The economy of the Spokane metropolitan area plays a vital role as the hub for the commercial, manufacturing, and transportation center as well as the medical, shopping, and entertainment hub of the Inland Northwest region. Although the two have opted not to merge into a single Metropolitan Statistical Area (MSA) yet, the Coeur d'Alene MSA has been combined by the Census Bureau into the Spokane–Coeur d'Alene combined statistical area (CSA). The CSA comprises the Spokane metropolitan area and the Coeur d'Alene metropolitan area anchored by Coeur d'Alene, Idaho. According to the U.S. Bureau of Labor Statistics, the Spokane metropolitan area has a workforce of about 287,000 people (255,000 non-farm) and an unemployment rate of 5.3 percent as of February 2020; the largest sectors for non–farm employment are education and health services, trade, transportation, and utilities, and government. The Coeur d'Alene metropolitan area has a workforce of 80,000 people and an unemployment rate of 6.8% as of June 2020; the largest sectors for non-farm employment are trade, transportation, and utilities, government, and education and health services as well as leisure and hospitality. In 2017, the Spokane–Spokane Valley metropolitan area had a gross metropolitan product of $25.5 billion while the Coeur d'Alene metropolitan area was $5.93 billion.
Spokane's economy has traditionally been natural resource based—heavily dependent on extractive products produced from farms, forests, and mines—however, the city's economy has now diversified to encompass other industries, including the technology, healthcare, and biotech sectors. Major trade in the city started with the first permanent European settlement in the Spokane area and Washington state with the fur trade, with the westward expansion and establishment of the North West Company's Spokane House in 1810. The Spokane House was the center of the fur trade between the Rockies and the Cascades for 16 years. The Spokane area is considered to be one of the most productive mining districts in North America. In the late 19th century, gold and silver were discovered in the Inland Northwest, leading to intensive development of mines in the region. After the mining rushes and associated trade ended at the turn of the 20th century, agriculture and logging became the primary influences in the Spokane economy. The expansion and growth of Spokane abruptly stopped in the 1910s and was followed by a period of population decline due to economic factors such as capital flight, low commodity prices, and loss of industry. A later stabilization of the economy came with the eventual diversification away from natural resources.
Economic history overview
Trade In search of furs, explorer David Thompson sent out two trappers, Jacques Raphael Finlay and Finan McDonald, to construct a fur trading post on the Spokane River in Washington and trade with the local Indians. In operation from 1810 to 1826, it was run by the British North West Company and later the Hudson's Bay Company, and the post was the headquarters of the fur trade between the Rocky and Cascade mountains for 16 years.Phillips (1971), pp. 134–135
Mining boom The 1883 discovery of gold, silver, and lead in the Coeur d'Alene region of northern Idaho lured prospectors.Stratton (2005), pp. 28 The Inland Empire erupted with numerous mining rushes from 1883 to 1892.Kensel (1969), pp. 88–89 At the onset of the initial 1883 gold rush in the nearby Coeur d'Alene mining district, Spokane became popular with prospectors, offering low prices on everything "from a horse to a frying pan".Kensel (1969), p. 85. According to the Spokane Falls Review December 1, 1883 edition. It would keep this status for subsequent rushes in the region due to its trade center status and accessibility to railroad infrastructure.Kensel (1969), pp. 85–89
Spokane became an important rail and shipping center because of its location between mining and farming areas (namely the Silver Valley and the Palouse).Stratton (2005), pp. 32Schmeltzer (1988), p. 41 After the arrival of the Northern Pacific, the Union Pacific, Great Northern, and Chicago, Milwaukee, St. Paul and Pacific railroads, Spokane became one of the most important rail centers in the western United States, being the site of four transcontinental railroads.Schmeltzer (1988), pp. 44 Secretary of the Spokane chamber of commerce, John R. Reavis tells of Spokane's significance to the Inland Northwest region as an entrepôt distributing center (largely the city's raison d'être) in his 1891 Annual Report, writing: "By reason of her geographical position and railroad connections Spokane is fitted as no other city is, or ever can be, to be the distributing center of all that country within a radius of 150 miles, and in some instances territory much farther away. There is no point 150 miles from Spokane that is not at least 225 miles from any other city of 10,000 population. We have about us a territory of 60,000 square miles in extent, to every point of which we are nearer than any other city, to every point of which we have better railroad connections and easier grades than any other city ... We have eight lines of railroad that radiate out in all directions through it, so that shipments made here in the morning can reach any point within its borders by nightfall. We have a telephone system connecting us with almost every shipping town and shipping station within its borders. Goods may be ordered, shipped and received, in most instances, within one day. Never was a city more intimately knit to its surrounding territory than Spokane, and never was one more free from a legitimate rival in trade ..."
Logging, forestry, and agribusiness
After mining declined at the turn of the 20th century, agriculture and logging became the primary influences in the Spokane economy.Kensel (1968), p. 25 The lumber industry in Spokane began with the city's founding in 1871 when Downing and Scranton built Spokane's first business, a sawmill. When it became widely known after a US Geological Survey done in the 1890s that there were large quantities of white pine, a highly prized softwood, in the Coeur d’Alene Mountains, the lumber industry from the eastern US began to inventory the timberlands, acquire land and invest in facilities across much of northern Idaho.Singletary p. 27 As with the mining industry, lumberjacks and millmen working in the hundreds of mills along the railroads, rivers, and lakes of northern Washington and Idaho were provisioning themselves in Spokane.Kensel (1968) p. 31 In Idaho, lumber production reached its height in the late 1910s and 1920s; in 1925 there were seven lumber mills operating in the area that were producing 500 million board feet of lumber.Singletary p.79, p. 93
Spokane became a noted leader in the manufacture of doors, window sashes, blinds, and other planing mill products.Kensel (1968), p. 28–29, 31 The city also became noted for processing and distributing dairy and orchard products and for producing products milled from timber. By the early 20th century Spokane was primarily a commercial center rather than an industrial center.Kensel (1969), pp. 96–97
The agricultural hinterland of the Inland Northwest was a breadbasket and was able to develop and grow further with the completion of several railroad networks as well as a highway system that began to center around the city, aiding farmers from around the region in distributing their products to market at low cost.Stratton (2005), pp. 126-127 As with mining in the late 1880s, Spokane was an important agricultural market and trade and supply center.
Stagnation
Expansion abruptly stopped in the 1910s and was followed by a period of population decline,Stratton (2005), p. 35 due in large part to Spokane's slowing economy. Control of regional mines and resources became increasingly dominated by national corporations rather than local people and organizations, diverting capital outside of Spokane and decreasing growth and investment opportunities in the city.
The Inland Northwest region was heavily dependent on natural resources and extractive goods produced from mines, forests, and farms, which experienced a fall in demand.Stratton (2005), p. 38 After the 1929 stock market crash and during the Great Depression, the lumber industry demand began to wane and by the mid-1930s about half the woodworkers in northern Idaho were laid off and the surviving mills were producing only 160 million board feet of lumber per year.Singletary p. 93
Federal-led development that sought to harness the power of the Columbia River resulted in hydroelectric dams, starting with the Bonneville Dam in 1938, which allowed the Pacific Northwest region to transition to new industries. When the construction of the Grand Coulee Dam was finally completed in 1942, the Northwest was designated the preferred location to mass-produce sheet aluminum to build materiel for World War II. Locally, the two aluminum plants as well as a magnesium plant brought 2,100 jobs to the Spokane area at its peak and supplied the materials to make airplanes and boats for the war effort. In 1950, Washington state accounted for half of all aluminum production in the United States. In addition to aluminum plants, the government also sited a military distribution center for the war effort, the Velox Naval Depot, in the Spokane Valley because it was believed to be inland enough to be protected from Japanese attack and because it had extensive railroad infrastructure already in place.
Economy diversification The growth witnessed in the late 1970s and early 1980s was interrupted by another U.S. recession in 1981, in which silver, timber, and farm prices dropped.Schmeltzer (1988), p. 87 The period of decline for the city lasted into the 1990s and was also marked by a loss of many steady family-wage jobs in the manufacturing sector. In 2000, Kaiser Aluminum, the area's largest industrial employer shuttered the Mead Works plant. Although this was a tough period, Spokane's economy had started to benefit from some measure of economic diversification; growing companies such as Key Tronic and other research, marketing, and assembly plants for technology companies helped lessen Spokane's dependence on natural resources.
Mining, forestry, and agribusiness continue to be important to the local and regional economy, but Spokane's economy has diversified to include other industries, including the high-tech and biotech sectors. Spokane is still trying to make the transition to a more service-oriented economy in the face of a less prominent manufacturing sector. Developing the city's strength in the medical and health sciences fields has seen some success, resulting in the expansion of the University District with University of Washington (first class in 2008) and Washington State University medical school (established 2015) branches. The opening of the River Park Square Mall in 1999 served as a catalyst and sparked a downtown rebirth that included the renovation of many derelict historic buildings and the expansion of the Spokane Convention Center in 2006.Spirou (2010), p. 210
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