Quarterly Economic Measures Report
First Quarter, 1998
Executive Summary
View the full report (86 KB .pdf)
Note: This document
is available for viewing in Adobe Acrobat .pdf format. You will need
to have a copy of Adobe Acrobat Reader v. 4.0 or 4.05 installed on
your computer to view the file. You can download a free copy of
the Acrobat Reader here or visit Adobe's site to get more information.
For more information about the QEM reports, please contact us.
I. National
Economic Measures/Interest Rates/AA Bond Rates
The national economy continued on a strong track in the first quarter of 1998, despite concerns about a slowdown due to the Asian financial crisis. Real gross domestic product (GDP) remained robust in the first quarter, growing at a 4.2% annual pace. This is up from a revised 3.7% in the fourth quarter of 1997. The increased GDP rate of growth was mainly attributable to accelerated purchases of durable goods by businesses, concentrated in computers and peripheral equipment. For the most recent twelve months, GDP grew 3.6%, down slightly from the 4.0% rate of growth between first quarter 1996 and first quarter 1997. The pace of GDP expansion in the first quarter was the highest since the first quarter of 1997, when gross domestic product grew at a 4.9% annual rate. Average annual real GDP growth has been steadily increasing over the past three years, expanding from 2.0% in 1995 to 3.8% in 1997.
The Federal Reserve Board has not raised the federal funds rate since late March 1997, when it was jumped 0.25 percentage points to 5.50%. The prime rate (8.5%) and discount rate (5.0%) have not changed in the past year. Contradictory data makes predicting the next move by the Fed difficult. While GDP rose robustly in the first quarter, March nonfarm payrolls declined by 24,000 workers over February levels and March unemployment increased by .1 percentage points to 4.7% Yet, at the same time that March average private sector hourly earnings increased from the previous month by .3% to $12.63, inflation remained very low. The implicit price deflator had its smallest increase in 34 years (0.9% annual rate) and rose only slightly in the twelve months ending first quarter 1998 (1.4%). The first quarter Consumer Price Index rose at an annual rate of 1.1%, expanding by 1.5% over the previous twelve months. For 1997, the rate of inflation stood at 2.3%.
Interest rates for treasury bills and bonds fell sharply in the first quarter. Thirty year home mortgage rates in Washington state also declined, averaging 7.17% - 85 basis points below last year's level and almost a full percentage point beneath the second quarter 1997 average. The first quarter 1998 mortgage rate was the lowest quarterly average in the past five years. Over this period, mortgage rates have ranged between 7.0% (October 1993) and over 9.4% (late 1994).
AA bond rates in late April rose from late January totals, increasing 30 to 35 basis points for non-taxable bonds and 45 to 50 points for taxable bonds.
Industrial/Manufacturing Measures
National manufacturing activity slowed somewhat in the first quarter compared to previous quarters. First quarter industrial production, while increasing in absolute terms, fell precipitously to a 1.1% annual rate of growth, down from the 6.8% rate in the fourth quarter of 1997. Industrial production actually declined on a month-to month basis in January and February of 1998, although March saw a slight uptick. Consistent with a slowing of production, capacity utilization rates fell slightly in the first quarter for total industry (82.4%), as well as for manufacturing (81.5%), although capacity utilization rates have remained relatively stable over the past year.
Nonfarm inventories were up $67 billion in 4Q/97, slightly above the $64.5 billion increase in the previous quarter, indicating a relative slowdown in sales to households and businesses.
Income Measures
Per capita disposable personal income rose at a brisk 5.9% annual rate in the first quarter, substantially above the annual rate for the previous quarter. For the twelve month period ending in the first quarter 1998, personal income rose 3.3%, over double the gain in the previous twelve months (1.4%).
I. King County
Economic Activity
Signs of inflation were somewhat mixed in the first quarter. The Consumer Price Index for all urban consumers (CPI-U) in the Western US increased by a low 0.9% annual rate in the first quarter and 1.9% in the twelve months ending 1Q/98. This was substantially less than 2.8% rise in the previous twelve months. However, the CPI for the Seattle/Tacoma area was up at a 6% annual rate after experiencing no increase in the previous quarter. Bankruptcy filings fell from 1Q/97 in both King County (4.1%) and the Central Puget Sound region (2.3%). Bankruptcy filings have stabilized the past year after rising dramatically in 1995 and 1996.
King County taxable retail sales were robust in the fourth quarter, 1997, reaching $7.9 billion. This was 11.9% above sales a year ago. (Fourth quarter 1997 is the most recent quarter for which data is available.) Retail trade retail sales, constituting about one-half of the King County total, increased by 12.0% over fourth quarter, 1997. Notable increases in this sector occurred in lumber and building materials (up 21%), electronics and music stores ( 24%), furniture ( 25%). Finance, insurance and real estate (FIRE) sales rose sharply (24%) as did contract construction (19%), highlighting the strong real estate activity that prevailed in late 1997. Services growth was strong (up 13%), fueled by sales in computer services (up 27%).
Seattle taxable retail sales (36% of the King County total) were also strong, increasing by 12.7% over 4Q/96 levels. FIRE sales rose sharply (36%), as did Contract Construction (up 24%). Services grew more modestly (11%), led by computer services (up 22%). Retail trade sales expanded by 12%, with noticeable gains in lumber/building material (up 52%), electronics/music stores (up 33%), and furniture (up 25%).
Employment
Area unemployment remained at extremely low levels. King County's first quarter unemployment rate was 2.9%, the lowest this decade. Unemployment rose slightly in the Central Puget Sound region, from 3.3% to 3.4%, although the region's unemployment rate stayed lower than the national rate (4.7% seasonally adjusted).
Central Puget Sound regional employment growth continued to be strong, increasing by 4.8% over first quarter 1997. Durable manufacturing employment rose slightly (at a 1.8% annual rate), gaining for the ninth straight quarter in spite of a 5.8% decline in Boeing's first quarter staffing.
Construction
The single-family housing market continued to be brisk, with increased housing prices and quick selling times. The median sales price rose by 14.1% over 1Q/97, to $202,390. The average time a house was on the market remained low (41 days). The average days on market has remained relatively constant during the past four quarters, ranging between 39 and 42 days.
Other construction activity was also robust. Building permit values for non-residential construction in Seattle more than doubled (an increase of 134%) over 1Q/97 levels. The value of residential construction permits rose to $94 million, an increase of 33% over the fourth quarter and 109% from 1Q/97 levels. The increase in these values reflects the 1,041 new residential units that received permits, a 68% increase over the fourth quarter, 1997.
Office Market
The Downtown Seattle office market remained healthy, with vacancy rates falling to 4.8% from 5.9% a year ago. Class A space tightened (2.3% vacancy rate), while the Class B market remained somewhat soft (11% vacancy rate). Absorption, the change in the amount of leased space, was at 204,000 square feet, an increase of 29% from the previous quarter. Given the low vacancy rate, it is not surprising to find office construction activity heating up: there is nearly 1.8 million square feet of office space under construction in the downtown market, with 3.8 million square feet on the drawing board.
Demand in the Bellevue/Eastside market has cooled from its previous high levels, in spite of absorption reaching over 48,000 square feet in the first quarter. This was down 29% from the preceding quarter and 73% from the high of 181,000 square feet in the second quarter of 1997. Nonetheless office space continued to be tight, with a vacancy rate of a low of 1.7%. Class A space is extremely tight (1.4%), resulting in median rents rising to $26.00 per square foot, 12% above first quarter, 1997. In response to low vacancy rates, nearly 1.2 million square feet of office space under construction on the Eastside, while and an enormous 13.2 million square feet of office construction is planned.
North King County vacancies rose slightly for the second straight quarter (5.6%), although they are still below last years 9.9% rate. South King County vacancy rates dropped for the third straight quarter to 8.6%, as Boeing leased the 92,000 square foot Kent Office Building.
Industrial Market
The King County industrial market tightened in the first quarter. Vacancy rates declined slightly in Seattle Close-In to 2.7%, with Seattle high tech vacancy rates falling sharply to 2.6%. Absorption rose to over 580,000 square feet, the highest since 4Q/96. Kent Valley vacancy rates rose slightly to 5.7%, as one million new square feet were made available, although absorption remained healthy at 354,098 square feet. The Eastside market had its lowest absorption in a year (22,000 square feet), with industrial vacancy rates rising slightly (4.5%) and high-tech rates staying low (3.8%). CB Commercial forecasts that the King County industrial market will remain strong in the near future. Most of the current and planned construction is taking place outside of Seattle. The Kent Valley remains busy, with 400,000 square feet under construction, and over 6.7 million square feet planned. The Eastside market is also strong, with nearly 630,000 square feet under construction and over 4.4 million square feet planned.
Apartment Market
Vacancies in the King County apartment market are at rock bottom, with second half 1997 vacancy rates generally below 2% and in some instances below 1%.
Convention Information
The number of Conventions and Events for 1Q/98 was up 10% from 1Q/97, though room nights declined 6%. Local room tax collections for 4Q/97 were 6% higher than for 4Q/96. (Fourth Quarter 1997 is the most recent data available for local room tax collections).
Job Dislocation Activity
Reported layoffs in King County declined slightly in 1997 (3.2%), totaling 3,848. There were 799 job losses reported through the Worker Adjustment and Retraining Notification Act (WARN) for the fourth quarter. Half of these were garment workers. The largest job losses took place at Brazos (Sun) Sportswear in Kent (300 workers in garment production), Seattle Gear (101 in garment production), Online Interactive in Seattle (83 in computer services), Seattle's Craftsman Press (80 in printing), Gargoyle Performance Eyewear in Kent (50) and Toll Free Cellular (50 in telephone sales and service).
Layoffs rose slightly (to 825) in first quarter 1998, though this was less than half of first quarter 1997 (1,873). Many of those laid off were office workers. The largest job losses were at Deluxe Corporation in Federal Way (190 in office and production), U.S. West in Seattle (142 technicians and salespeople), Atlas Copco Robbins in Kent (80 in office and production), Community News Group in Sea-Tac (60 in newspapers), Kits Cameras in Kent (60 in office and distribution), Microsoft (MSN) in Redmond (50 in computer software) and Western Optical (50 in office, production and retail sales).
Boeing and Airline Industry Data
Boeing employment in Washington state (97,427) fell for the first time since 1995. This was a 6% decrease from the fourth quarter. However, Boeing contractual backlogs remained steady, ending the quarter at $120.9 billion. Commercial aircraft orders backlog declined slightly ($92.4 billion). Backlogs for Information, Defense and Space division, made up of elements from the former Boeing Defense & Space Group and McDonnell Douglas Corporation, rose $700 million to $28.5 billion.
Return to Top
Updated: January 29, 2004
Return to QEM Archive Index
King County |
Business Relations and Economic Development |
News |
Services |
Comments |
Search
Links to external sites do not constitute endorsements by King County.
By visiting this and other King County web pages,
you expressly agree to be bound by terms and conditions of the site.
The details.
| 
