The Spokane economy continued to slow during the first quarter, and the sluggish numbers were not a big surprise to those who make it their business to study and analyze economic statistics. The tough reality is that the United States is in what will likely be a deep, prolonged recession, and we are sharing in the pain.

But there is another reality that is undeniable. The Spokane area continues to fare much better than many other parts of the state, the region and the country. Home prices are flat, but not plummeting. Retail sales are down, but not by double digits. Unemployment has increased, but so has our labor pool. And while some of our local financial institutions are struggling, the contraction in that sector doesn't begin to rival that of some areas.

Unemployment Numbers Reflect In-migration

The average unemployment rate during the first quarter was 9.8 percent, up from 5.9 percent a year ago. Perhaps more interesting, while Spokane County had over 10,000 additional people out of work in the first quarter compared to a year ago, the actual number of employed has only fallen by about 1.5 percent. We also added nearly 6,800 people to the labor force during that same time frame. How can we explain these numbers?

Home Sales Continue Slump

Home sales continued to fall in Q1, despite exceptionally low interest rates and first-time homebuyer incentives. The units sold and dollar volume were both down about 27 percent. The average sales price, however, was up just slightly, at $200,475, and the median sales price was down just 2 percent.

Lack of Major Projects Affect Permitting Numbers

The total number of city and county permits was down almost 22 percent from a year ago, but the total valuation was even more dramatic - down 55 percent. These numbers indicate that we're working through the existing pipeline and did not add any major projects in the first quarter. "Where are we going to be a year or two from now if we don't start adding more projects to the pipeline?" asks Scranton.

Sales Retreat to 2006 Levels

Retail sales were down almost 8 percent quarter to quarter, with total taxable sales down 6 percent. Discouraging numbers, to be sure, but before anyone panics, a bit of perspective may be in order. We haven't fallen back to levels of the '70, '80s or even the '90s. Our Q1 sales activity matches that of Q1 2006, which, at the time, we were hailing as a pretty good quarter.

Negative CPI a Rarity

Sales numbers may have fallen to 2006 levels, but you'd have to go back to the 1950s to see a quarter-over-quarter decline in the Consumer Price Index of .84 percent.

Airport Activity Down, New Flights Announced

The total number of passengers flying in and out of the Spokane International Airport during the first quarter fell 15 percent compared to Q1 of last year. Much of the decline can be attributed to the departure of Express Jet from our market. "Over 20,000 passengers traveled out of Spokane on Express Jet during the first quarter of 2008," said Todd Woodard, the airport's director of marketing and public relations. "Losing that service was a major contributor to weaker first-quarter numbers."

Healthy Financial System Key to Recovery

The general consensus seems to be that restoring health to the financial system is key to the economic recovery. "I think when you start to hear people saying that it's easier for them to get loans, especially small businesses, we'll be more comfortable saying things are turning around," said Scranton. "Whether that's next month or six months from now is anybody's guess."

Forsyth is encouraged by the fact that the federal government is more forthcoming about what they think the new regulatory environment will look like, and how they plan to get the bad assets off the banks. "That's good, because it starts to give people confidence that progress is being made and that the situation can be resolved. At the policy level, I think things look a little clearer, more organized and rational," he said.