Pierce County: Economic Index
The Tacoma-Pierce County Chamber (TPCC)'s 2025 Pierce County Economic Index (PCEI) Report, authored by economist Dr. Neal Johnson, reveals a nuanced economic landscape for Pierce County, with particular emphasis on the challenges confronting the construction sector. While the overall forecast anticipates moderate economic growth of 1.6%, the report highlights significant headwinds for construction, primarily stemming from persistent high mortgage rates. Andrea Reay, President & CEO of TPCC, acknowledges these difficulties, stating that while progress is evident in areas like personal income and job creation, the struggles within the housing market underscore the lingering impact of broader economic conditions. The report serves as a critical tool for members to navigate the year ahead, particularly those in or reliant on the construction industry, providing insights needed to foster resilience amidst these specific challenges.
The PCEI Report projects the creation of 2,750 new jobs across Pierce County in 2025, with growth concentrated in sectors like education, health services, and trade. However, this positive trend largely bypasses the construction industry, which continues to grapple with the dampening effect of high mortgage rates on residential development. This situation presents a distinct challenge within the broader economic context, requiring targeted strategies to address the specific constraints on building activity.
The housing market analysis within the PCEI Report underscores the difficulties facing the construction sector. Despite a slight easing of mortgage rates in 2024, housing affordability remains significantly below historical averages, with the Housing Affordability Index forecasted to reach only 93.1 by the end of 2025. This persistent affordability gap directly impacts demand for new residential construction. Although new housing listings saw an increase of 12.4 percent in 2024, closed sales lagged significantly at 2.7 percent, reflecting buyer hesitancy likely linked to financing costs. This sluggish sales environment further discourages new construction projects, creating a cyclical challenge for the industry. The report explicitly identifies addressing housing affordability as crucial for Pierce County's overall competitiveness, particularly in attracting and retaining talent, a factor directly linked to the health of the construction sector.
While the report notes modest activity in commercial real estate, with a 3.6 percent growth in industrial warehouse inventory, this growth does not offset the constraints experienced in residential construction. This divergence highlights the segmented nature of the construction market, with residential building facing unique pressures from borrowing costs. The PCEI Report implicitly calls for targeted policies to alleviate these pressures and stimulate residential construction activity.
In conclusion, the 2025 PCEI Report for Pierce County paints a picture where overall moderate economic growth is tempered by significant challenges within the construction sector. High mortgage rates continue to impede residential development and housing affordability, creating a bottleneck that requires focused attention from policymakers and industry stakeholders. While other sectors anticipate growth, the construction industry's performance will be a key determinant in the county's ability to achieve a more robust and equitable economic future. The report underscores the urgent need to address housing affordability and explore strategies to revitalize residential construction activity in Pierce County.