,445

13,699

13,967

14,260

2.6%

1.9%

2.0%

2.1%

16

44

55

57

0.1%

0.2%

0.1%

0.0%

110.6

112.5

114.7

116.9

119.3

121.6

1.6%

1.7%

1.9%

1.9%

2.0%

1.9%

110.8

113.0

115.2

117.4

1.8%

1.9%

2.0%

2.0%

-0.2

-0.4

-0.4

-0.5

-0.2%

-0.2%

0.0%

0.0%

February Preliminary Forecast

3.5%

3.6%

3.7%

3.9%

4.1%

4.3%

November Forecast

3.5%

3.6%

3.8%

4.0%

0.0%

0.0%

-0.1%

-0.2%

February Preliminary Forecast

3.8%

4.2%

4.5%

4.5%

4.6%

4.6%

November Forecast

3.8%

4.2%

4.5%

4.6%

0.0%

0.0%

0.0%

-0.1%

2.2%

2.3%

Real GDP
Billions of 2012 dollars

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

Real Consumption
Billions of 2012 dollars

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

PCE Price Index
2012 = 100

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

Unemployment Rate
Percent of Labor Force

Difference in forecast

30 Year Fixed Mortgage Rate
Annual Average

Difference in forecast

3 Month T-Bill Rate
Annual Average

February Preliminary Forecast

1.7%

1.5%

1.8%

2.0%

November Forecast

1.7%

1.6%

2.1%

2.3%

0.0%

-0.1%

-0.2%

-0.2%

Difference in forecast

Economic and Revenue Forecast Council

24

 Washington Forecast Comparison

Fiscal Years
2020

2021

2022

2023

2024

2025

457.7

468.6

480.4

492.9

506.7

521.9

3.7%

2.4%

2.5%

2.6%

2.8%

3.0%

452.1

461.1

472.9

486.4

2.6%

2.0%

2.6%

2.8%

5.6

7.5

7.4

6.5

1.1%

0.4%

-0.1%

-0.2%

506.4

527.4

551.1

576.4

604.3

634.6

5.3%

4.2%

4.5%

4.6%

4.8%

5.0%

500.9

520.9

544.7

571.2

4.4%

4.0%

4.6%

4.9%

5.4

6.5

6.4

5.2

0.9%

0.2%

-0.1%

-0.3%

3,505.8

3,552.7

3,593.2

3,624.6

3,647.2

3,668.5

2.0%

1.3%

1.1%

0.9%

0.6%

0.6%

3,500.4

3,542.6

3,578.9

3,609.0

1.9%

1.2%

1.0%

0.8%

5.4

10.2

14.4

15.7

0.2%

0.1%

0.1%

0.0%

48.0

44.0

43.1

43.0

42.3

41.7

4.2%

-8.2%

-2.2%

-0.2%

-1.5%

-1.4%

Real Personal Income
Billions of 2012 dollars

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

Nominal Personal Income
Billions of dollars

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

Nonfarm Payroll Employment
Thousands

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

Housing Permits
Units Authorized, Thousands

February Preliminary Forecast
Growth

November Forecast
Growth

Difference in level
Difference in growth forecast

Economic and Revenue Forecast Council

44.7

43.0

42.4

41.9

-2.9%

-3.9%

-1.3%

-1.1%

3.3

1.0

0.7

1.0

7.1%

-4.4%

-0.8%

0.9%

25

 Year-Over-Year Employment Growth by Industry
(November 2018 to November 2019)
Washington vs. U.S.
Washington
(000)

Total
Electronic Shopping and Mail-Order Houses
Software Publishers
Information Excluding Software
Other Services
Transportation, Warehousing and Utilities
Professional and Business Services
Education and Health Services
Financial Activities
Aerospace Product and Parts Manufacturing
State and Local Gov Non-Education
Construction
Leisure and Hospitality
Wholesale Trade
State and Local Gov Education
Manufacturing Excluding Aerospace
Mining and Logging
Information
Retail Trade
Manufacturing

% Chg.

U.S.
% Chg.

65.2
11.8
4.7
4.6
5.5
3.2
11.6
11.2
3.4
1.8
3.7
3.6
5.0
1.3
0.0
-0.4
-0.6

1.9%
21.0%
7.0%
6.6%
4.5%
2.8%
2.7%
2.3%
2.1%
2.1%
1.7%
1.7%
1.4%
0.9%
0.0%
-0.2%
-9.5%

1.5%
-3.4%
7.1%
-0.9%
1.5%
1.0%
2.0%
2.8%
1.4%
3.6%
1.1%
2.0%
2.5%
1.1%
0.6%
0.5%
-1.1%

9.4
4.7
1.4

6.8%
1.2%
0.5%

0.2%
-0.2%
0.6%

Source: WA State ERFC Kalman filtered data, U.S. Bureau of Labor Statistics

Economic and Revenue Forecast Council

26