On Friday, the Washington Economic & Revenue Forecast Council released a preview of the upcoming revenue forecast.

Overall, things may be looking up.

The report states that recovery in economic activity continues in the fourth quarter of 2009, but recovery in jobs continues to lag.

Though concerns remain regarding credit to small business, the recovery of the construction sector, and the tentative nature of consumer confidence, there are reasons for positive thinking. Washington’s economy will outperform the nation, benefitting from higher overall exports and relative stability in aerospace and softwar publishing. In addition, cumulative revenue collections are on track to come in at $45-50 million above the November forecast.

Details

• Continued tight credit for small businesses poses a significant challenge for recovery and will slow down the recovery in jobs.
• Though consumer confidence is improving, this is tentative. Holiday shopping figures showed some evidence of a modest release of pent-up demand, but were mostly positive in growth because of the very poor results a year ago.
• House marketing indicators are signaling a potential turnaround. Single family housing starts, sales and prices have begun to firm-up, despite the overhang of excess housing which has yet to be absorbed.
• The state’s economy continues to lose jobs but the rate has slowed to a trickle in recent months and growth in some sectors has already turned positive. In addition, initial state unemployment claims seem to be indicating an imminent turnaround in the state’s labor market.
• New housing construction in the state continues to improve according to housing permit data.
• Construction employment continues to decline. It is estimated there is a one-year lag between turning points in permits and turning points in housing related construction employment.
• Washington’s manufacturing sector is poised for a rebound
• Washington’s personal income is now growing moderately.

Though things seem to be improving it is important to note that downside risks remain significant and at the same level as in November. There is a risk of a double-dip  or “W-shaped” recovery where economic activity lags in the fourth quarter of 2010. This is likely to happen if by the middle of next year consumer spending and confidence fails to recover as is expected.

The official February revenue forecast is scheduled for February 12.