Walla Walla’s Economy is Concentrated but Slowly Changing

By Dr. Patrick Jones

Over the past decade, little has changed in the concentration of sectors in Walla Walla’s economy. The share of total employment taken up by the largest five sectors averaged 71% in 2021. In 2012, the share was 70.7%.

This measure gives a sense of the diversification of the Walla Walla economy, as measured by jobs. In an ideal world, the ability of an economy to maximize revenues via specialization is balanced by the protection against a loss to any one leading sector. In other words, a regional economy ideally competes nationally through specialization while at the same time as hedging its bets. The obvious analogy is the investment practice of trying to choose some “winners” while maintaining diversification across many asset classes. There are several measures of distribution or diversification, whether in finance, income, or the make-up of an economy. This one has the virtues of simplicity and, we hope, understanding.

Of course, size matters. It is much easier for a larger economy to diversify than a small economy. Typically, a large economy doesn’t depend on one or two industries, as is the case with smaller economies. And, with a population of less than 65,000, Walla Walla falls into the category of a small economy. In 2021 the five largest sectors in Washington state, by job count, took up 56% of the total.

How does Walla Walla stack up to eastern Washington metro areas by this measure? As Trends indicator 1.3.6 reveals, generally in the middle. Concentration in the Tri Cities is nearly 10 percentage points lower than here in 2021. Yet, Walla Walla’s concentration is lower than in Yakima, as that county reported a concentration ratio of nearly 74% in 2021. Both of these counties are much larger, 5– to 6-fold bigger than Walla Walla, by population.

Within the mix of top sectors, however, a bit has changed in Walla Walla over the past decade. The share of employment in agriculture dropped about 2.5 percentage points, while the share in healthcare & social assistance rose by a point and manufacturing by 1.5 percentage points. Health care & social assistance here is now more important to the local economy, at measured by jobs, than it is overall in Washington state. This breakdown is viewable in Trends indicator 1.3.5.

Further, the employment share taken by county manufacturing in 2021 was nearly twice as large as in the state overall. Manufacturing here is largely concentrated in food and beverage production.

Over the next few years, it seems unlikely that the Walla Walla economy will diversify much further. At least as measured by the total share of jobs in the top five sectors. It is especially hard for small, slow-growing communities, such as Walla Walla. Population over the past decade advanced by about 315 per year. Jobs grew by about 175 a year.

Further, sectors that most local economies would like to nurture have actually declined in Walla Walla over the past decade. Despite the presence of two home-grown banks, the finance & insurance sector has shed about 10% of its jobs. Professional & technical services, the sectoral home of many professionals such as lawyers, accountants and engineers, has experienced an even steeper decline, losing 13% of its jobs since 2012. And perhaps the most coveted sector, information, which includes software publishers but also the traditional media, has absorbed a 30% decline in its workforce.

And yet, the current mix of top sectors, even if more concentrated than the (much larger) Tri Cities economy leaves room for optimism. Three of Walla Walla’s most important sectors pay well. The largest, government, offers the second-highest annual earnings and has slowly but surely added jobs. Manufacturing firms pay annual earnings that are the highest among the large sectors and have expanded their workforce at three times the overall rate. The other large, growing sector, healthcare & social assistance has steadily increased its wage earnings and augmented its workforce faster (two times) than the overall rate.

In the aggregate, then, the concentration ratio tells a story of little change. Beneath the surface, however, the mix of Walla Walla’s leading economic sectors is slowly changing, in the direction of higher earnings.