One-Two-Three Punch Puts Seattle on the Ropes
It hardly seems to Robert Millage that it was just three years ago when he came here for a job with Amazon.com, helping the Internet retailer set up warehouses all over the country and collecting stock options worth $250,000, more money than the 26-year-old from Idaho had ever seen in his life.
Then, as quickly as it started, it was over. Millage got laid off, Amazon’s stock price took a dive and Millage put Seattle in his rearview mirror. He’s back in Idaho now, working at a Radio Shack.
“I don’t know, that whole bubble just broke,” he said. “Everything was going so fast we didn’t realize it was a snowball rolling downhill.”
An economic downturn has settled on much of America but in few places quite as painfully as in Seattle. In this rags-to-riches-to-rags story, Millage was able to leave. But much of the rest of this city--a town that blasted its way through the 1990s like a roadrunner on speed--sailed over a cliff.
The dot-com implosion that ended Millage’s job was bad enough, stripping the Puget Sound region of the bulk of more than 25,000 jobs over the last two years. Then Boeing Co., the bedrock that for decades has been the bellwether of Seattle’s economic fortunes, moved its headquarters to Chicago this summer.
The Sept. 11 terrorist attacks struck next, leaving the only major Boeing component to survive in Seattle, the commercial aircraft group, to face one of the worst airline industry slowdowns in recent memory.
On Dec. 14, 5,000 Boeing workers will be out of a job in the first round of an estimated 22,500 Boeing layoffs scheduled to take effect in the state before the middle of next year. An additional 2,000 Boeing contractors’ jobs will also end in mid-December.
Combine that with a significant drop in tourism brought about by the Sept. 11 attacks--hotel occupancy rates were down 22% in September--and then factor in the stock market: Microsoft Corp.’s rank-and-file employees alone took a $21.2-billion hit in the value of their stock options in 1999.
The bottom line: “Our recession will be deeper and our recovery will be slower than the rest of the U.S., which is not the case in normal times,” said Chang Mook Sohn of the state’s economic forecast council.
State revenue estimates already are down $813 million from what they were in September--leaving Washington Gov. Gary Locke scrambling to find cuts--and many forecasts don’t show any signs of recovery until 2004.
“When it comes to the Washington economy, we have not just been whistling past the graveyard. We have been a marching band playing the entire works of John Philip Sousa at full volume past the graveyard,” Bill Virgin, columnist for the Seattle Post-Intelligencer, wrote recently. “But we have run out of breath, run out of tunes, run out of belief in the continuing delusion that we could escape a recession.”
A Proliferation of Millionaires
To understand why Seattle thought it could be different--why nobody thought bad times were going to be quite this bad--one need only go back a few years when Millage joined his buddies at Amazon.com.
Boeing in the late 1990s was in the middle of a growth spurt that added nearly 48,000 jobs to the payroll--and not the kind of Wal-Mart jobs that were fueling employment growth in much of the rest of the country, but good jobs that could earn a person $50,000 or $80,000 a year, fully paid health benefits, retirement packages.
Meanwhile, with the explosion of dot-com companies and the software industry, new millionaires became more common than Suburu Outbacks. By the end of the 1990s, there were 60,000 households in the Puget Sound area with a net worth of $1 million or more.
New luxury condos went up downtown, many of them bought as crash pads so people wouldn’t have to drive home to the suburbs after working late. In March of last year, a house in the tony Madison Park district sold for $1 million more than its asking price. The community of Medina called for a moratorium on megahouses after former Microsoft President Jon Shirley erected his 23,000-square-foot home not far from Microsoft co-founder Bill Gates’ 65,000-square-foot, $109.5-million residential compound.
Millage, for his part, was working 10-hour days that often stretched into 12 or 14 hours, six days a week. He was good with logistics at a time when Amazon was expanding its ability to make an expansive inventory of books and other products available by mail at the click of a mouse. With his stock options doubling in value every few months, Millage was soon worth a quarter of a million dollars in unexercised options.
What happened when Millage got laid off in June of 2000, with tens of thousands of others in the industry, isn’t much different from the dot-com nightmare that unfolded all over the country. The difference was that the New Economy was Seattle’s hedge against the gut-wrenching cycles of the Boeing production line.
For years, Boeing had led the region through one boom-and-bust cycle after another, hiring everyone in sight one year, laying them off a few years later. But then Seattle went into the Sept. 11 disaster without the New Economy to fall back on.
And then Boeing started acting up again. This time, many fear the layoffs aren’t just hallmarks of a production downturn. With management vowing to reposition the company to be more competitive globally, workers fear that the Boeing recovery, when it happens, may happen not in Seattle but in Israel or Indonesia or Russia.
“In the past, there was a sense that you knew what you would be coming back to, that there was an expectation and confidence that Boeing would compete successfully in the long run,” said Stan Sorscher, labor representative for the Society of Professional Engineering Employees in Aerospace, which represents Boeing engineers and technicians. But the last time the union asked Boeing employees if the company was making changes necessary to compete, only 9% said yes.
The coming layoffs, Sorscher said, will drive many of the senior engineers to seek new jobs and eliminate most of the company’s younger engineers. “After this current round of layoffs, we’ll essentially have wiped out everybody below the age of 32,” Sorscher said.
Danny Faidley’s grandfather worked for Boeing in Wichita, Kan. His father retired from Boeing after 30 years. Faidley himself has worked 15 years as a tool grinder at Boeing’s Auburn, Wash., plant. He makes $28.60 an hour, but has just been told he has to take a lesser job with a $5-an-hour pay cut if he wants to stay on for another six months. In any case, he’ll be out of a job by July.
Faidley’s been on strike before. His friends have been laid off and hired back. “But you always came back. The difference now is, these jobs going now, they’re not coming back. These jobs are being eliminated. Oh, airplanes are going to be going out the door no matter what. They’re just not going to be done by us, and they’re going to be done for half the wage they’re being done [for] now. At work, we call it the death of the middle class. And we’re the middle class.”
Boeing officials say it’s too early to predict how many employees will be hired back, and when. “Nobody knows how things are going to turn out,” company spokesman Bill Cogswell said. “Hopefully, it will be more of a short-term thing than anything.”
At a high-tech employment fair earlier this month in the suburb of Bellevue, there were 20 companies looking for workers, compared with 160 last year. A long line threaded back from the Lockheed Martin booth, where Boeing employees sought work with the company that beat out Boeing for the Pentagon’s Joint Strike Fighter contract.
Mike Taing, a manufacturing engineer, said he’s lived in Seattle for 20 years but would move to Texas for a Lockheed Martin job. “The company [Boeing] hasn’t been loyal to the community. I don’t feel sorry for them.”
At a table nearby, Aaron Nanto, a 23-year-old software test engineer, said he was waiting for a laid-off colleague to apply for a job and keeping his own options open. “I’m one of the last people left at my company, so it’s been pretty hard for me, watching everyone else go. People are basically taking anything that comes their way. One of my friends is trying to get into the construction business.”
Seattle, in a surly mood, threw incumbent Mayor Paul Schell out during the primary. His successor, Greg Nichols, admits he’s got his hands full but has faith the city will pull through.
“We’re going to have to ride out the aftermath of Sept. 11 and what it has done to the tourism industry in the short run and try and put ourselves in the position where, when those things start to turn around, we’re in a position to take advantage of that,” Nichols said.
The city will push Boeing hard to center much of its upcoming high-speed, commercial Sonic Cruiser production in Seattle, Nichols said. He said he will also address some of the issues--high taxes, congested freeways--that have made the region less competitive for business. “We’ve got a long way to go to catch up, but we need to. This slowdown in the economy might be the perfect time to begin that work,” Nichols said.
Not everyone sees a slowdown as a setback. When Kristy Martin got laid off from an entertainment Web site earlier this year, she didn’t mourn, she partied--throwing a “return to simplicity” bash. Microbrews were out. Good old Rainier beer was in. The guests drove over to see Mudhoney, a classic grunge band from the days before wine bars took over.
“In the long run, it will be nice to go back to maybe facing what Seattle’s always been, which is a workers’ town,” Martin said. “Even during the Boeing exodus in the ‘80s, people still knew what they were. They just were impoverished. You need that humility.”
Martin, for her part, tried humility for several months. Then she got a job in New York.
