Home to Starbucks, a coffee guzzler’s haven, perhaps Seattle’s second quarter 2000 economic results should be called “The Big Gulp.” Greater Seattle can look forward to a percolating economy thanks, in part, to its two largest companies, Microsoft and Boeing. Swallowing a few dregs as though they were double lattés, these companies represent the region’s largest economic bases: Microsoft for high tech and Boeing for manufacturing.
Taking the Hit at Microsoft
According to a June 2000 report by the State’s Office of the Forecast Council, Microsoft’s employee stock option income, which counts as wages in the prepackaged software industry, took a $5-billion hit from Q4 of 1999 to Q1 of 2000.
That dismal news heaped on top of the software leader’s brewing anti-trust battles like a dollop of whipped cream. You’d think Microsoft would run out of steam. But the company just reported revenues of $22.96 billion — a 16% increase over last year — and a net income of $9.42 billion, not to mention:
- The unveiling of Microsoft.NET, a new platform that professes to make computing and communications easier
- The enormous potential for software demand in China
- A new, three million-square-foot campus for 12,000 employees in Issaquah, approximately 15 miles east of Seattle
Greater Seattle ranks fifth in the nation for concentration of high-tech businesses, says the Economic Development Council of Seattle & King County, with more than 1,100 high-tech companies employing over 80,000 workers. Microsofties make up the largest portion, with a Puget Sound headcount hovering around 20,000.
Forecasters predict a gradual decline in software wages, however, with the average expected to grow only 1.6 percent in 2000, compared with 7.9 percent in 1999. Excluding software, Greater Seattle wages are expected to grow 4.6 percent this year, compared with 4.9 percent last year.
Services sector employment grew rapidly, to a 5.2 percent annual rate in Q1 2000, boosted by strong showings in both software and temporary help services. This sector is expected to continue outperforming the overall economy, although it will not entirely escape the state’s economic slowdown. The forecast is for services growth to average 3.3% per year through 2003.
Good News and Bad at Boeing
With approximately 77,100 employees as of July 2000, Boeing is the region’s largest employer and exporter, as well as the world’s largest aircraft manufacturer.
Boeing reported Q2 net earnings of $620 million, or $.71 per share, on revenues of $14.8 billion. And the company not only delivered 242 aircraft this year, it has received 328 orders year-to-date.
Employment hasn’t fared so well, however. A blend of Boeing layoffs and labor strikes, along with general downturns in the aerospace industry has left a bitter taste. Overall, the Council expects a reduction of 28,600 from the peak in Q2 1998 through the trough in Q2 2001, with a modest upturn by Q4 2001.
Overall Economic Climate
In a recent survey by the City of Seattle, businesses of all sizes gave the city generally high marks.
It was thumbs down, however, to availability of both affordable commercial space and housing for workers. And that’s a viable concern, according to Bill Walters, senior community development specialist with the Office of Economic Development. “Commercial vacancy rates are at all-time lows,” he says. “Anything under four percent is unheard of, and the current rate in downtown Seattle is under one percent.”
Many businesses have met this challenge by moving to nearby Kent, a former farming community, where office space is plentiful and the locale is picturesque.
Walters notes the median price for single-family homes is $240,000 — still significantly less than a home in the Bay Area, where this might be considered a down payment. Greater Seattle saw a housing boom in fiscal 1999 due to low mortgage rates, high incomes and unprecedented consumer confidence. The housing market will likely see a downturn over the next three years but should rise in 2003, as population growth picks up.