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Originally published Wednesday, August 6, 2008 at 12:00 AM

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On the Economy

Wall Street clear-cuts jobs at Weyerhaeuser headquarters and Seattle faces the runoff

Job losses bad news for white-collar workers at Weyerhaeuser and Seattle-area economy. But, Wall Street isn't really interested in that.

Special to The Seattle Times

Weyerhaeuser's conference call with securities analysts Tuesday morning was another stark reminder of how the interests of Wall Street and Main Street have become much more complex — if they haven't diverged completely.

A few minutes into the call, Chief Executive Dan Fulton dropped, light as a feather, a heavy blow for the Seattle-area economy: Weyerhaeuser will eliminate 1,500 corporate jobs over the next 18 months. While the specifics weren't discussed, most of those cuts will come from the 2,500 employees at the company's Federal Way headquarters.

And that was it. Top executives didn't mention the cuts again, although Fulton promised to "pursue other opportunities to streamline the operation" and the star Wall Street analysts asked no questions about them.

Nobody asked where those employees, laid off from well-paid jobs with good benefits, would recoup their livelihood in an economy that continues to shed jobs and in a metropolitan area that is suffering a bloodletting of headquarters' positions. There was no curiosity about the economic and civic costs to Seattle.

Of course, many Americans wear multiple hats in today's complex economy. All are consumers, most are also employees, many are also shareholders, if only at a distance through mutual funds. Unfortunately, those roles are in conflict.

In today's capital markets, institutional investors and other players have abandoned the old rules: Instead of shareholders buying companies they believe in and holding that stock, most activity is speculative, demanding quick returns then cashing out.

That may provide good short-term boosts to investors, but it leads directly to the pressure Weyerhaeuser felt to sell off subsidiaries and cut headquarters jobs. It rewards not only job cuts, but the mergers that gut the corporate assets of communities.

It means an individual might see a rise in her 401(k) — although probably not lately — but she also lost her job in one of the nearly daily restructurings that grind across corporate America.

It means a college endowment or insurance company in one city enjoys a good return, while cultural events in another city suffer because their old headquarters company went away.

Back on Wall Street today, the analysts treated Weyerhaeuser's executives gently, even though the company posted a $96 million loss, and Fulton said "the effect of this slowdown is deep and touches every part of its portfolio."

The analysts were curious about how bad the real-estate market will be (no improvement until at least next year) and how the company is profiting from the mineral rights to land in Louisiana that might yield oil or natural gas.

The message was clear: The investment community believes Weyerhaeuser will eventually become a real-estate investment trust (REIT).

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A REIT would ensure that most earnings are passed directly along to shareholders. Fulton reassured them that the leaner Weyerhaeuser will be in a position to select the most efficient structure for the future.

This concept for a timber company was pioneered by Seattle-based Plum Creek. But it smacks of another immediate-gratification Wall Street fad, and it's unclear what its consequences will be for what was an integrated timber giant.

How, for example, will a Weyerhaeuser REIT afford the research and development to make good on its ambitions in biofuels and other innovations? Wall Street would be happy if it could just get a big pop next quarter from the company selling off land for development (if that sector weren't circling the drain at the moment).

The questions are different in the Seattle region, which until recently had enjoyed an enviably diverse economy for its size, including the power that only comes from major corporate headquarters.

Suddenly, Safeco is all but gone. Washington Mutual has slashed thousands of jobs and could be sold. Macy's closed its regional headquarters here. While small business and entrepreneurial vibrancy are also vital, healthy major headquarters are essential to attracting talent and capital.

This is especially true if the Seattle area hopes to keep the advantage of being more diverse than simply a smaller Silicon Valley.

Business continues to consolidate, and the number of America's major business cities are shrinking. San Antonio is losing the headquarters of AT&T to Dallas.

Whatever its boosters may say, the Alamo City will be a second-tier, back-office town, like Phoenix, the nation's fifth-most-populous city but a corporate weakling. Atlanta, by contrast, remains a corporate powerhouse. St. Louis and Cleveland, once big Fortune 500 hubs, have faded.

The maddening problem is there's no immediately stopping Wall Street's churn-and-burn dynamic. So a city had better be seeding and growing tomorrow's big players today. This year, with Seattle on the losing end of so many mergers, it's not happening here.

As for Weyerhaeuser, the venerable company will likely still be here in three years — an eternity in Wall Street time. But it will never again have the power and influence it once wielded and the benefits that brought to the Seattle area and generations of Washingtonians.

Jon Talton is a journalist and author living in Seattle. For more than 20 years he has covered business and finance, specializing in urban economies, energy, real estate and economics and public policy. You may reach Jon Talton at jtalton@seattletimes.com

Copyright © 2008 The Seattle Times Company

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About On the Economy
Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest
jtalton@yahoo.com

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