‘Cautious optimism’ for county economy

The Tacoma-Pierce County Chamber hosted its annual Horizons Economic Forecast on Jan. 29 at the Greater Tacoma Convention Center. Presenting its 2025 Pierce County Index Report, the Chamber invited guests to speak about the county’s economic health, outlook and future prospects for this year.

Authored by economist Dr. Neal Johnson, the report highlights a blend of growth and challenges, focusing on trends in gross domestic product, labor markets, housing, and retail sales while forecasting moderate growth and ongoing challenges for key sectors in 2025.

“This PCEI Report provides our members with the insights they need to navigate the upcoming year with resilience, while recognizing the obstacles still facing Pierce County. Although we are seeing improvements in personal income and job creation, challenges in housing affordability and retail spending reveal the lingering effects of high interest rates and inflation,” said Tacoma-Pierce County Chamber President and CEO Andrea Reay. 

“We maintain a cautiously optimistic outlook for Pierce County. From job creation to housing affordability, this report helps our community make informed decisions to strengthen our economy and promote equity. Our commitment is to ensure that businesses – both large and small – have the tools they need to succeed.”

Pierce County Executive Ryan Mello addressed the audience to pledge the county’s continued alliance with businesses large and small. 

“You’ve seen Pierce County lead with our Pierce County Business Accelerator Program. It has helped to start up over 400 new businesses and entrepreneurs right here in this community, helping to bring their dreams to reality, employ people and build wealth,” he said.

“You’ve seen us launch the Businesses Navigator Program, leaning in to support Black, Brown and Indigenous People of Color owned businesses, and businesses owned by women and veterans, to help these marginalized communities that have not had historical access to wealth and the skills the build wealth. I’m here to tell you that no matter what happens in the other Washington, you won’t see Pierce County shy away from equitable economic development and lift all communities up.”

Just as the county must support business, Mello said it must also support the people who work at these businesses for them to live in Pierce County, succeed and keep county businesses thriving. 

“We’ll continue to build more housing at all income levels, especially affordable housing,” Mello said. “We will work tirelessly to expand childcare access and improve community safety because all these issues are business issues. We need all of those sectors to succeed in order to make this place a great place to do business.”

Port of Tacoma Commission Vice President Dick Marzano spoke about two Port projects aimed to improve Pierce County’s economic vitality. He noted that the Port provides 42,000 family wage jobs and with that, $2.8 to $3 billion in labor income. The Port brings in more than $100 million for K-12 education, transportation investments, and social services across the county. 

Last month, the Port, City of Tacoma, City of Fife, Pierce County and the Puyallup Tribe agreed on a draft subarea plan for the tideflats. 

“The plan was over seven years in the making, and it creates a shared vision among the five governments that balances industrial growth, environmental protection, and long-term stability to our region,” Marzano said. “The plan now heads to the Tacoma Planning Commission then to the city council for approval.” 

He said another example of economic vitality involving the Port is its effort to redevelop the east side of the Foss Waterway. In 2023, working together with its community partners – Tacoma School District, the Puyallup Tribe and City of Tacoma – the Port commission entered into an agreement to develop a Port Maritime Center. Its groundbreaking ceremony held on Jan. 8, the center will be home to new Port administration buildings as well as Maritime 253 regional skills center. 

“The Maritime Skills Center will serve students throughout Pierce County. It will give students the ability to go anyplace in the world for a job,” Marzano said. “By working together, we can look forward to making our region a place everybody can be proud of.”

KEY FINDINGS

The 2025 Pierce County Index Report gives a forecast of the county’s economic conditions, labor market, income, and housing activity. Johnson, its author, said the 2025 PCEI looks a bit weaker than in 2024 as he spoke of the COVID pandemic’s cost to the Pierce County economy and how the county is slowly rebounding.

“Economic growth in Pierce County will depend on population growth which may be hindered by low housing affordability, which is hindered by higher mortgage rates, and that policy is not likely to move in a direction that would improve this state of affairs,” he said about the county’s overall economic forecast.

Concerning economic growth, the PCEI is projected to rise by 1.6 percent in 2025, driven by increasing personal income and enhanced gross domestic product (GDP) contributions from key sectors like government and real estate. According to the report, this growth reflects the resilience of Pierce County’s economy. Total real personal income is expected to increase by 1.8 percent, with per capita income reaching $69,680. This indicates an ongoing recovery following recent economic disruptions that is now capable of providing a solid foundation for local businesses to create new opportunities.

Regarding employment trends, Pierce County anticipates the addition of 2,750 new jobs in 2025, primarily in the education, health services, and trade sectors. However, challenges persist for construction employment as high mortgage rates continue to impact residential development. The report advises that with a labor force growth of 0.8 percent, now is the time for employers to align their workforce strategies to harness emerging talent.

“The labor force participation rate took a hit during the pandemic. Post-pandemic labor growth has been decidedly lower than pre-pandemic labor growth. Pierce County’s population growth since 2021 has been one-quarter to one-half of the pre-pandemic rate,” Johnson said.

“When you put this all together, the unemployment rate for 2025 looks about the same and maybe a slight bit higher than 2024. Pierce County runs high relative to the U.S., the state and King County, being higher than King County, which is understandable, but one would hope that we’re closer to the same or national rates.”

Johnson noted that non-farm employment gains in 2024 were average with 5,500 jobs. 

“While construction only gained 108 jobs, that was far better than expected. I chalk that up to non-residential construction particularly in industrial and warehouse spaces. Education and healthcare, particularly healthcare, led the way.”

The report’s analysis of the county’s housing market revealed some not too surprising facts. Although mortgage rates eased slightly in 2024, housing affordability remains below historical averages. The Housing Affordability Index is expected to rise modestly, reaching 93.1 by the end of 2025, which is still below the benchmark of 100. This limits housing accessibility for many families. Even though new housing listings increased by 12.4 percent in 2024, closed sales only grew by 2.7 percent, indicating ongoing hesitancy or challenges among buyers. The report notes that addressing housing affordability is critical for maintaining and enhancing Pierce County’s competitive edge in attracting and retaining talent.

“Residential building permits are a weak indicator for both construction material sales and construction employment. High interest rates, supply chain issues, and higher prices for construction materials pushed building permits down but there was an uptick in the fourth quarter of 2024,” Johnson said. “On the inflation side, material prices are still relatively high.”

With housing affordability being low and mortgage rates not likely to come down significantly, Johnson doesn’t see an improvement unless prices come down, which is not likely, he said. 

“Household income jumping substantially is also not likely. With high mortgage rates and low affordability, it should come as no surprise that housing activity is soft, and I don’t see an improvement here.”

In real estate and construction, commercial real estate has seen modest activity, with a 3.6 percent growth in industrial warehouse inventory, while residential construction continues to face constraints due to high borrowing costs. These trends underscore the need for targeted policies to improve housing affordability and capitalize on opportunities in growing industrial sectors.

Pierce County anticipates the addition of 2,750 new jobs in 2025, primarily in the education, health services, and trade sectors.