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The Nation

One-Two-Three Punch Puts Seattle on the Ropes

Economy: Dot-com slump, Sept. 11 and Boeing cuts take their toll.

November 25, 2001|KIM MURPHY | TIMES STAFF WRITER

SEATTLE — 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.

FOR THE RECORD
Los Angeles Times Tuesday November 27, 2001 Home Edition Part A Part A Page 2 A2 Desk 1 inches; 18 words Type of Material: Correction
Seattle economy--In a Sunday story in Section A about the economy in Seattle, the name of mayor-elect Greg Nickels was misspelled.

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.

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