Apr 172013

For those of a certain age, the billboard remains etched in memory. It was April 1971. Boeing employment over the course of about three years had collapsed from more than 100,000 to fewer than 40,000 following cancellation of government funding for a supersonic transport and commercial orders for the then-shiny-new 747.

It was known as the “Boeing Bust.” Housing vacancies soared and prices fell. Little wonder that a couple of real-estate salesmen paid to put up the famous billboard  near the airport inviting the last person out of Seattle to “turn out the lights.”

The Seattle-area economy is far more diversified and healthy now than it was 42 years ago. It is way too soon to suggest turning out the lights. But in the past few days we’ve had a run of news with negative implications for the economy the likes of which I have not seen in recent memory.

Start with word April 9 that Boeing will pour more than $1 billion into South Carolina and hire as many as 2,000 more there by 2020 in exchange for a $120 million state incentive. That was followed the next day by a memo leaked to the Seattle Times in which a senior manager thanked Boeing manufacturing engineers in Everett for helping fix problems on the 787 Dreamliner then informed them that some of them will be let go.

Boeing’s going” blogged my friend Jon Talton of the Times. Hyperbole is Jon’s stock in trade, but I think he has a valid point when he writes that “Our conceit is that the Puget Sound region has the talent, skills and sunk costs in facilities that offset its relatively higher costs” and that “We will know when Boeing enters a down cycle and the big layoffs come here, not in North Charleston.”

Nowhere is it written in stone that Seattle will remain at the top of the heap as a producer of commercial airplanes. Boeing’s current management is obviously extremely opposed to unions, especially militant ones. The machinists have always been militant, and lately the union representing engineers has developed sharp elbows.

Japan is about to test-fly a 90-seat passenger jet that poses a competitive threat to Boeing’s smallest jets.  Development of the Mitsubishi jet, the New York Times reports, was “abetted in large part by Boeing’s outsourcing more of its aircraft manufacture to overseas suppliers.” About a third of the 787 is made in Japan.

The aerospace sector employs nearly 100,000 in Washington State, including some of the globe’s best-compensated blue-collar workers. Simple inertia, and a backlog that exceeds seven years at current production rates, will keep this work force busy for a while.

But the straws in the wind suggest that we are at or near peak employment. The decline may not be gradual. Don’t expect loyalty to community to count for much. Boeing severed its C-suite ties to Seattle a decade ago when it moved headquarters to Chicago.

Then there is Microsoft, being blamed, along with Intel, the chip-maker, for an unprecedented collapse in the sales of personal computers. It has become clear that both companies, which dominated the PC business from its earliest days, missed the boat when it comes to mobile devices like phones and tablets.

Microsoft’s Windows is a “civilizational tool,” wrote Jason Pontin in the MIT Technology Review last fall, with more than a billion users around the globe. The problem is that when any one of those users boots up a Win8 computer for the first time, he or she will “recognize nothing.”

Microsoft had hoped that the new operating system would speed up sales of PCs; instead, it seems to be pushing them down. IDC says PC shipments in the January-March quarter fell nearly 14%, the largest such decline on record.

We’ll know more about the take-up of Win8 and about Microsoft’s prospects Thursday, when earnings for the January-March quarter are announced. Microsoft stock has been range-bound between $20 and $30, give or take an occasional break on either side, for the better part of a decade. I see nothing that would help it break out of that range.

The sale of Seattle-based Fisher Communications (KOMO TV and 19 other stations) to Maryland-based Sinclair Broadcast Group means another loss of a corporate headquarters, small but important, as my friend Talton blogged. KOMO TV is an ABC affiliate; I’m no fan. But, as Talton observed, the community loses a distinctive voice. Arts groups, charities and other non-profits will see lists of potential directors, contributors and volunteers narrow. Fisher’s roots in Seattle go back more than 100 years. Now, once again, we’re just a branch town.

Another development with negative implications for the Seattle-area economy is the decision by oil majors to suspend drilling in the Arctic offshore Alaska, in part because of regulatory uncertainty. Tacoma is the jumping off point for almost everything that gets consumed in Alaska, from supplies for the North Slope oil fields to beer and Pringles.

Alaska’s Legislature has just approved $750 million of annual tax breaks for the oil industry in an effort to reverse a decline in oil production that threatens the viability of the pipeline that moves oil from the North Slope to Valdez. It may be too late.

Alaska once was the nation’s largest producer of crude oil. North Slope production has fallen from about 2 million barrels a day 20 years ago to only a little more than 500,000 barrels a day. Texas, North Dakota and California all produce more crude today than Alaska.

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>



This site uses Akismet to reduce spam. Learn how your comment data is processed.