Puget Sound region's ability to retain good jobs more important than ever during recession

Since the United States careened into the worst recession since at least 1982, economists have aimed like lasers on two problems: housing and banking. Very soon the crisis will have an overriding focus: jobs.

In January, the nation lost 598,000 jobs, the biggest decline since 1974. Ominously, the losses have shifted out of housing and finance. Services suffered their biggest three-month drop since the 1950s. Well-paid manufacturing jobs, which have been hammered for years, dropped another 207,000.

Add in discouraged workers and those in part-time positions who want full-time jobs, and the national unemployment rate rose to 13.9 percent, versus the official 7.6 percent rate. Long-term unemployment is worsening. Many economists now expect the official rate to reach 10 percent by 2010. What's especially startling is the speed and depth of the job losses, which are far worse than recent recessions.

This is a global jobs downturn, too, with rising unemployment in China presenting the ruling communist party with a potentially destabilizing force.

Washington and the Seattle region have lost their Teflon, with layoffs striking Microsoft and Boeing as well as Starbucks, Alaska Air, Paccar, Weyerhaeuser and, catastrophically, Washington Mutual.

Even with the help of a federal stimulus bill, with some of its job-creating heft compromised away to achieve passage, we're in for a long, rough ride worse than most of us can remember. One consequence will be to change the calculus behind regional and state economic-development strategies.

The years of expecting strong job growth are giving way to a time where competitors will claw just to retain jobs, especially good ones.

This will be true even if, against all evidence, the economy rebounds in a relatively short time. The aftermath of the recessions of 1990 and especially 2001 showed that job creation takes much longer to get going compared to previous post-World War II recessions. And even when job growth resumed earlier this decade, it was tepid and wages remained stagnant. At least two causes are technology and globalization.

This new paradigm struck me at a recent commission meeting for the Port of Seattle, where the Port presented its economic-impact report. In 2007, the Port directly sustained more than 111,000 jobs. This was down slightly from the previous study in 2003.

Someone said there was "a school of thought" that questioned the worth of spending approximately $1.3 billion on seaport investments over the past 20 years to essentially retain, rather than increase, jobs. Might the region have been better served with more of an emphasis on housing?

My first reaction, silent, of course, was "Are you out of your mind?" having decamped for Seattle in 2007 from Phoenix, which has been devastated by its reliance on sprawl building (as have Florida, inland California and Las Vegas). Seattle's diversified economy, including the Port, allows it to operate on a world-class level. Port-supported jobs, for example, are far more likely to pay a family wage than Sunbelt-style construction, which isn't coming back anytime soon.

But the more important lesson is that the Port, for all the criticism it has faced for contract oversight, has managed to retain good jobs in the face of a battered and restructured airline industry and longer-term changes in the shipping business. It's this retention capacity that will become more important in this recession and its aftermath.

The Puget Sound region doesn't lack for smart people with good plans, such as enterpriseSeattle and the Prosperity Partnership. But whether the region actually has a strategy is debatable. Rather, through a combination of luck and good stewardship, it was able to accumulate high-quality economic assets, smart, young talent and a forward-leaning posture focused on aerospace, software and life sciences.

The results have surpassed those for some places with precise economic-development plans.

For example, North and South Carolina are being battered by bets they made, and heavily favored with policy, in banking and manufacturing. Alabama's gambit with a nonunion work force and big-business subsidies still leave the state with lower income and college attainment than the national average.

Our success is even more impressive in that it happened despite a Keystone Kops approach to many policies epitomized by little Portland building a world-class light-rail system while big city Seattle can't even get its buses out of modest snowbanks.

Impressive enough to create hubris restrained, of course, in our Northwestern way. Yet the stars that aligned for Seattle in the past may be tougher to conjure after this disruption.

In such times, established players like Seattle benefit from going in with a fully stocked pantry of economic assets, so to speak. Yet economic history shows those are the very ones who risk losing their standing, perhaps forever, in a historic paradigm shift (e.g., Buffalo, N.Y., and Dayton, Ohio).

I don't claim to have all the answers. But this is a conversation we urgently need.

Some elements are obvious: get the most from the Feds for infrastructure, research and technology. These will enhance productivity, create and sustain good jobs and help maintain Seattle as a talent magnet.

Maintaining strong universities, cultural amenities and improving the environment again, essential for creative class talent, will be difficult given state finances. But we ignore them at our peril.

Retaining advanced businesses and the region's culture of entrepreneurship is a murkier, but still vital, discussion. Private capital is pulling back everywhere.

How can we limit the damage? Are taxes and regulation too onerous? If so, how is that balanced against a high-quality economy that is partly a result of smart regulation and an adequate tax base? We'll need to learn new ways to grow the pie — even just keep it — as global losses continue and global competition and change accelerate. Standing still is not an option.

This sounds heartlessly esoteric if you've been given a pink slip or are dreading one. But it is the heart of the matter for the region and state's leaders.