The new year begins during a time of uncertainty and anxiety about the state of the economy, both nationally and at the state level. Inflation has been rising at worrying rates for the last year, driving up costs for consumers and employers. The Federal Reserve’s attempts to bring it under control have increased the cost of borrowing and raised concern about a recession in the coming year.

So far, the labor market remains strong, and unemployment is low, but warning signs are flashing. A new survey of employers conducted in December by the Association of Washington Business shows employers are feeling a growing sense of unease.

Half of the employers surveyed said they are “very concerned” about the potential for a recession in the new year, and almost all of the remaining respondents said they are “somewhat concerned” about a recession. This concern is leading employers to delay capital expenditures (41%), postpone hiring (28%), postpone expansion into new markets (17%), and lay off workers (7%).

Of particular cause for concern is the number of employers—nearly one-third—who report their business is beginning to experience a downturn. That’s double the number reported in July.

The primary task lawmakers face during the new session, which began earlier this month, is to adopt a new two-year state budget. As is customary, Gov. Jay Inslee introduced his budget and policy ideas first, rolling out a new, $70.4 billion plan in December.

Although Gov. Inslee’s proposal doesn’t call for new taxes, it would drain reserves at a time of tremendous uncertainty, leaving little in the way of a safety net in the event that a recession leads to a drop in state revenue. And it would continue the trend of significant spending increases, driving up state spending by another 9.8%. 

For comparison, 10 years ago Washington’s two-year budget was $33.6 billion, or less than half of the governor’s proposed 2023-2025 budget.

As employers grow increasingly concerned about the health of their businesses, lawmakers would be wise to take these concerns seriously and to act as champions for the economy during this legislative session.

Being champions for the economy means slowing the trajectory of state spending, setting aside resources for a rainy day, and looking for ways to provide targeted tax relief to promote positive outcomes, such as doubling the state’s manufacturing sector.

Being champions for the economy also means taking steps now to ensure that Washington has enough affordable electricity to power our homes and manufacturing facilities in the coming years, so we can maintain the state’s competitive advantage of low-cost, reliable electricity.

Being champions for the economy means addressing the significant housing shortage facing our state. Lawmakers can help by supporting legislation that reduces the regulatory timeline and duplicative overview required for permitting new home construction. 

And they can support reform of land use laws to allow greater flexibility in zoning for home ownership.

These are just a few of the issues facing lawmakers in the 2023 session. Others include finding solutions to the state’s long-term care insurance and Paid Family and Medical Leave programs and helping address the workforce shortage, which continues to be a top concern for many employers. 

Kris Johnson is president of the Association of Washington Business, the state’s chamber of commerce and manufacturers association.