It’s time to take a break from my normal retail column topics and tidbits to reflect on what happened in Whatcom County’s economy in 2016 and how it might impact the coming year.
The year 2016 was an interesting one in terms of local business trends, with several grocery developments (Haggen bankruptcy and sale to Albertsons, Costco opening on Bakerview and Albertsons closing its Birchwood store) landing on The Bellingham Herald’s top news stories of 2016.
Here’s a look at some other big trends in the local economy in 2016, in no particular order:
Intalco avoids being idled, saving hundreds of jobs
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Changes to a power deal and $3 million in state funding for workforce training were key factors in keeping the Intalco aluminum smelter operating. The impact was about 465 manufacturing jobs remaining in Whatcom County in 2016.
Alcoa originally announced in November 2015 plans to curtail the smelting operations at the end of March because of an oversupply of aluminum on the global market. At the time, the price of aluminum had fallen below $1,500 a metric ton, a level that makes it difficult to turn a profit in many U.S. smelters, according to the London Metal Exchange.
An amendment added to a power deal with the Bonneville Power Administration allows Alcoa to purchase more of its energy on the spot market, which remains below the rate BPA charges. The amendment lasts through Feb. 14, 2018, while the 10-year contract between Alcoa and BPA lasts until September 2022.
Since the agreement in May, aluminum prices have rebounded, hovering around $1,750 a metric ton in mid-December, according to the exchange. Aluminum prices can be volatile, so it is not known where it will be when the amendment expires in early 2018, but it clears the way for a potentially quiet and productive 2017 at the smelter.
Canadian dollar remains weak all year
The Canadian dollar remained weak throughout 2016, ranging between 68-79 cents compared to the U.S. dollar.
The recent weakness in the loonie began in mid-2015, ending a five-year run of it being 80 cents or higher. That led to a steep drop in southbound border crossings and cross-border shoppers in Whatcom County. Currently the loonie is around 74 cents compared to the U.S. dollar.
Some are expecting the Canadian dollar to continue to weaken in 2017. A Canadian forecaster recently told CBC News that he expects the loonie to hit a low of 65 cents in the next 12 months. A big factor is the divergence in monetary policy between the U.S. and Canada, according to the article. The U.S. is expected to raise interest rates in 2017, while the Bank of Canada is not. Higher rates will strengthen the U.S. currency.
Oil prices tend to have a major influence on Canadian currency. At this point the relatively low oil prices are not expected to rise much in 2017, so that will also keep the loonie from strengthening much.
If the Canadian dollar does continue to weaken, Whatcom County residents who visit Canada in 2017 can expect to find good deals.
Real estate prices jump, especially in Bellingham
With tight inventory and growing demand, home prices took off in 2016, particularly in Bellingham.
The median price for a home sold in Bellingham hit $369,900 in the third quarter, while the average price hit $431,517, according to a report by Lylene Johnson of The Muljat Group. The median price for Bellingham is up 13.6 percent compared to a year ago.
With strong sales in October and November, it’s expected the year-end numbers will also show double-digit price increases.
While rent prices appear to be easing with the construction of hundreds of apartment units this year, it appears tight inventory will remain in place heading into 2017 for single-family homes. As the Seattle-area real estate market remains hot, it has an impact in this area: More than 5,000 people commute from Whatcom County to the Seattle, Bellevue and Everett areas for work, according to data collected by Hart Hodges, director of the Center for Economic and Business Research at Western Washington University.
Bellingham waterfront sees construction activity
After years of little construction activity on the waterfront, it started ramping up in 2016.
Two projects involved moving growing manufacturing companies. Construction began this summer on a new 57,000-square-foot building for All American Marine, which builds a variety of boats, including ferries and research vessels. The move into the new space is expected to be completed in early 2017. Along with building bigger boats, the company plans on hiring around 25 employees once they are in the new space.
Itek Energy, which makes solar panels, is also moving into a building near the waterfront in the first half of 2017. The growing company bought a 48,000-square-foot warehouse and 2 acres of property at 800 Cornwall Ave. from the Port of Bellingham for around $1.7 million. The company has 95 employees in Bellingham and expects to hire 30 more after the waterfront facility is up and running.
Work was also started to refurbish the Granary Building in 2016. It is expected to be completed later in 2017.
It will be interesting to see what momentum these projects will create as the port continues to redevelop the former Georgia-Pacific property. Having around 100 employees from Itek Energy near the downtown core should create some business activity in the district.
Voters approve minimum wage hike
The passage of I-1433 in November should have implications for the local economy in the coming years.
According to data from the Washington Employment Security Department, an estimated 5,449 Whatcom County jobs will receive a 16 percent wage increase as the minimum goes from $9.47 an hour to $11 an hour. If the worker hours in those jobs remain around the same, that could mean a significant increase in consumer spending from that demographic.
On the other side of the coin are the business owners who pay minimum wage to employees or buy goods from companies that pay their workers that rate. It means a big bump in expenses starting at a time of year when economic activity, particularly consumer spending, is relatively slow. This will impact several industries, including child-care centers, agriculture and tourism. It will also impact restaurants and drinking establishments, of which there were about 485 in Whatcom County last spring, according to Washington Department of Revenue data.
Businesses that don’t offer paid sick leave will also have to start preparing for that change. The paid sick leave aspect of the initiative starts in 2018.
Several longtime business owners are moving on
Quite a few stalwarts in the Whatcom County retail business community either closed, sold or have put their businesses up for sale in 2016.
The list includes Gary and Barbara Lupo, who recently closed Garys’ Mens and Womens Wear. Those who sold their businesses include Rick Wilson of Wilson Motors; Chuck and Dee Robinson of Village Books and Paper Dreams; and Ken and Marguerite Ryan of The Bagelry. Those who put their businesses up for sale include Dorie and John Belisle of BelleWood Acres, Chris Foss and Foster Rose of Greenhouse, and Randy and Patricia Clark-Finley of Mt. Baker Vineyards.
In the case of the three businesses that were sold (Wilson Motors, Village Books/Paper Dreams and The Bagelry), Village Books and The Bagelry were sold to longtime employees, while Wilson Motors kept its longtime management team in place, making for smooth transitions.