July 5, 1979
Although doomsday warnings about recession and inflation are being
heard, the Western region of the country is still moving ahead
sharply on many fronts. Capital spending plans for the remainder of
1979 are well ahead of 1978—and higher
capital-investment
projections are being made through 1980.
On the West Coast in particular, commercial building and industrial-plant construction are continuing at a brisk pace. Nonresidential construction in Los Angeles is booming at a fever pitch, with labor, materials, and equipment all in short supply. In both Seattle and Spokane, ground has been broken for two major office towers, which represent the largest construction program ever undertaken by the Seattle First National Bank. And these two new buildings represent only a part of an exceptional surge in construction of new office, hotel, and retail space in the major cities of Washington State. In central Seattle alone, announced downtown construction projects total $386 million for 1979—more than double 1978's construction pace.
In addition, a significant number of new banking, university, and manufacturing plant facilities are under way in the Northwest, as well as building and parking-lot expansions and rehabilitations. All of this will add significantly to regional production capacity in forest products, electronics, aircraft construction, cement, and metal fabrication. Kaiser Aluminum expects record capital spending for the current year and anticipates even higher expenditures in 1980. The same is true of truck manufacturers, swimwear, and apparel makers, and wide-body jumbo jet builders. All predict capital- spending outlays to increase over 1978 figures by 20 percent or more.
Employment continues strong in California and Washington, and the large influx of orders to their electronic, aircraft, and other manufacturing industries should produce steady gains in income. Employee recruitment continues vigorously in most areas and in most lines of business. Unemployment in the city of Los Angeles is at a new five-year low of 4.8 percent—below the current 5.8-percent national average, in a reversal of earlier relationships.
Several negatives, unfortunately, tarnish the relatively strong outlook for the future. The reduced availability and skyrocketing cost of gasoline have helped fuel the inflation while significantly changing the pattern of consumer spending in the West. Small "mom and pop" neighborhood retailers have experienced higher customer counts and sales increases of up to 40 percent in the first five months of 1979 over the same period in 1978. But sales at large regional and suburban shopping centers are down, due to the public's reluctance to use gasoline to drive substantial distances.
This resistance has also been felt in the tourist industry, where long-distance travel and vacation activities have been sluggish, with spending volumes down at resort, amusement park, and motel complexes. Oregon's tourism, the state's third largest industry, is down an estimated 25 percent from last year, with attendant summer employment losses. The restaurant business in Seattle is down approximately 20 percent. Reduced tourism in Utah has been most keenly noticed in the national parks in the south of the state. And California's out-of-state visitor flow has dropped noticeably.
Other gas-related industries also are suffering a slowdown in consumer spending. While the sales of economy import cars are going wild (up 36 percent in Oregon), large domestic cars and run-about trucks, moderately priced pleasure boats, travel trailers, and recreational vehicles just aren't moving. One Portland auto dealership which could not meet its financial commitments has already shut down, and three others are up for sale because of the decline in domestic sales. The Santa Clarita National Bank reports that large used cars currently are selling at only about half of wholesale book value in southern California. Even summer registrations at Seattle University are down significantly because of the uncertainty about gasoline availability over the summer months.
Because of the gas crunch, Seattle area public-transit ridership was up 12 percent over the year ending in April, and the system reports even bigger gains in May and June, straining the system's capacity. Boise (Idaho) and the San Francisco Bay area also report increases in the use of public transportation. With the gasoline and diesel price rise expected following OPEC's latest hike, further downward pressures on business activity are likely to result.
The West's housing market remains mixed with both ups and downs. The housing boom continues strong in San Diego County, particularly for homes under $100,000. But real estate sales are beginning to slow in the Central Valley and in suburban areas of southern California which are distant from Los Angeles. While financing in the Los Angeles area is very difficult, demand for residential housing continues strong. This demand is greatest and supply the shortest in the "low-priced" $125,000-and-under range.