ERC Report: Retail Trade Helps Lead Washington’s Economic Recovery

This past month, Washington state revenue collections came in $260 million higher than the June forecast, according to a Economic and Revenue Forecast Council report.  The higher collections are not due to deferred payments being paid back (as those came in on target), but show greater economic activity, primarily in retail trade.  

A key part of the economic report says:

Non-retail trade payments were down about 20%, similar to the forecasted decline in total collections for the period. During May, a majority of counties reached Phase 2 of the state’s pandemic reopening plan, which allowed non-essential retail establishments to open on a limited basis. In June, most of the remaining counties reached Phase 2 and several reached Phase 3, so next month’s retail trade activity could also be higher than forecasted. It remains to be seen, however, if the higher activity is sustainable or if it represents a one-time response to several months of pent-up demand.   

• U.S. employment increased by 4.8 million jobs in June; the unemployment rate declined to 11.1%.
• Light vehicle sales improved for a second straight month but remain 24.1% below June 2019 levels.
• Housing units authorized by building permits and housing starts both increased in May but were below May 2019 levels.
• Washington employment continued to recover in June following the historic decline in April.
• Washington manufacturing activity improved in June for the first time since February.
• Major General Fund-State (GF-S) revenue collections for the June 11 – July 10, 2020 collection period came in $260.7 million (14.8%) higher than the June forecast.
• Revenue Act tax collections were $247.0 million (19.7%) higher than forecasted and other tracked revenue came in $13.6 million (2.7%) higher than forecasted.
• Most of this month’s surplus was from higher-than-expected taxable economic activity in retail trade, the result of the allowed May opening of non-essential retail establishments in a majority of counties. While increased June openings may bring another month of stronger-than-expected activity, it remains to be seen if the activity is sustainable or merely a temporary release of pent-up demand.

“I see people in our district working hard everyday to bring their businesses back to pre-COVID-19 levels, and this report shows the results of so many efforts,” said Senator Ann Rivers, 18th Legislative District. “I support them, and we need to keep a balance in our state as we continue to recover from the effects of this pandemic.”

Employment Outlook

The council has just one month of new Washington employment data since the June forecast was released. The report says employment continued to recover in June following the historic decline in April. Total nonfarm payroll employment rose 86,500 (seasonally adjusted) in June, which was 34,600 more than expected in the June forecast. Private services-providing sectors added 74,600 jobs in June. Construction employment increased by 10,100 jobs and manufacturing added 1,700 jobs despite the loss of 3,000 aerospace jobs. Government payrolls were unchanged in June. Washington’s unemployment rate declined to 9.8% in June from 15.1% in May and 16.3% in April. The April rate was an all-time high in the series that dates back to 1976.

Tax Payments

The report also says total tax payments as of July 2 from electronic filers who also filed returns for May activity in the June 11 – July 10, 2019 period were down 9.0% year over year (payments are mainly Revenue Act taxes but include some non-Revenue Act taxes as well). Last month payments were down 14.4% year over year. Some details of the payments:

• Total payments in the retail trade sector increased 6.3% year over year. Last month, payments were down 7.1% year over year.
• Payments from the motor vehicles and parts sector were down 4.1% year over year. Last month, payments in the sector dropped 54.3% year over year.
• Retail trade sectors showing strong year-over- year growth were miscellaneous retailers (+77.8%), electronics and appliances (+32.2%), nonstore retailers (+28.9%) and building materials and garden supplies (+12.4%).