In a worrying sign for the state's recovery, hiring in Washington stalled last month amid fears over inflation and consumer spending, even as big players like Boeing stepped up their recruitment campaigns.
Washington lost 2,300 jobs in May, the first month in the red since January 2021, according to data posted Wednesday by the state Employment Security Department.
Although May's figures will likely be revised upward slightly in future reports, the overall trend suggests "you're probably seeing the economy transition into a slower growth" trajectory, said Paul Turek, the ESD's state economist.
Washington's unemployment rate for May was 3.9%, down from 4.1% in April. The U.S. unemployment rate in May was 3.6%.
Several factors are driving the slowdown, including the absence of the federal pandemic stimulus that had buoyed consumer spending, and rising interest rates as the Federal Reserve tries to rein in inflation, Turek said. On Wednesday, the Fed announced an interest rate hike of 0.75%, the biggest increase since 1994.
As a result, even as Washington saw solid gains by tech and manufacturing employers — Boeing actually overtook Amazon in the number of posted job openings — hiring went the other way for many employers that rely on consumer spending.
The state's biggest job losses came in retail, which shed 6,600 jobs in May, the most since the first big pandemic-related layoffs in April 2020.
A retail slowdown often signals falling consumer confidence as "people are making adjustments due to the higher prices," said Turek.
Retailers' woes were also reflected Wednesday by the federal government's monthly report on retail and food service sales for May, which were down 0.3% compared to April.
"The retail industry has been shaken up by changes in shopping and location patterns ever since the pandemic," said Jacob Vigdor, an economist with the University of Washington Evans School of Public Policy who has studied state and local job markets. "A stroll around downtown Seattle is all you really need to conclude that this sector hasn't found its new normal yet."
Although tourism and foot traffic downtown has steadily risen in recent months, downtown offices are still only a third full, according to cellphone location data from Placer.ai posted by the Downtown Seattle Association.
Big job losses were also posted by professional and business services companies, which gave up 3,800 jobs in May. That drop could be a sign of the accumulated economic damage caused by the pandemic, supply chain disruptions, labor shortages and now inflation and the war in Ukraine, Vigdor said.
Because many professional and business services companies rely heavily on contracts from other firms, the sector "can be a good leading indicator of optimism or pessimism of the business community at large," added Anneliese Vance-Sherman, an ESD regional economist who covers the Seattle area.
Although a single month's job losses could be an aberration, Vance-Sherman said, "this is a sector I will be watching carefully over the next several months."
Another mixed result: Leisure and hospitality businesses added more jobs than any other sector — 2,400 — but are still nearly 22,000 jobs, or 6%, below pre-pandemic employment levels.
May's jobs report had a few bright spots. The state's tech industry is still adding jobs. And manufacturing continues to bounce back.
Boeing is trying to add so many engineers and machinists that the company actually posted more job openings statewide than Amazon did February through May (26,759 to 19,290) to take over the top spot on the state's employer demand chart.
Boeing has also stepped up efforts to keep existing workers. Engineers and technical workers have seen increases in raises, retention bonuses and other compensation, according to the workers' union, the Society of Professional Engineering Employees. This year, SPEEA-represented workers received $21 million in raises, or about $15 million more than union contracts require, the union said.
"Boeing is doing everything they can to keep engineering and technical talent." said SPEEA spokesperson Bill Dugovich.
More broadly, despite May's losses, the state's job market is still relatively healthy. The total workforce is larger and the number of people collecting unemployment benefits fell slightly. May's unemployment rate of 3.9% is the same as it was right before the pandemic.
But the potential for a recession remains high if the Federal Reserve's efforts to curb inflation by raising interest rates hit the economy too hard, Turek said. That would mean pain not only for slowing sectors, such as retail, but also for sectors that are still doing well.
If a worldwide recession hits, he said, "people are going to quit buying airliners."
