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Two Northwest cities a tale of prosperity, but the hinterlands lag

The economic state of the Pacific Northwest right now shows just how far the city can be from the country. The region's cities, notably Seattle and Portland, Ore., are humming along, generally in tune with the national recovery. But out in the hinterlands, where the economy is based on forest products and agriculture, there are a lot of people who are feeling pretty glum.

Unemployment in metro Seattle is around 7 percent-plus, on a par with the nation as a whole, notes Dennis S. Fusco, vice-president and regional economist at Seattle-First National Bank. ''But there are parts of western Washington with unemployment in the double digits already, and this is before winter layoffs begin.''

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In Portland, Kevin R. Kelly, senior vice-president at US Bancporation, echoes Mr. Fusco. ''Portland is on a roll, with a number of new plants announced just in the last few months. It looks very much like the national average. But there are plenty of small towns out there that are dependent on one or two mills, and those mills are shut down right now, and those towns are hurting.''

And from Jeff Hannum, state labor economist for Oregon, in Salem: ''The Portland area is head and shoulders above everyone else (in the state). And it looks as if the disparity may even widen.'' He emphasizes, though, that it may, not will.

Unemployment for both Washington and Oregon as a whole is above the national average - by a point and a half in Oregon, less so in Washington. And Mr. Hannum expects that gap to remain, in Oregon, at least, for some time. Even so, conditions have improved enough on balance that people are voting with their feet for both Washington and Oregon. After two years of what the demographers call ''net outmigration,'' Washington is expected to end up with 8,000 more people coming into the state than leaving it this year. And preliminary figures show Oregon, which also had two years of net outmigration, gaining 7,000 net newcomers last July over 1983.

Mr. Hannum hastens to acknowledge that the numbers are small. ''The important thing is that the numbers are positive.''

Moreover, both states have seen modest employment gains over the past year. Washington had 56,200 more nonfarm payroll jobs in September than the previous September; Oregon's gain, this October over last, was just about half that, 28, 200. In both states the bulk of the gain came, in roughly equal proportions, from the manufacturing, trade, and service sectors. Aerospace, in Washington, and electronics, in Oregon, accounted for most of the manufacturing-sector gains; the forest-products employment picture was pretty much static.

The pulp and paper business is generally doing well, because it goes where the general economy goes: When people buy more, they need more paper bags to bring their treasures home in, for example.

But the lumber industry, despite fairly healthy housing starts of late, and production at near-normal levels, is in a pinch. The culprits? The Canadians, who, as United States lumbermen see it, have the unfair advantages of cheap timber from crown lands, subsidized freight rates, and a weak dollar. Canadian lumber now accounts for some 35 to 40 percent of the US market. Also to blame: excess production capacity, a legacy of the days when the industry thought the housing boom of the late 1970s would never end. The strong dollar is another downside factor for the Northwestern timber industry, as are high interest rates and relatively high labor and production costs.

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The strong dollar is also hurting the Northwest's heavily export-oriented farmers. Some 80 percent of the wheat grown in Oregon, for instance, is normally exported.

There are bright spots, though, and high-tech industry has been one of them. Oregon has a significant high-tech manufacturing base, particularly in silicon production. Software is a growth industry in both states; in Washington it is concentrated along the eastern shore of Lake Washington, east of Seattle.

And of course Seattle's high-tech industry also includes the Boeing Company. At its peak, in 1968, aerospace (read Boeing) was responsible for 19 percent of nonfarm payroll jobs in the two counties at the core of metro Seattle. Then came the waves of layoffs and the stories about the sign on the way to the airport, ''Will the last person leaving Seattle please turn out the lights.''

Several business cycles later, Boeing is on an uptrend, with some 6,800 jobs added over the past year, and more expected next year. But these increases will not restore the work force to the size it was before the last recession, when some 22,000 workers were dropped.

''Boeing has been far more cautious in this stage of expansion'' than in times past, says SeaFirst's Mr. Fusco, with a bit of a sigh of relief. With aerospace, lumber, and other capital-goods producers, such as shipbuilders, looming so large on the scene, Washington's economy has been highly cyclical and interest-rate sensitive.

It's this cyclicality that has made the much-noticed growth in metro Seattle's service sector so welcome. The growth has been notable because the area has been in effect playing catch-up. Says Fusco: ''It used to be, for example, that an insurance company might serve this area by sending in a representative once a month from San Francisco or Los Angeles or Chicago. Now such a company is more likely to have an office here. We've got the population to support that kind of service.''

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