Despite a sluggish economy and slow job growth, Washington's exports are defying the odds and surging ahead. But here's the surprising part: this growth spurt is happening in the face of a less-than-rosy economic forecast for the state.
Lawmakers in Olympia are scratching their heads over recent reports showing a slowdown in overall revenue growth. While the state expects to see some increase in funds over the next two years, it’s not the kind of robust growth Washington has seen in the past.
“We’re definitely seeing a slower pace compared to previous years,” explains David Reich, the Chief Economist for the Washington Economic and Revenue Forecast Council. He points out that employment growth has been particularly anemic, creeping up by only 0.3% so far this year. “That’s a clear sign that the economy is moving at a snail’s pace,” Reich adds.
And this is the part most people miss: the ongoing government shutdown, now in its third week, isn’t helping matters. However, Reich downplays its immediate impact, calling it a “relatively modest economic event”—at least for now. The real wildcard? Inflation caused by tariffs. Interestingly, it’s been milder than expected, likely because suppliers are absorbing some of the costs rather than passing them on to consumers.
“We’ve seen smaller price increases than anticipated,” Reich notes. “But don’t be fooled—we still expect those impacts to hit, just maybe not as hard or as quickly, possibly stretching into 2026.”
Here’s a breakdown of where Washington’s money comes from: over 75% of state revenue relies on just three taxes—retail sales tax, business and occupation tax, and property tax. Reich attributes part of the slower-than-expected revenue to a dip in taxable sales.
But it’s not all doom and gloom. Here’s where it gets controversial: while many sectors are lagging, imports and exports are up a solid 7% year-to-date, driven largely by transportation equipment. This surge is likely thanks to Boeing’s recent deals to sell planes internationally. Agriculture exports are also holding strong. However, other sectors have taken a hit, dropping about 10% in the first half of the year.
“This trend has been ongoing for over a year, so it’s probably not just about tariffs,” Reich explains. “It’s more likely a shift in global markets.”
Despite the slow growth highlighted in the September report, Reich remains cautiously optimistic. He predicts a GDP uptick next month, which could have a positive ripple effect. “We’re not heading into a recession,” he reassures. “We’ll see growth, but it’ll be slow and steady.”
Looking ahead, Reich expects higher inflation over the next few years, largely due to the lingering effects of tariffs, with things stabilizing by 2027.
The next economic forecast for Washington is set to drop in November, and it’ll be fascinating to see how these trends evolve.
What do you think? Is Washington’s economy on the right track, or are there deeper issues at play? Let us know in the comments—we’d love to hear your take!
