Winners and Losers: The Whatcom County economy vs COVID-19

Dustin McKissen and Mike McKenzie

As 2020 draws to a close, the COVID-19 pandemic continues wreaking havoc on the Whatcom County business community. With vaccine development uncertain and Gov. Jay Inslee’s “Safe Start” plan stalled locally, the impact will likely inflate even more.

Business closures this year include manufacturing, restaurants, retail, bars, gyms, salons, churches and many others, leaving the county economy reeling just as voters recently made decisions that will affect how and when the state will fully reopen.

A short list of closings shows just how widespread were the challenges created by the pandemic and the resulting economic restrictions. Safran Cabin — a French aerospace manufacturer of overhead cabins and ceiling panels for airline giants such as Boeing, Airbus and Mitsubishi Aircraft — announced Sept. 28 that it will lay off its remaining 250 local employees (with 60 days’ notice) and close its Bellingham facility by the end of 2021. The closure revelation followed the company’s April decision to lay off 205 employees shortly after the national COVID-19 shutdown. With travel severely restricted across the globe, demand for the company’s products had plummeted.

State Rep. Rick Larsen pledged support in a news release to “the (laid-off) workers and communities I represent. … Northwest Washington is home to the best aerospace workforce in the world. I will work to ensure necessary resources to help them find new work.”

But options for this region’s unemployed aerospace workers could dwindle further, given Boeing’s recent announcement that it would shift production of 787 jets from Everett to a facility in South Carolina; many Boeing employees commute from Whatcom County.
The Safran announcement followed a stunning earlier decision by Alcoa to curtail activity at its Intalco Works aluminum smelter in Whatcom County’s Cherry Point Industrial Zone. Alcoa’s April announcement resulted in as many as 700 layoffs.

The planned closures of the Intalco Works plant near Ferndale and of Safran’s Bellingham facility means that more than 1,000 jobs will have disappeared from two major area employers by this time next year. Alcoa has been on the local scene for 50 years, and Safran has operated for 30 years in the Barkley Village area (including time under the Heath Tecna and Zodiac Aerospace brands).

The economic impact of the pandemic has spread far beyond large manufacturers. COVID-19 shutdowns and continued state and local restrictions have left food and beverage establishments throughout Whatcom County either closed permanently or in danger of going out of business. For example, the breakfast restaurant Over Easy in Bellingham closed its doors for good in June. The owners called the closure a “heartbreaking decision” in a letter posted to the eatery’s front door. Village Pub & Eatery, Kay’s Cake Designs, Firefly Lounge and others have faced the same dilemma. Statewide restrictions shut them down, and many were left to decide whether they could wait it out and reopen.

National brands also have felt the sting. In late spring, Pier1 closed its Meridian Street location, joining several Bellis Fair Mall retailers that have struggled since March to stay open. Starbucks closed its downtown Bellingham location at the end of August, citing the lack of a drive-thru window as a key factor in the decision.

Brick-and-mortar retailers faced a severe uphill climb because of the ongoing closure of the United States border with Canada, which has accelerated the negative impact on stores. Many have braced for the possibility that nonessential border traffic could remain prohibited or heavily restricted during the peak holiday buying season beginning at Thanksgiving in late November.

The toll on Whatcom County’s businesses has devastated the workforce. The countywide unemployment rate stood at 9.4% on Aug 31. That was down almost half from a high of 17.7% in April but still more than twice the 4.7% rate the county had in March, less than a month before state and local governments put lockdowns and economic restrictions in place.

Contrary to the business closures, the local housing market remained strong in some ways. For example, as of August the median home price in Bellingham was $620,000, according to data from the Northwest Multiple Listing Service. That was a 20% increase over August 2019.

According to several sources, part of the reason for the continued strength of the residential real estate sector may be the pandemic itself. With many companies permanently making a transition to telecommuting arrangements, buyers from Seattle and other high-priced housing markets see Whatcom County as a relative bargain, especially outside of Bellingham.

“People are moving here from California, Oregon and generally from about anywhere, trending from urban to suburban,” said Troy Muljat, who leads the regional Muljat Group.
Muljat publishes a detailed quarterly report on what’s happening on the county real estate front. After the third quarter, he reported that the market was growing outside of Bellingham to smaller towns and unincorporated areas.

Spring wasn’t its usual self, Muljat said, but July through September flourished.
“Second quarter is usually big, but fell through June,” he said. “Then in July, August and September the COVID makeup sales appeared. But inventory is still at an all-time low in Bellingham because the delay in sales squeezed the market.”

The experience in Whatcom County mirrors what national experts call the most uneven overall economic downturn in modern history. The downturn favors highly skilled white-collar workers capable of telecommuting. According to an analysis by The Washington Post, at the outset of the pandemic, 60% of college-educated workers could telecommute for their jobs, compared to just 14% of workers with no more than a high school education.

In Bellingham and Whatcom County, that ability for college-educated workers to telecommute while keeping the same job has meant that demand for housing is skyrocketing, causing home prices to increase by hundreds of thousands — even during a pandemic-fueled recession. While that favors homeowners and real estate agents, higher housing costs leave affordable housing even further out of reach when many families need it most.

Amid the bad news, a smattering of well-known Whatcom County companies have managed to survive and even grow, with strong website sales and such changes in business models as shorter hours, the addition of take-out, drive-through sales, home delivery and no-contact curbside pickup. Pizza, fast food and coffee come to mind at the forefront. Incrementally, cafes, bars and breweries have eased open by limping through capacity limitations.

Some businesses with existing e-commerce capabilities have adapted well to the public’s concerns over safety and to the Inslee administration’s public health directives.

“Our online sales have gone up about 70%,” said Ty McClellan, third-generation owner of Hardware Sales LLC, a perennial entry among the Business Pulse Top 100 Private Companies. He said that in-store sales went through a huge decline and gradual recovery (“from down 70% to 50-to-30-to-10, and flat by year-end”). But the company’s internet activity boomed. Why? In short, everyday consumerism. A huge part of the Hardware Sales business model is built on business-to-business, industrial and wholesale.

“One, with social distancing and most stores closed, people have been staying in place in front of computers, and two, home improvement projects became the thing,” McClellan said. “And then, the government stimulus checks played a big role, as people began spending again.” Stores reopened, too, and retail picked up proportionately.

An always-thriving industry in Whatcom County, coffee set a positive example because of the ubiquitous presence of drive-thru service in virtually every corner of the county. Three chains led the way, with 36 combined locations in Bellingham and Whatcom County: Starbucks (14, with 10 in Bellingham and two each in Ferndale and Lynden); Woods Coffee (14, with nine in Bellingham, one near Blaine, and two each in Ferndale and Lynden) and Cruisin Coffee (eight, including six in Bellingham, plus Ferndale and Lynden).

“Without any marketing strategies, our online sales went through the roof,” Woods Coffee CEO Wes Herman said. Starbucks reported the same trend nationwide. Both companies also have strong sales on grocery shelves, and both closed in-house barista services for several months — Starbucks closed downtown Bellingham permanently, and Woods closed inside-only shops temporarily — and strengthened their drive-thru procedures and methods. Among the county’s big three, Cruisin Coffee (established in 1993) is the only one with a drive-thru-only model, and its lines at the windows have remained steady and long.

Cruisin Coffee also has five other locations — 13 total — in Bow Hill, Anacortes, Mount Vernon and Yakima (2).

As essential businesses, grocery stores were exempted from closures, and all the major local players set the standard high for in-store adaptations — one-way paths, limited numbers, extra cleaning methods, etc. — and for curbside, no-contact pickup.
For the most part, sometimes after temporary closures, traditional stalwarts of food and beverage — restaurants, bars and specialty stores — established themselves and stayed alive through take-out menus.

“The biggest problem we all had,” said Kevin Weatherill, CEO of The Markets LLC, “was the slowdown of our supply chains.”

That was a common testament mentioned by leaders in several industries who spoke with Business Pulse, including from appliance giant DeWaard & Bode, personal home-training equipment store Bellingham Fitness Gear and companies such as Barlean’s that have packaging shortages. Supply chain issues were among most-heard complaints from the buying public as well, given the shortage of such items as toilet paper, sanitizers, hand soaps, masks and gloves.

In the big picture, Whatcom County businesses face major challenges in the coming months. The likelihood that cases of COVID-19 might increase over the winter months could compel a rollback of aspects of the state government’s “Safe Start” plan and a reimplementation of the strict lockdowns that were mandated during the first few months of the pandemic.

That stance would assume that a full reopening would require the complete eradication of the novel coronavirus, some semblance of herd immunity, or the wide availability of a vaccine. And with no guarantee of a safe vaccine on the horizon, many businesses and industries could face the stark reality that they could never viably reopen. That also fuels a perceived shift in public policy, from the prevention of hospital beds and treatments from becoming overwhelmed (“flattening the curve,” so to speak) to a complete elimination of the virus.

An option for businesses concerned about their futures is to engage in public policy. Some industries have publicly sought the reevaluation by Inslee’s administration of public health mandates, with limited success. One successful attempt, however, did occur in late summer: The personal fitness industry successfully lobbied for changes in gym capacity requirements that, had they not been changed, likely would have decimated the state’s health clubs.

Many individual business leaders have told Business Pulse of this conundrum: Speaking out is risky, but so is remaining silent and disengaged from the processes for legislating public policy.

Barbara Chase, executive director of the WBA, puts it this way: “We believe that if you or your business don’t participate in the shaping of public policy, you will be governed by those who do.”

Richard Johnson owns and operates Bellair Charters & Airporter at the southern edge of Ferndale, and his company — not to mention the entire travel and tourism industry — has been decimated.

“But I’m just one small voice,” he said. “We’re often slow to speak because an individual business can suffer outlash, or just simply don’t have the time or expertise to approach government. We need large voices — like the Washington Policy Center and, locally, the Whatcom Business Alliance, and all the industry associations and professional groups we belong to — to combine their resources and knowledge and get it in front of government officials.” (You can read more about Johnson and Bellair’s economic struggle on page 26.)
Chase said that these issues are front and center for the WBA, a nonprofit, nonpartisan organization that speaks on behalf of many businesses in the county.

“With the current mix of economic restrictions and proposed massive tax increases, Whatcom County and Washington business communities risk entering a downward spiral that would be difficult to recover from,” she said.

The lingering restrictions, business closures, layoffs and furloughs have left myriad companies, workers and families with nowhere to pivot.

The economic impacts of the pandemic and the novel coronavirus itself aren’t the same. Recession and business closures aren’t inevitable side effects of the disease, nor is there conclusive evidence or widespread agreement that continuing to throttle the nation’s economy is an effective way to keep a population healthy.

On the other hand, strong — though frequently unmentioned — evidence shows that isolation, stress, poverty and housing insecurity lead to an abundance of what renowned economists Angus Deaton and Anne Case call “deaths of despair.” Statistics show that these deaths are attributable to increases in suicide, drug and alcohol abuse, domestic violence and violent crime in response to personal financial situations.

Many Whatcom County businesses and employees won’t survive another six months of local restrictions — they are stuck, for the most part, in Phase 2 of the four stages of recovery — and the populace faces head-on the potentially devastating consequences.