Seattle among top four metros in the nation for gains in job density: Brookings Institution.

The on-the-ground experience in Seattle – lots of cranes, futuristic new buildings, more everything – received another dose of empirical verification. The Brookings Institution has released a study (press release) finding that Seattle is one of four metro areas in the nation that have posted the largest gains in job density.

The Seattle Times business columnist writes of the study.

In addition to the blockbuster news that Apple will be expanding here with a “key engineering hub” in South Lake Union, a new study shows that Seattle is one of the four metros in America with the greatest increase in job density. The other “superstar cities” in this regard are New York, Chicago and San Francisco.

It gets better. The nation’s density of information tech jobs increased by 60 percent between 2004 and 2015. San Francisco, New York and Seattle accounted for virtually all of this rise.

The Brookings authors (full report) say of the importance of job density,

Density helps drive economic growth by enablingmore frequent and productive interactions among firms and workers. It encourages more sharing and trading among firms, better matching of workers to firms, and faster learning—helpingto lower costs, increase industrial diversity, spur innovation, and ultimately raise the productivityof local firms and workers.

Density increases firms’ proximity to one another,permitting them to share more inputs and more easily trade their products and services. In denser areas, more intermediate inputs are more readily available.6 Similar firms will have access to largerpools of specialized labor and suppliers. Proximity also helps lower the cost of transporting goods and providing services, leading to more trade.

They also discuss research that has “demonstrated the important role that density plays in fostering economic growth, social capital and civic engagement, and healthier, more sustainable communities.” They acknowledge that making that happen requires additional factors: A primary focus of the research is identifying strategies to promote densification that works, that advances the positive outcomes identified. They write,

Strengthened by policies that encourage investment in existing development areas rather than low densitylocales and greenfield sites, such concentrations do not equate to economically dynamiccommunities—but they seem increasinglyrequisite for creating them. When coupled
with good design and programming driven by the vision and values of local stakeholders, density not only promotes economic and socialbenefits but also addresses urgent fiscal and environmental challenges facing many U.S. cities and metropolitan regions today.

Hence this report, which aims to help leaders understand how, and how much, changing demands for place are influencing the clusteringof jobs both across and within metropolitanareas. The findings suggest a need for them toembrace policies and investment strategies that advance more concentrated growth patterns, while also supporting transformative placemaking solutions that help such dense places become vibrant communities where businesses and workers thrive.

Washington, through the Growth Management Act and other pro-density regulation, as explicitly embraced such policies, though not without controversy and unintended consequences. Setting those issues, let’s look at Seattle’s job density record. The following graph from the study tells part of the story.

More,

The metro areas of New York, Chicago, San Francisco, and Seattle account for almost 90% of the increase in job density seen among all 94 large metroareas from 2004 to 2015. The outsized influenceof these four metro areas stems from their size, density, and growth. Together, they comprise about 20% of private, non-administrative jobs in metropolitan America and a slightly larger share of its job growth during this period. Their job density increased from an average of 65,813 to92,000 jobs per square mile, or by 40%.

This suggests that the narrative of metro job growth is more unevenly distributed than is commonly thought. (And, of course, we again mention that 10 counties here have unemployment rates of more than 7.1 percent while King County experiences an almost unbelievable unemployment rate of  2.8 percent.)

Unsurprisingly, given Seattle’s tech concentration, the cluster gives a major boost to job density.

…jobs in the knowledge-intensive information sector saw a 60% increase in density across all 94 metros taken together, but this was driven largely by the increasing concentration of information jobs in the especially large and dense metro areas of San Francisco, New York, and Seattle. Indeed, the information sector’s job density increased

in just 33 (35%) of metro areas, a group whichalso included fast-growing tech hot spots such
as Austin, Greenville, S.C., Indianapolis, and Nashville, Tenn. Moreover, in almost all these metro areas those increases were greater-than- expected, indicating that in the metro areas where the information sector is adding jobs, it is disproportionately adding them to already-dense parts of the metro area.

A major conclusion reached by the authors.

“The large rise in job density during the recent economic expansion suggests that place actually matters more, not less, in today’s digital economy,” said Chad Shearer, senior research associate and lead author of the report. “City and regional leaders can build stronger, more inclusive economies by investing in policies that promote more concentrated development patterns that better meet the needs of businesses and workers.”

There are unavoidable consequences to a sharp urban-rural divide, consequences that have be acknowledged and addressed to mitigate difficult public policy questions, as the recent experience in Oregon demonstrates. Seattle’s demonstrated success in attracting and retaining jobs, however, is a net positive for the region and the state. Addressing the consequences of the success represent a challenge and an opportunity, again, for the region and the state.

Head of Road Builders Association: “We need people actually starting to legislate on infrastructure.” Feds must step up.

Agreement on a federal infrastructure funding bill remains elusive, caught up in the hot mess of this D.C. summer. But political neglect doesn’t obscure the reality that infrastructure needs grow more urgent each day. 

The U.S. Chamber of Commerce and the AFL-CIO support a $2 trillion investment.

The Business Roundtable has documented the need for a renewing America’s infrastructure, including the benefits to our state

So has the National Association of Manufacturers.

And yet, little gets done. In Governing magazine, an interview with Dave Bauer, the CEO of the American Road & Transportation Builders Association, adds another informed call to action.

…Bauer recognizes the formidable challenges to getting any infrastructure package through Congress as the next presidential election looms. The biggest obstacle, he says, is addressing the growing shortfalls in the Highway Trust Fund, the federal government’s main source of surface transportation money. It is primarily funded with fuel tax revenues, but the federal gas and diesel tax rates haven’t been raised since 1993.

The continuing shortfalls in that fund — which are now up to $18 billion a year — are a “a 50-pound weight that the highway and public transportation programs have been carrying around for 11 years on their back,” Bauer says. Congress needs to shore up those finances as part of any broader infrastructure deal, he adds.

For those who have followed the inaction in recent years, much of the interview will cover familiar territory. It includes a link to a map of how the federal infrastructure dollars are distributed to the states. We don’t know all the underlying details, but it appears to show Washington receiving a below-average share of federal funding.

Bauer explains the federal-state partnership this way.

State efforts in a vacuum are not going to produce the solutions that they want more of, or that the American people need. [Bauer points to a map showing how much of each state’s road construction budget is paid for by the federal government. It shows the federal share is 70 percent or higher for 14 states.]States in a lot of areas have stepped up and done their part. It’s very fair for them to ask their federal elected officials to do their part now.

His conclusion:

We need to be is moving away from what has occurred in the last two years, which is a bunch of people talking about infrastructure. We need people actually starting to legislate on infrastructure.

Soon, we hope.

Amid heightened uncertainty, today’s state revenue forecast little changed, with growth projections primarily a result of legislation.

The Economic and Revenue Forecast Council reports a largely status quo update of the March projections (press release, full report).

The Near General Fund-State (Near GF-S) revenue forecast for the 2017-19 biennium is decreased by $47 million, and revenue for the 2019-21 biennium has increased by $432 million. The Near GF-S includes the General Fund-State, Education Legacy Trust Account and Washington Opportunity Pathways Account and provides the fullest picture of resources available for budget purposes. Legislative changes were responsible for the bulk of the forecasted increase in 2019-21, adding $330 million in revenue…

Near general fund-state revenues are expected to grow 17.9% between the 2015-17 and 2017-19 biennia and 10.7% between the 2017-19 and 2019-21 biennia.

The level of uncertainty in the baseline remains elevated, with downside risks outweighing upside risks.

The report comes as the Association Press reports Federal Reserve Chairman Jerome Powell confirms heightened uncertainty.

Federal Reserve Chairman Jerome Powell said Tuesday the economic outlook has become cloudier since early May, with rising uncertainties over trade and global growth causing the central bank to reassess its next move on interest rates.

Speaking to the Council on Foreign Relations in New York, Powell said the Fed is now grappling with the question of whether those uncertainties will continue to weigh on the outlook and require action.

Washington continues to do well, writes the Association of Washington Business.

Washington’s economy remains strong and set a new record for taxable retail sales last year, 425 Business reports.

Retail sales hit a record high of $170.2 billion in 2018, which is a 9.6 percent gain over 2017.

The ERFC forecast says, “Washington’s economy is continuing to outperform the nation but not as dramatically as in past.”

The following slide documents the extraordinary revenue growth pouring into state coffers.

We commented on the trend in yesterday’s post, pointing out that Washington’s budget growth stood out among U.S. states.

The ERFC also provides some caution in its commentary, including the familiar concern:

Major threats to the U.S. and Washington economies remain, including international trade concerns, geopolitical risks and a maturing economic expansion.

We’d also note that, expansive as the NGFS+ outlook is, it does not capture all the taxes increased by lawmakers. For a more complete overview, see the Washington Research Council publication, Despite Substantial Recent Revenue Growth, Legislature Increases Taxes by Over $1 Billion.

Despite strong state economy, 10 counties still have unemployment rates of 7.1 percent or higher

 

 

 

 

 

 

 

 

 

Washington’s economy ranks among the strongest in the U.S. As we’ve written, three of the nation’s top 30 metropolitan areas are here. WalletHub says we have the nation’s best state economy. And the state’s post-recession budget recovery is fifth-best in the nation.

That’s backdrop for today’s report that the May unemployment rate held steady at 4.7 percent. Pretty good, right? 

So it got us thinking that it’s been a while since we checked in on the state’s disparate economic regions. As the map above shows, ten of Washington’s 39 counties have unemployment rates of 7.1 percent or higher. Populous King County, with a 2.8 percent unemployment rate, and Snohomish County, 3.0 percent, explain the overall low statewide rate.

The urban-rural economic divide, while lessened during the recovery, continues.

In budget showdown, New Jersey governor insists on “millionaire’s tax.” Washington voters rejected concept a decade ago.

As we wrote yesterday, most states have managed to reach timely budget agreement this year. Notably, Governing magazine pointed out, New Jersey is not among them.

In New Jersey, one-party control hasn’t prevented disagreements. Democratic lawmakers introduced their own state budget on Monday that scraps Democratic Gov. Phil Murphy’s millionaire’s tax, setting up an 11th-hour showdown that could lead to a state government shutdown.

NJ.com reports the governor isn’t backing down.

Democratic Gov. Phil Murphy issued his strongest threat yet Wednesday to New Jersey’s Democratic-controlled state Legislature: Without tax increases, I’m prepared to slash spending items you want.

In a letter to lawmakers, Murphy warned that if they continue with their current plan to send him a state budget that lacks his proposal to increase income taxes on the state’s millionaires, or if they don’t agree to raise any other taxes, then he’ll consider line-item vetoes on the Legislature’s $38.7 billion proposed budget.

We’re not interested in wading into New Jersey budget dilemmas, but the showdown is instructive for what it tells us about progressive income taxes. The Tax Foundation has closely followed the debate over the millionaire’s tax. Dominic Pino wrote earlier this month,

On June 3, New Jersey Governor Phil Murphy (D) renewed his plea to expand the state’s so-called millionaire’s tax to apply to all income above $1 million, down from the current $5 million threshold…

The millionaire’s tax is a legislative zombie, killed and reanimated repeatedly by Garden State politicians. New Jersey was the first state to pass a true millionaire’s tax in 2004 when then-Gov. Jim McGreevey (D) approved an 8.97 percent income tax rate on incomes over $1 million.

After reviewing the legislative history of the tax, he hits on the main policy issue:

As we wrote in March, “The millionaire’s tax violates principles of stability and neutrality, while doing nothing to solve the state’s current problems with complexity and lack of transparency.” New Jersey currently has seven tax brackets and a labyrinthine tax code. Taxes on high earners are notoriously volatile because of the heavy reliance on capital gains and other impermanent revenue streams, and because high earners are not only the most incentivized but also the best equipped to move out of state for tax purposes. New Jersey already leads the nation in net outbound migration.

The whole thing reminds us of a similar debate here in 2010, when Initiative 1098 proposed a progressive income tax on high earners. The Washington Research Council analysis of the proposal concluded,

…the proposed income tax would penalize small business owners and entrepreneurs, destabilize the tax system by introducing a highly-volatile revenue stream, and damage our state’s national and global competitiveness for new investment and job creation. The I-1098 income tax scheme departs from fundamental policy principles and demonstrates a faulty understanding of the Washington tax structure.

Because the new income tax targets only the very top of the income distribution, its revenue stream will be very volatile. This will increase the likelihood of serious fiscal crisis the next time that the economy turns down…

Even for those who favor an income tax, the peculiar, punitive and volatile tax imposed by I-1098 cannot be considered acceptable. It jeopardizes the economic recovery, destabilizes the state revenue system, and chases jobs and investment from Washington.

Voters agreed. The headline in the Puget Sound Business Journal: I-1098 goes down in flames

The Seattle City Council, of course, continues its quixotic pursuit of an income tax on the wealthy, as the city’s business community amps up efforts to reshape the council in the what the Seattle Metropolitan Chamber of Commerce sees as a “change election.”

The more things change…

Taxing Tipple: Washington has nation’s highest liquor taxes.

It’s not a surprise that Washington has the nation’s highest liquor taxes, but the Tax Foundation analysis is nonetheless surprising. The $10.54 per gallon gap between No. 1 Washington and No. 2 Oregon is substantial. TF reports,

Data for this map comes from the Distilled Spirits Council of the United States. To allow for comparability across states, the Council uses a methodology that calculates implied excise tax rates in those states with government monopoly sales.

In this category, Washington State by far leads the states with an excise tax rate on distilled spirits of $32.52 per gallon. The Evergreen State is followed by Oregon ($21.98), Virginia ($19.93), Alabama ($19.15), and Utah ($15.96).

The liquor regime in Washington was transformed by Initiative 1183, passed in 2011. And, as the Department of Revenue  points out, there are two types of liquor taxes here. The Tax Foundation notes the complexity:

Like many excise taxes, the treatment of spirits varies widely across the states. Spirits excise rates may include a wholesale tax rate converted to a gallonage excise tax rate; case and/or bottle fees, which can vary based on size of container; retail and distributor license fees, converted into a gallonage excise tax rate; as well as additional sales taxes. (Note that this measure does not include a state’s general sales tax, only taxes in excess of the general sales tax rate.) Rates may also differ within states according to alcohol content, place of production, or place purchased (such as on- or off-premise or onboard airlines).

It looks complicated, though we trust the Distilled Spirits Council gets the comparative data right.

We thought you’d like to know.

More states increase spending, reach early budget accord in 2019. Washington fits the mold.

Washington’s on-time budget performance this year in at least that respect lines up well with most states. Liz Farmer reports in Governing magazine that this year most states reached timely budget agreement, aided by one-party governance and steady revenue growth.

As of Tuesday, 39 states had either passed a budget or had one awaiting a governor’s signature, according to the National Conference of State Legislatures. That’s a far cry from 2017 when 11 states started the fiscal year without a signed budget and another 10 had to call a special session to approve one after missing the initial deadline.

The drama was partially the product of divided government and tight finances — both of which are less of an issue today. The rise of one-party states has led to less political gridlock….But the bigger reason so many states have passed a budget without theatrics this year is that revenues are in good shape.

Washington fits the mold, with Democratic control of both chambers and the governor’s mansion and strong revenue growth. The National Association of State Budget Officers (NASBO) recently published its fiscal survey of the Staes, the source for Farmer’s story. The summary report says,

Governors have recommended budgets for fiscal 2020 calling for moderate general fund spending and revenue growth. Proposed spending plans would increase general fund expenditures by 3.7 percent in fiscal 2020, with 47 states proposing spending increases and governors directing the majority of new money to education.

And there we see Washington’s departure from the norm, for no one would call the state’s 18.4 percent biennial budget growth and billion dollar tax increase “moderate,” however anyone feels about the merits of the fiscal actions. We’ve previously written that Washington has experienced the fifth most rapid expenditure expansion since the 2008 recession.

Although it’s not a perfect comparison – Washington adopts a two-year budget, the NASBO report looks at annual changes – the two graphs below suggest the magnitude of the contrast between Washington and all states. The first is from the NASBO report, looking at budget growth since 2008.

The second is a Washington Research Council presentation of biennial spending growth here. The steep post-recession hike is apparent.

The data-rich NASBO report will make for good reading for fiscal wonks (likely not a large population). We’d cite this from the report’s conclusion:

Despite favorable revenue conditions, governors and other state officials are mindful that some of the recent revenue gains, especially from non-wage income, are likely temporary, and therefore are choosing to direct some new money in fiscal 2020 budgets towards one-time expenditures including paying down debt and making extra pension fund contributions. State officials are also continuing to bolster their states’ rainy day fund balances in anticipation of the next economic downturn.

As we warned repeatedly, it’s coming.

On the money: Latest state revenue update shows cumulative collections 0.5 percent above March forecast.

The Economic and Revenue Forecast Council reports revenue collections for the most recent month are 1.1 percent higher than anticipated in the March forecast.

Major General Fund-State (GF-S) revenue collections for the May 11 – June 10, 2019 collection period came in $29.6 million (1.1%) above the March forecast. During the period there were $26.2 million in large refunds that were not included in the forecast. Without these refunds, collections would have been $55.7 million (2.0%) higher than forecasted.

Cumulatively, collections are now $30.0 million (0.5%) above the March forecast. Since the March forecast, large one-time payments and large refunds have summed to a net re- fund of $9.2 million. Without the large one-time payments and refunds, cumulative collections would have been $39.2 million (0.7%) higher than forecasted.

In a time of some clear economic volatility and uncertainty, then, the March forecast turns out to be right on the money. 

Some other insights from the report:

We have three months of new Washington employment data since the March forecast was released. Total nonfarm payroll employment rose 25,300 (seasonally adjusted) in March, April, and May which was 6,100 more than expected in the March forecast. Private services-providing sectors added 15,400 jobs in the three-month period and the construction sector added 5,900 jobs. Manufacturing gained only 200 jobs in spite of a 1,300 increase in aerospace employment. Government employment increased by 3,700 jobs.

Washington’s unemployment rate remained at 4.7% in May after increasing in March and April. The rate was at its all-time low of 4.4% as recently as October 2018. The reason for the increase in recent months is that although employment has continued to grow, the la- bor force has grown faster.

Nationally, we see some signs of softening.

National data were mixed this month. Job growth was much lower than in recent months and layoff announcements were up but the unemployment rate remained at a very low 3.6%. Residential construction activity was up this month but lags last year’s level and home sales dropped. Light vehicle sales bounced back this month but industrial produc- tion and new orders for core capital goods were down.

The U.S. economy added 75,000 net new jobs in May, down from an average of 186,000 jobs per month in the prior four months. Employment data for March and April were revised down by 75,000 jobs.

So far, so good, but with reasons to be cautious.