Washington jobless rate nears 8%, likely to go higher

The numbers in Tuesday's state jobs report were bad enough — the highest unemployment rate in more than two decades, more unemployed people than ever before, drops across nearly all business sectors and the prospect of even worse news in the months to come.

But as bleak as the official statistics are, the state's 7.8 percent unemployment rate for January doesn't fully capture the impact of rising joblessness on the wider economy, including the majority of workers who still have jobs.

People who see jobs evaporating in other companies and other industries tend to ratchet back their own spending, economists say — an understandable response, but one that could drive down the local economy even further.

"The shoe may not have dropped for people just yet, but they have this nagging feeling they might be next," said Joseph Phillips, dean of the Albers School of Business and Economics at Seattle University.

As a result, he said, "a lot of people feel they have to conduct themselves in a more austere manner."

"They don't go out to dinner, they stay home and cook instead, and what's the result of that? People (working) in restaurants have a hard time."

Restaurants and bars, in fact, cut 700 jobs last month — a tenth of the 7,000-job drop in Washington's nonfarm payrolls.

Along with declines in manufacturing, construction, the information sector and business services, those cuts helped push up the state's estimated jobless rate to 7.8 percent.

The rate was estimated by the state Employment Security Department because of delays in implementing a new computer system by the federal Bureau of Labor Statistics. All states, including Washington, use the bureau's system to calculate local unemployment figures.

Still, you'd have to go back to December 1986 to find a higher jobless rate. During the recession after the dot-com bust early this decade, unemployment peaked at 7.7 percent.

Mary Ayala, the Employment Security Department's chief economist, warned that many more jobs could be jeopardy.

Unless the nation's banking system stabilizes in the next six months and lending resumes at something approaching normal levels, she warned, "we could hit 12.5 percent very easily by the end of this year or early next year."

For context, the highest jobless rate recorded in Washington state since modern tracking began in 1976 was 12.2 percent, in November 1982.

In the Seattle metro area, unemployment rose from 6.3 percent in December to an estimated 6.8 percent last month.

January's statewide unemployment rate topped the national rate for the first time since December 2006. An estimated 303,570 Washingtonians — the most ever — reported being out of work last month; that's 125,880 more people than in January 2008.

If anything, the official figures understate Washington's jobs deficit since the state's economy peaked last summer.

The Seattle Times estimates that, just to keep pace with the growing population, Washington payrolls should have added 17,900 jobs since the July 2008 peak. Instead, payrolls have shrunk by 63,100 jobs — meaning the real "job gap" is in the neighborhood of 81,000 jobs.

The rapidly deteriorating situation has helped drive down U.S. consumer sentiment. Tuesday, The Conference Board reported its widely watched consumer-confidence index hit a new low this month.

"Not only do consumers feel overall economic conditions have grown more dire, but just as disconcerting, they anticipate no improvement in conditions over the next six months," The Conference Board's Lynn Franco said.

In short, Seattle U.'s Phillips said, the economy appears to be spiraling downward, as negative news and negative perceptions feed off one another. Both will have to reverse, or at least stabilize, before recovery can begin.

"You can't just will yourself through something when the bottom line isn't working," he said. "Positive thinking is not enough. It's going to take positive doing at some point."

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com