Microsoft cuts pile on local economic woes
SEATTLE (AP) - Until recently, this high-tech region was largely insulated from the national economic downturn, kept afloat by international trade and demand for its software and airplanes.
But Thursday's announcement of the first major layoffs in Microsoft Corp.'s history comes on top of thousands of pending cuts at the Boeing Co. and the gaping hole that the collapse of Washington Mutual promises to leave in Seattle's downtown business district.
It took about a year longer than the rest of the nation, but recession officially arrived in Seattle in December 2008, said Seattle economist Dick Conway.
"Like the rest of the world, we got hit hard by the collapse of the credit and housing markets," said Conway, co-publisher of the Puget Sound Economic Forecaster.
Up until the end of 2007, Seattle's economy was advancing at about twice the national rate, with Microsoft and Boeing both having a strong influence on that growth, he said.
But then the housing bubble burst and construction employment dropped like a piece of concrete, people stopped spending money, companies began cutting staffs and the recession arrived, Conway said.
The economic downturn in Seattle hit harder and faster than the beginning of the national downturn in late 2007, and Conway says the bottom is nowhere in sight.
On Thursday, Microsoft announced it would be laying off about 5,000 people, about 5 percent of its work force, in 2009.
Boeing announced its job cuts a few weeks ago, saying it would cut about 3 percent of its work force because of a drop in global demand for airplanes. The company said it expects to cut about 4,500 positions from its passenger jet business, which has factories in the Seattle area.
JPMorgan Chase & Co. is cutting 9,200 jobs at Seattle-based Washington Mutual Inc., which it acquired in September.
Thousands more layoffs have been announced at commercial truck maker Paccar, billionaire Paul Allen's Vulcan Inc., nearby timber mills and at both Seattle newspapers. And the Seattle Post-Intelligencer could be closing its doors entirely if a buyer cannot be found in the next few months.
People who hope to stay in Seattle after losing their job at another company won't have a lot of openings to apply for. The state Employment Security Department says job vacancies in Washington fell 32 percent in during the past six months.
One of the most interesting things about the layoff announcements at Boeing and Microsoft, in Conway's opinion, is that these are two companies that are fundamentally strong.
The Microsoft and Boeing layoffs weren't really connected to the Seattle economy, but the aftermath of the job cuts will push Seattle further into recession, said Alan Hess, a professor of finance and business economics at the University of Washington.
"The fact that Microsoft is laying off people is not due to any economic situation in our state. It's due to the economic situation in the world," Hess said.
Everyone is cutting jobs, even the University of Washington, where a hiring freeze prevents deans from hiring replacements for workers who leave.
Hess said only a trickle of people have quit the university but their departures are starting to affect some students who are having a harder time getting into the classes they need to graduate because the university is scheduling fewer classes.
Conway said he expects this recession to be not as bad as the region's previous economic downturn after the dot-com bust earlier this decade.
"We'd barely gotten over that recession and now we've got another, which is fairly surprising," he said. "If you look at long-term growth, it makes for a very disappointing decade for the economy."
The 2001-2003 recession was so bad that the greater Seattle area did not produce a single net job during the five years from 2000 to 2005, Conway said.
Conway said Seattle's economy was so strong before the current recession began that the downturn might take a different path here.
"We might not be the total wreck that you see in other states," he said.
The economic indicator he is watching most closely is housing prices. When they bottom out, Conway says that's when the Seattle area will start to see things improve.
But Thursday's announcement of the first major layoffs in Microsoft Corp.'s history comes on top of thousands of pending cuts at the Boeing Co. and the gaping hole that the collapse of Washington Mutual promises to leave in Seattle's downtown business district.
It took about a year longer than the rest of the nation, but recession officially arrived in Seattle in December 2008, said Seattle economist Dick Conway.
"Like the rest of the world, we got hit hard by the collapse of the credit and housing markets," said Conway, co-publisher of the Puget Sound Economic Forecaster.
Up until the end of 2007, Seattle's economy was advancing at about twice the national rate, with Microsoft and Boeing both having a strong influence on that growth, he said.
But then the housing bubble burst and construction employment dropped like a piece of concrete, people stopped spending money, companies began cutting staffs and the recession arrived, Conway said.
The economic downturn in Seattle hit harder and faster than the beginning of the national downturn in late 2007, and Conway says the bottom is nowhere in sight.
On Thursday, Microsoft announced it would be laying off about 5,000 people, about 5 percent of its work force, in 2009.
Boeing announced its job cuts a few weeks ago, saying it would cut about 3 percent of its work force because of a drop in global demand for airplanes. The company said it expects to cut about 4,500 positions from its passenger jet business, which has factories in the Seattle area.
JPMorgan Chase & Co. is cutting 9,200 jobs at Seattle-based Washington Mutual Inc., which it acquired in September.
Thousands more layoffs have been announced at commercial truck maker Paccar, billionaire Paul Allen's Vulcan Inc., nearby timber mills and at both Seattle newspapers. And the Seattle Post-Intelligencer could be closing its doors entirely if a buyer cannot be found in the next few months.
People who hope to stay in Seattle after losing their job at another company won't have a lot of openings to apply for. The state Employment Security Department says job vacancies in Washington fell 32 percent in during the past six months.
One of the most interesting things about the layoff announcements at Boeing and Microsoft, in Conway's opinion, is that these are two companies that are fundamentally strong.
The Microsoft and Boeing layoffs weren't really connected to the Seattle economy, but the aftermath of the job cuts will push Seattle further into recession, said Alan Hess, a professor of finance and business economics at the University of Washington.
"The fact that Microsoft is laying off people is not due to any economic situation in our state. It's due to the economic situation in the world," Hess said.
Everyone is cutting jobs, even the University of Washington, where a hiring freeze prevents deans from hiring replacements for workers who leave.
Hess said only a trickle of people have quit the university but their departures are starting to affect some students who are having a harder time getting into the classes they need to graduate because the university is scheduling fewer classes.
Conway said he expects this recession to be not as bad as the region's previous economic downturn after the dot-com bust earlier this decade.
"We'd barely gotten over that recession and now we've got another, which is fairly surprising," he said. "If you look at long-term growth, it makes for a very disappointing decade for the economy."
The 2001-2003 recession was so bad that the greater Seattle area did not produce a single net job during the five years from 2000 to 2005, Conway said.
Conway said Seattle's economy was so strong before the current recession began that the downturn might take a different path here.
"We might not be the total wreck that you see in other states," he said.
The economic indicator he is watching most closely is housing prices. When they bottom out, Conway says that's when the Seattle area will start to see things improve.