The aerospace industry comprises a significant component of the manufacturing economy in Washington. The magnitude and scope of the aerospace industry are major factors influencing the general level of commercial and industrial activity within the state economy. At present, roughly one out of every four manufacturing jobs in Washington is directly engaged in the aerospace industry.

Aerospace is broadly classified into two major groups:

• Aircraft and parts, including aircraft assembly, aircraft engines and parts, and aircraft parts and auxiliary equipment (SIC 372); and
• Guided missiles and space vehicles and parts, including guided missiles and rockets, space vehicles, propulsion units for guided missiles, airframe assemblies, and research and development (SIC 376).

Figure 1

Periodically, the aerospace industry goes through serious cyclical downturns. For instance, between 1968 and 1971, Boeing’s employment declined by nearly 60 percent, from 102,400 to 41,000 jobs. Subsequent production cuts in 1975-1977, the early 1980s, and the early 1990s also resulted in substantial drops in employment during those periods. Since 1995, aerospace deliveries and employment have resumed growth only to contract slightly in early 1999.

Figure 2

Annual Change in Aerospace and Total Nonfarm Employment in Washington State, 1960-1998
Source: Washington State Employment Security Department

For more detail of above graphic

During the 1960s through the 1980s, the common expression "as Boeing goes, so goes the state economy" seem to prove itself time and again. However, more rigorous research indicates that when Boeing experiences a downdraft, the rest of the state’s economy does not catch a cold. In particular, the latest Boeing downturn in the early 1990s—where employment in aerospace declined by 30 percent—did not result in the state economy sinking into recession. This remarkable change is due to a number of factors including: (1) the state’s economy has become more diversified and, as such, is less dependent upon the aerospace industry; (2) other basic industries (both traditional like wood products and metals; and new like software, biotechnology, and environmental services) have continued to grow; and (3) increased high-technology start-ups surge in the wake of Boeing layoffs.

Figure 3

Aerospace Production and Employment in Washington State, 1960-1998
Sources: Washington State Employment Security Department and The Boeing Company

For more detail of above graphic

Such trends do not diminish the overall importance of aerospace—or Boeing—on the state’s economy. Indeed, according to a recent economic impact study of the Boeing Company, one out of every six jobs in Washington is supported either directly or indirectly by the aerospace industry. Clearly, the aerospace industry will continue to play a dominant role in the state’s economic health.

The influence of the aerospace industry on the state’s economy is also attributable to more than the size of its workforce. In particular, the industry has historically enjoyed high wages and salaries. In 1998, the average aerospace worker earned $54,000, three-fourths more than the average statewide worker. Seventy percent of all aerospace workers earned $20 or more per hour and nearly two-fifths earned more than $26 per hour in 1997. These high wage levels translate into significant disposable income for purchases of local consumer goods and services.

Table 1

Real Average Wages for Washington Aerospace Workers,
1981-1998 (1998 dollars)
Sources: Washington Employment Security Department,
U.S. Bureau of Economic Analysis

Figure 4

Average Hourly Wages for Washington Aerospace Workers, 1997
Source: Washington Employment Security Department

For more detail of above graphic

The wage structure of aerospace is directly related to the industry’s occupational profile. More than two-fifths of the aerospace workforce are professional and technical workers, with such occupations as engineers (aerospace, mechanical, chemical, industrial, computer, electrical), engineering technicians, system analysts, and computer programmers. Product assembly and material handlers occupations (e.g., precision inspectors and testers, aircraft mechanics, tool and die makers, machinists, aircraft structure assemblers, electrical assemblers, machine tool operators, general assemblers0 garner a significant share of the aerospace workforce.

Table 2

Occupational Profile of Aerospace Workers in Washington,
1998 and 2008
Source: Washington Employment Security Department

Another factor of aerospace’s influence is the magnitude of purchases from other industrial sectors in the state’s economy. According to a Boeing release, the company spent more than $2.9 billion within the state for needed goods and services; or about 16 percent of its total 1995 purchases of $18 billion. Such spending supports a significant number of jobs within the state’s economy, particularly in such sectors as industrial machinery, electrical and electronic machinery, instruments, metals, and business services.

Finally, aerospace is the state’s leading export sector. The ability of a state to sell goods and services in markets beyond its borders (i.e., to customers in other states, foreign countries, and the Federal government) is a key determinant of its economic health and welfare. A recent study found that export production is Washington’s most critical basic economic activity; accounting for more than two-thirds of the state’s total employment when both the direct and indirect effects of export activity are taken into account. Aerospace figures prominently within this state total. In 1998, aerospace foreign exports amounted to $25.5 billion.

Figure 5

Washington State’s Total and Aerospace Foreign Exports, 1960-1998
Sources: Washington State Community, Trade & Economic Development Department; U.S. Department of Commerce; Foreign Exports and the Washington State Economy, Dick Conway & Associates, 1997.

Prospects for long-term demand of aircraft is bright. Over the next two decades, Boeing predicts that the demand for new passenger jets will grow 4.7 percent per year on average to a worldwide fleet of 28,400 passenger and cargo jets. The total market potential for new commercial airplanes over the next twenty years is 20,150 airplanes or an equivalent $1.38 trillion in 1998 dollars. Such a forecast would require an average annual output of over 750 planes by the world’s commercial aircraft manufacturers—substantially above the current rate of production. A significant amount of the demand is expected to emanate from replacement aircraft due to fuel inefficiency, excessive noise, or obsolescence. The remaining three-fourths will be generated by continued growth in air travel.

Growth of aerospace employment in Washington will be bounded by several potentially limiting factors. The most significant factor is foreign competition, particularly from Airbus. In recent months, Boeing has lost substantial market share to the European aerospace consortium. Another limiting factor is productivity. To meet the challenge of foreign competition, Boeing recognizes that productivity of its workers must increase. Higher productivity means that large numbers of new workers, hired during periods of "ramping up," will no longer be required to produce proportionately higher levels of output. Finally, in order to gain new aircraft orders from foreign carriers, Boeing will likely continue to outsource some components to manufacturers in the foreign carriers home countries. This practice of "home content" outsourcing would further constrain employment growth in Washington.

Figure 6

Washington Aerospace Wage & Salary Employment Forecast, 2000-2020
Sources: Washington Office of Financial Management, Washington Employment Security Department