Early in 2008, the U.S. economy was teetering at the edge of a recession, with unprecedented losses at major financial institutions, falling stock market indexes, and uncertainty about the course of the economy. Only time will tell how all this sorts out. Meanwhile, what are the prospects for Washington state? As the accompanying chart shows, the unemployment rate in Washington has steadily declined in December of the last five years, while employment growth rates grew from 2002 through 2005, dipped down a bit in 2006 and recovered in 2007. The state's economy has been buoyed by the strength of Boeing and Microsoft, strong exports of agricultural and other products, and, until recent months, a healthy construction industry. Housing starts in Washington slowed through the fall, but the construction industry is benefiting from commercial and public sector projects. As of December, construction remains one of the strongest industries in the state.

What impact will the troubled national economy have on Washington? Export-oriented industries, including Boeing, Microsoft, agriculture, and wood products, may see strong markets aided by a dollar that will continue to fall in value relative to other currencies.

On the other hand, whether the current market fluctuations turn into a full-blown recession in 2008 or just a period of slow growth, demand will be weaker for companies whose customers are in other U.S. states. Overall, the growth rate in Washington will slow this year and could turn negative if the U.S. economy indeed goes into recession, or if that recessionary trend spreads into other countries.

Paul Sommers is a professor at the Institute of Public Service and Albers School of Business at Seattle University.