As 2027 approaches, the national and regional economies look like the previous two years: Output is still growing, but with significant underlying imbalances.  

Specifically, U.S. and regional employment remains heavily dependent on the healthcare sector, consumer and business input inflation remain elevated, U.S. investment spending remains heavily dependent on AI, the U.S. fiscal deficit continues to grow, and difficult demographic trends continue unabated.    

 U.S. and regional employment growth remained weak in 2026, with healthcare again being the key driver. Using data through the summer, U.S. employment growth for 2026 will be about 0.2%; however, excluding the healthcare sector, U.S. employment growth will be around -0.3%. The same trend emerges regionally, but with comparatively more weaknesses in overall employment growth. 

For the Spokane metro area, employment growth in 2026 will be around -0.6% but, excluding healthcare, that number falls to around -1% (see chart). One concern for Spokane metro is the marked slowdown in healthcare employment growth between 2025 and 2026. In 2025, healthcare growth was 2%, but this year it will likely be around 0.4%. A similar growth pattern exists in the Kootenai metropolitan area, although employment growth on the Idaho side of the border is stronger and has been less dependent on healthcare growth.  

I expect U.S. and regional employment growth will continue to be weak in 2027, especially given the on-going policy uncertainty around healthcare, interest rates, and tariffs. This uncertainty will keep many employers on the hiring sideline for the next 12 months. Specific to Eastern Washington, the ongoing adjustment to recent tax increases, as well as uncertainty over future state taxation, will also weigh on employers’ hiring decisions.  

Like the rest of the U.S., the region saw a resurgence in inflation for both consumer goods and business inputs, largely reflecting the recent energy price shock. However, energy prices are not the only culprit. Also at work are new tariffs that circumvent the Supreme Court’s recent ruling and demand pressures coming from the AI’s buildout. 

The AI expansion, although supporting GDP growth, is generating price pressures in certain capital goods, refined metals (e.g., copper), and other building materials.  Specific to the extreme Western fires this summer, we could see some regional inflation pressures coming in the form of a tighter housing supply from lost homes and rising insurance rates. As a result, I don’t expect consumer inflation will reach the Fed’s 2% target until 2028 or 2029, depending on the path of energy prices, tariffs, and AI spending.  

Adding to the inflation pressures is the rising price of money. Financial markets expect at least one more Federal Reserve interest rate increase this year and another one early in 2027. In addition to tighter monetary policy, long-term rates continue to be propped by the financial risk posed by America’s growing national deficit and debt, especially in the absence of a viable plan to address it. This means higher borrowing costs for households and businesses. Outside of the AI world, this will slow investment and household consumption, and will create additional barriers to improving housing affordability. 

On the demographic front, U.S. population growth is still dependent on immigration, especially with the ongoing decline in the U.S. birth rate. Census data indicates that between 2020 and 2025 the average annual U.S. population growth rate without international immigration would have been 0.1% instead of 0.6%. This means in the absence of immigration, the U.S. labor force will struggle to grow.  

Our region is no less dependent on in-migration for labor force growth. Looking at 2020-2025 Census data, population gains in both Washington and Idaho without in-migration would have also been negligible. I expect that population growth in the combined Spokane-Kootenai metro area will stay around 1% in 2026 and 2027, with North Idaho continuing to grow faster than Eastern Washington. 

Since the pandemic, people have been asking me to frame what’s happening to the world they grew up in. In response, I’ve repeatedly used this example: According to U.S. Census records, there were just over 2,000 people in 1950 who where at least 100 years old. That means they were born around 1850. Think about a 100-year-old waking up in America in 1950 versus the America they were born in—in terms of medicine, technology, culture, politics, and just about everything else, it was like waking up on an alien planet.

I believe we are about halfway through a100-year change of that magnitude. So, for those born around the start of the 1970s, if you make it another 50 years you too will be effectively waking up on an alien planet. I’m not sure that’s comforting, but it is reality.

Dr. Grant Forsyth is the chief economist at Avista Corp. and previously was an economics professor at Eastern Washington University.