State’s top economist: Uncertainty is slowing economic growth to “an agonizing crawl.”

Dr. Arun Raha, the state’s chief economic forecaster, is delivering the quarterly state economic review now. Watch live on TVW or keep up here.

“Since our last forecast, the economic recovery has slowed to an agonizing crawl,” he said. He said the risk of a double dip recession has increased, but he still doesn’t believe it will happen.

He said the equity market is weak, which could foretell economic weakness to come. Ditto for bond markets. “I do not believe, though, that we are at risk for getting into a Japan-like economic spiral,” he said. The two economies are different and the Fed acted more quickly, among other factors.

Raha said GDP growth in the second quarter was revised to 1.6 percent.

He said private sector job growth in Washington is similar to national averages, but that state and local jobs have dropped off. Consumer confidence is still down, he said, but they expect it to improve as unemployment rates drop.

“Just before the recession, household revolving debt was growing at an annualized 10 percent per month. Now it is shrinking at approximately the same rate.” What’s that mean? Pre-recession, people were accumulating more debt than they could pay off. Now, they’re cutting back.

“Corporate profits are back up to pre-recession levels,” he said — a bit of good news. “Even a small increase in demand could translate to jobs,” he said, because productivity gains are slowing. That means increased demand would lead to more workers needed.

Other good news: The asset quality of Washington’s regional banks is improving.

Bad news: Housing data is disappointing. “Single family permits are now down,” he said, and previous gains were “clearly due” to the tax credits offered by the federal government. He said housing construction won’t reach pre-recession levels anytime in the state’s six-year forecast window.

He said home remodels are expected to increase this year and into 2011, which is good news for the out-of-work construction workers. He said today’s remodelers are more frugal and aim to make a low-quality house sellable.

Outlook for aerospace is similar to June’s forecast: Sustained but moderate gains, he said, beginning next year. Ditto for software: “We expect modest software employment growth through 2011,” and picking up in 2012. Those two industries make up a substantial chunk of the state’s economy, he said, and 5 percent of the workforce.

“In conclusion, I wish I had better news to give you but I don’t.”

Tags: economic review, Raha