The Spokane area is expected to face a cooling, yet stable, level of economic activity in the new year that will be reflected in a flat labor force trajectory, some economists here say.

Nationally, economic indicators suggest that the U.S. isn't in a recession, however, consumer feelings and spending behavior indicate an "emotional recession," says Washington Trust Bank Chief Economist Steve Scranton during a presentation at Greater Spokane Incorporated's 28th annual Economic Forecast. 

Workers are being paid more on average than last year, but they're working fewer hours on average, which, combined with inflation, eliminates the increased spending power attributed to higher wages, Scranton adds.

Despite these headwinds, modest growth is anticipated in 2026, primarily due to the resilience of the U.S. economy, the continued growth of Spokane's population, and the potential for strategic investment by businesses in the new year. 

Mike McBride, regional labor economist for north central and northeast Washington at the Washington state Employment Security Department, says employers currently have greater leverage in the labor market compared to job seekers.

"Presently, the power dynamics between the employer and a job seeker has shifted more towards the employer in the past year or so because of waning demand and people (who) are now job hugging, wanting to stay in their job rather than actively looking for change or a raise," he says. "It's becoming less attractive to take the risk to change your job or career."

Elevated retirements also are contributing to flat labor growth projections, and these retirements are expected to continue outpacing the number of new workers entering the workforce over the next five to seven years, explains McBride. In the meantime, he says, the Spokane-area labor market is expected to be able to mitigate some of these job losses through in-migration.

"Spokane grew last year slightly faster than both the country and the state in terms of percentage growth, so that's good and does help lessen the the impact," says McBride.

Unemployment in Washington state has decreased by an estimated 14,500 seasonally-adjusted jobs in September, which, due to the six-week federal government shutdown, is the most recently available employment information, according to a press release from the Washington state Employment Security Department. The November 2025 labor report is scheduled for release in January 2026.

In the Spokane market, job growth is highly concentrated in the health care sector, McBride says, adding that the concentration poses a risk for the economy here when the majority of growth is focused in one specific area. Transportation and warehousing sectors also have seen year-over-year growth, he says.

The largest sector-level gains in private industry employment were in education and health services (up 10,300 jobs); transportation, warehousing, and utilities (up 2,100); and leisure and hospitality (up 2,080), according to Employment Security Department data for the month of September.

Other sectors, such as those impacted by trade, including manufacturing, construction, and retail, are facing flat or declining workforce rates.

Vange Hochheimer, economics and finance professor at Whitworth University and CEO and chief economist at Grand Fir Analytics, says about 40% of the Inland Northwest labor market is related to trade in some way.

"So when you have tariffs and you have retaliation from our trading partners, that will definitely translate into lower jobs," Hochheimer told the Journal in the December Elevating The Conversation Economic Outlook podcast episode. 

Additionally, Hochheimer says uncertainty surrounding tariff policies is making it difficult for companies to plan inventory levels and forecast revenues, which can force businesses into a state of inaction.

Expanding the labor pool by engaging individuals on the sidelines to get into the workforce should be a priority for employers in the new year, McBride contends. However, expanding the workforce likely will cost employers, who will need to offer higher wages to help recruit women with young children to rejoin the labor market. Additionally, workers with disabilities, who are underrepresented in the workforce, can help expand the labor pool, but these individuals risk losing crucial benefits if they earn more than a certain threshold, so it will take a significantly higher income for them to justify losing essential benefits, such as housing assistance.

Employers also need to focus on developing strategies to retain and develop their existing workforce in the year ahead. For instance, accommodating a diverse workforce through philosophical shifts and generational awareness can help motivate teams and benefit productivity. Investing in internal management training and building leadership skills also may help stem the tide of baby boomers who are retiring from the workforce and creating a deficit of management-level workers. 

Statewide, advocates need to prioritize policies that nurture the labor force and talent market here to prevent out-migration and promote population growth.

"If we are forward-looking and can adapt in a positive way to the changes that are happening, this could be a very short-lived transition," says Hochheimer.