The "subprime" market has evaporated and the stress is showing in the economy in several places. The accompanying graph shows the impact on the natural resources sector - forestry and mining - as well as in wood products. The two industries recovered from the 2001 recession and enjoyed a brief period of growth in 2004, but then began to falter.

The natural resource sector mainly supplies local customers, but many logs from Washington forests get milled in Oregon. Products from in-state mills go to builders throughout the West, especially in California, the largest housing market on the West Coast. With new home inventories hitting historic highs in September, builders are slowing output in most regions of the country. It's unclear whether the natural resources and wood products sectors will continue to slow, and whether this slowdown will spread into other markets as has happened in past recessions.

Paradoxically, the raging forest fires in October 2007 in southern California may spark a boom in construction that will at least temporarily offset the cooling market for construction products. If the housing market recovers, a recession may be avoided, with growth nationally and in the state looking better in 2008. But slower growth, or even a recession, remains a possibility. Since 2008 is an election year, the one safe forecast is that we'll hear a lot about economic programs from presidential and gubernatorial candidates.

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