The Economic and Revenue Forecast Council has released its preliminary economic forecast. This release is ahead of the new revenue forecast coming out later this month. The state economy continues to recover. Note well: Employment is down 4.1% from the pre-pandemic peak.
We have two months of new Washington employment data since the June forecast was released. Total nonfarm payroll employment increased 48,800 in June and July which was 900 more than the increase of 48,000 expected in the forecast. Washington employment is now 143,000 (4.1%) lower than at its February 2020 peak. Private services-providing sectors added 40,800 jobs in June and July. The manufacturing sector added 900 jobs despite the loss of 500 jobs in aerospace manufacturing. Construction employment increased by 2,000 jobs. State and local government employment increased by 5,000 jobs in the two-month period and federal government employment increased by 100 jobs.
Washington’s unemployment declined to 5.1% in July from 5.2% in June. The unemployment rate is down significantly from the 16.3% rate reached in April 2020 which was an all-time high in the series that dates back to 1976. At the business cycle peak in February 2020 the Washington unemployment rate was 4.1%.
In sum, some improvement from how things looked in June.
We expect a 2.4% increase in Washington employment this year which is up from the 2.0% increase in the June forecast. We expect above-average growth through the remainder of the forecast as the economy continues to recover from the recession. We expect employment growth to average 2.3% per year in 2022 through 2025 which is the same rate expected in the June forecast. Our forecast for nominal personal income growth this year is 6.4%, up from 6.0% in the June forecast. Personal income growth will slow next year as the extraordinary stimulus of the last two years is withdrawn. We expect personal income growth of only 1.7% in 2022 compared to 1.5% in the June forecast. Our new forecast for nominal personal income growth in 2023 through 2025 averages 5.3% per year compared to the 4.8% rate in the June forecast.
So far, it looks like a possible uptick in the revenue forecast. But we typically avoid speculation.