The Puget Sound region lost nearly 7,000 jobs in 2025, according to a new report that calls the decline a warning sign for every business corridor in Seattle.

The job loss marks the first annual decline outside a recession or pandemic in at least two decades, Challenge Seattle found in a report released Monday, Sept. 14.

It followed two years of flat employment growth across King, Pierce, Snohomish and Kitsap counties. For Ballard restaurant owners already operating on razor-thin margins and Queen Anne landlords watching vacancies rise, the regional numbers confirm what many have felt at the register.

"We have lost our competitive edge," former Gov. Christine Gregoire, CEO of Challenge Seattle, told KOMO News. "We have tremendous assets, but the warning signs are very, very clear."

Challenge Seattle is an alliance of 23 organizations representing major regional employers including Microsoft, Amazon, Boeing, Costco, Nordstrom, Alaska Airlines and Zillow.

The numbers behind the slide

Washington's overall business ranking fell from 1st to 11th between 2017 and 2025, the report found. The state's cost-of-doing-business ranking dropped from 32nd to 47th over the same period. Central Puget Sound unemployment stood at 5.2%, more than a percentage point above the national rate.

The costs add up fast. Per-employee business taxes rose from $7,600 in 2015 to $11,900 in 2026, according to the report as analyzed by Seattle Red.

Permitting timelines doubled from roughly 400 days to 900. State agencies adopted about 71% more regulations last year than in 2015.

The restaurant data is stark. Half of surveyed Seattle restaurants lost money in 2024, the report found. Opening a restaurant in the city can require more than 63 steps, 16 forms and $7,500 in fees before a single customer walks in. Washington has the lowest five-year business survival rate of any state.

Corporate moves add urgency

Starbucks expects to create up to 2,000 support jobs at a new $100 million Nashville office over five years, moving some teams from Seattle.

Amazon plans to vacate an 81,000-square-foot South Lake Union office when its lease ends in March 2027. WaFd Bank, based in Washington for nearly 110 years, announced its holding company will relocate from Seattle to Bellevue as part of a merger with Florida-based EverBank.

Neither Starbucks nor Amazon has said Washington taxes or regulations alone drove their decisions, according to KOMO's reporting.

Microsoft Vice Chair Brad Smith, standing beside Gregoire at Monday's press conference, warned that a statewide payroll tax would force the company to consider moving jobs elsewhere. GeekWire reported Smith said Seattle should "revisit whether a payroll tax makes any sense" and compared such a levy to taxing cigarettes rather than jobs.

What comes next

The report lays out 20 recommendations: business concierge services, a simpler tax structure, economic impact analyses for major tax proposals, clearer permitting timelines and stronger workforce partnerships with the University of Washington and regional colleges.

Challenge Seattle pledged $1 million to Greater Seattle Partners to track progress.

Seattle Mayor Katie Wilson, who spoke at a separate forum Monday, called the moment "fragile." She said her proposed city budget, expected the week of Sept. 22, would reflect the need to stay economically competitive.

King County Executive Girmay Zahilay said his office has hired an economic development team and begun an internal permitting audit.

April Sims, president of the Washington State Labor Council, acknowledged that businesses need predictability and margin to invest. But she added a counterpoint: "working people need margins, too."

Downtown Seattle employment fell from roughly 330,600 in 2024 to about 317,600 in 2025, with more than 32% of central business district office space sitting vacant, according to the report. Wilson's budget proposal will be the next signal of how City Hall responds.