2025 WBA Economic Forecast Breakfast

2026 Economic Outlook: Key Insights from Our Sold-Out Event

On December 3rd, over 400 Whatcom County business leaders gathered at the Bellingham Golf & Country Club for the WBA's annual Economic Forecast Breakfast. The capacity crowd heard from Wells Fargo economist Jackie Benson on the national outlook, followed by WWU's Dr. Hart Hodges and James McCafferty on what it all means locally.

National Outlook: Navigating Volatility

Jackie Benson
Vice President & Economist, Wells Fargo

The economy contracted 1% in Q1 2025, then boomed nearly 4% in Q2—driven largely by tariff-related inventory shifts, not underlying weakness.

"Through all of the chaos and the uncertainty, the data show us that demand held up in the first half of the year amid these tariffs."

— Jackie Benson

GDP volatility driven by inventory swings, not demand weakness

Tariffs Stabilizing: After spiking to 30% in April, effective rates settled to ~17% and may drop further pending Supreme Court rulings.

Fed Rate Cuts: Expect 75 more basis points through June 2026, bringing rates to 3.25%.

Labor Paradox: Unemployment stays low at 4.4% despite weak hiring—labor supply has stopped growing.

Labor force growth has essentially stopped, keeping unemployment contained

The K-Shaped Consumer Reality

About 50% of consumer spending is driven by the top 10% of earners. Lower-income households face higher inflation and slower wage growth—business owners must think carefully about their target customers.

Lower-income households experiencing higher inflation rates

Whatcom County: "The Fog of Uncertainty"

Dr. Hart Hodges
Director, WWU CEBR

James McCafferty
Director, WWU CEBR

"Whatcom County's forecast used to be incredibly boring. 2%. Didn't matter, 2%. We're below 2% now in terms of employment growth."

— Dr. Hart Hodges

Whatcom County housing affordability compared to regional neighbors

Housing Crisis: Home price-to-income ratio of 9.49—worst in the Puget Sound region, even worse than King County when adjusted for wages.

Cost of Living: 27% above peer college towns for housing, 19% higher for transportation—yet wages are average.

2026 Forecast: ~1% employment growth—positive but below the historical 2% trend.

Only construction and professional services have recovered to pre-pandemic levels

Local Headwinds to Watch

Major Employer Pressures: Government (16.5%) and healthcare (14%) represent nearly one-third of local employment—both facing budget cuts.
Canadian Retail Slowdown: Q1 and Q2 2025 retail sales were "measurably lower" than expected.
Manufacturing Decline: The sector has lost 12% of jobs since 2020.

The Bottom Line for Your Business

Prepare for near-term bumps: Q4 2025 and Q1 2026 will see continued tariff effects. Build financial cushions.

Position for late-2026 acceleration: Tax cuts, lighter regulation, and AI-driven productivity should drive growth in the second half.

Address the labor reality: Tight labor markets won't ease. Consider wage adjustments and creative recruitment.

Know your customer: The K-shaped economy means value retailers face different dynamics than those serving affluent buyers.

Thank you to our sponsors:

Title Sponsor: Wells Fargo
Presenting Sponsor: AltaGas
Co-Sponsors: WRS, People's Bank, Larsen Gross, BP, Saturna Capital

Under the leadership of our board and the hard work of Barbara Chase and her team, WBA event attendance grew from 87,000 to 130,000 this year.

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