Loss of new 787 line may hurt Snohomish County housing market

The economic impact of Boeing's decision to build a second 787 assembly line in South Carolina will ripple out slowly, but one place that may feel it sooner than others is the Snohomish County real-estate market.

Boeing's announcement that it won't build the line in Everett was the latest bit of bad news for a county already hard hit by the slump in housing.

While most county observers said they expected the announcement, it still comes as "a pit in the stomach," said Deanna Sihon, vice president of consulting for New Home Trends, based in Mill Creek.

The county's new-home sales were already down. They totaled 1,748 for the 12 months ending in August, a sharp slide from a high of 3,148, recorded in the 12 months ending in August 2005.

"The question is really about perception. The jobs aren't going to go away in the short term, but people may be wondering if the sky is falling," Sihon said.

Bill Hurme, head of Team Builder John L. Scott, which markets new homes for developers, said Snohomish County's economy is much less diversified than King County's and still heavily dependent on Boeing jobs.

The news that several thousand future jobs will go to South Carolina, Hurme said, "will have a chilling effect" on Snohomish County development. "There's no way you can spin it as good news," Hurme said.

He said that Wednesday, out of dozens of pending sales, one homebuyer backed out of a purchase agreement.

On a regional basis, the longer-term employment implications are what worried economist Dick Conway.

Boeing's plan will make it that much harder for Washington to pull itself out of its jobs slump, he said.

"If the 3,800 jobs stayed here, that would be helpful to the economy and its recovery," Conway said. Without them, "the recovery will be even slower than it was going to be."

High-paying jobs such as those at Boeing support other jobs throughout the local economy — a Boeing worker buys a new fridge, the fridge salesman buys a sandwich for lunch, the sandwich-maker renews her gym membership, and so on. The more people work in well-paying jobs, the more jobs are created further down the economic food chain.

Conway, who has studied Boeing's impact on the regional economy for decades, estimates that each Boeing job generates spending that supports 1.7 other local jobs — one of the highest "multipliers" of any private-sector employer.

That means every job Boeing creates in South Carolina represents nearly three jobs that won't be created in Washington.

Conway noted that those 3,800 jobs are to be created over time, and that in a local economy with nearly 1.7 million jobs, the immediate impact wouldn't be that great in any case.

Boeing's tally of job cuts shows its local work force has already shrunk by 3,000 jobs so far this year.

But Conway said his bigger concern is what Boeing's decision might mean for the future strength of the local economy.

"My fear is more the implications for the long term. If the plant turns out to be successful, what happens with the next plane after the 787? What happens with the 767 tanker, if Boeing wins that? Would they consider building that there?

"We might not lose all of the company, but all of a sudden it's not quite inconceivable, at least in my mind."

Arun Raha, director of the state Economic and Revenue Forecast Council, said Boeing's decision "does have a psychological impact," but won't change the state's current revenue projections because forecasters didn't assume it would build the second 787 line in Washington.

"I'm not trying to make it out to be good news," he said. "Would I have liked to have had the line? Sure. But it doesn't make any difference to this biennium's forecast."

Raha said state economists will try to assess the longer-range impact of Boeing's decision and incorporate it into their forecast for the next two-year budget cycle, which begins July 2011.

What would be the worst-case scenario if Boeing did gradually eliminate its Puget Sound area presence — say, over the next decade?

The company employed 73,357 people in Washington at the end of September, nearly all of them around Puget Sound. If you assume each Boeing job indirectly supports 1.7 other jobs, that's about 198,000 local jobs dependent on Boeing — nearly 12 percent of the region's work force.

Right now, Conway and his forecasting partner, Doug Pedersen, predict the local economy will add about 350,000 jobs over the next decade. Were Boeing to ramp down to zero in that time, the net jobs created would be just 152,000 jobs.

"If you lose a job, it's a negative impact. If you don't gain a job, you have a loss of a positive impact. It's still a cost. We'd still be better off if we'd never heard of Charleston," Conway said.

Lynn Thompson: 206-464-8305 or lthompson@seattletimes.com