There’s improved economic news in the preliminary economic forecast released Friday by the Economic and Revenue Forecast Council. The numbers suggest that next month’s revenue forecast will boost expectations from the gloomy June forecast that sliced forecast revenues by nearly $9 billion over four years. Actual collections have bested the June expectations for the last two months, for a cumulative total of $643 million, nearly 20% higher than predicted.
The preliminary economic forecast includes this:
The preliminary September forecast features a quicker rebound in economic activity in the near term, particularly in housing construction. The preliminary forecast also features higher personal income from the second quarter of 2020 through the end of the year. The higher personal income is mostly due to the assumption of much higher transfer payments than forecasted in June.
Comparing with June employment and personal income projections.
We have two months of new Washington employment data since the June forecast was released. Employment continued to rise in June and July following the historic decline in April. Total nonfarm payroll employment rose 137,500 (seasonally adjusted) in June and July which was 63,000 more than expected in the June forecast. Private services-providing sectors added 118,400 jobs in the two-month period. Construction employment increased by 10,700 jobs and manufacturing added 1,600 jobs despite the loss of 1,900 aerospace jobs. Government payrolls increased by 6,900 jobs in June and July.
We expect a 4.9% decline in Washington employment this year compared to the 5.5%% decrease in the June forecast. We expect above-average growth through the remainder of the forecast as the economy recovers from this deep recession. We expect employment growth to average 2.4% per year in 2021 through 2025 compared to the 2.1% average rate expected in June. Our forecast for nominal personal income growth this year is 8.0%, up from 3.8% in the June forecast. The adverse effects of the recession on personal income this year are more than offset by substantial income support from the federal government. Our new forecast for nominal personal income growth in 2021 through 2025 averages 3.0% per year, which is down from the 3.5% rate expected in the June forecast. The effect of the recovery on growth in 2021-25 is offset by the loss of income support from the federal government.
Much more detail in the preliminary economic forecast document.
Note that most of this looks better than expected in June. That said, there’s a lot to be concerned about, including the obvious point that the improved outlook comes nowhere near suggesting that the $9 billion reduction will be eliminated; it’s just likely that we’ll see it trimmed some. The next official forecast will be released September 23.