Inflation buzzsaw fells Northwest lumber industry. But good news could be on the way as prices, interest ease

When few houses go up, few trees come down. In the timber-rich Northwest, where forest products are big business, thousands of lumberjacks and sawmill workers are jobless, or working short shifts. For three years, inflation and interest rates have steadily tightened their grip on the industry.

Relief could be in sight. Mortgage rates -- critical to home building -- fell to 16.9 percent last week, the lowest since July. And wholesale prices rose only 0.5 percent last month, another sign that inflation is easing.

But for lumbermen, there still won't be much tinsel on the forests here this Christmas - especially in Oregon, Washington, and Idaho. California and Montana rank second and fifth, respectively, in the number of sawmills and number of workers employed in timber-related industry. But the impact on the overall economy of each is offset by other job and revenue-producing activities.

In seven other Western states -- Arizona, Colorado, Nevada, New Mexico, South Dakota, Utah, and Wyoming -- the forest products industry has suffered significant losses since 1979, but it does not loom as large in their economies. In the ''big five'' timber states of the West, more than 35,000 sawmill workers are either unemployed or underemployed; in the other seven states the total number of mill workers affected is some 5,000.

Forest products industries in other parts of the US, particularly the South, have also been affected by the housing construction slump. But industry figures indicate the impact is about twice as severe in the Northwest as in the South.

How Oregon and Washington are reacting to economic and budget crises, due a great extent to timber industry problems, is detailed in an accompanying article. Here is what is happening in California, Idaho, and Montana:

* California has a budget crisis, but not because of timber industry problems. In October 1979 there were 71,200 workers employed by lumber and wood products industries in the state; in October 1981 that figure had dropped to 55, 300 -- a loss of almost 16,000 jobs. But in a state where 9.98 million people are employed, that is a small ripple on the charts.

California is facing the necessity of budget cutbacks between now and the end of fiscal 1982 (next June 30) because of revenue-slashing tax reforms, the general economic recession, and federal aid cutbacks --not because of the serious trouble its sawmill owners and workers are having.

* Montana, says state budget director David Lewis, is a study in paradox.

The timber industry in the northwest part of the state is in a ''depression.'' Of some 6,000 timber industry workers, more than 2,000 are laid off or underemployed. Unemployment compensation is running out and people are going on welfare. Meanwhile, the upsurge in exploitation of oil, coal, and other mineral resources in eastern Montana produced 5,600 new jobs between September 1980 and September 1981.

Why don't those unemployed timber workers go east where the jobs are? Many do, says Mr. Lewis. But many others don't want to move the 800 or so miles from their homes.

Besides, oil and mining jobs often call for skills timber workers don't have. A lot of the new jobs are being filled by out-of-staters, and there are more than enough applicants. In one instance Exxon had 15 jobs open at a drilling site - and 500 applicants.

Lewis says the Montana timber industry is so hard hit by the current slump that it may never recover. The trees harvested in the state are the kind that take 80 to 100 years to mature, and the planting cycle has been interrupted.

Meanwhile, riding its mineral boom, Montana has no overall budget problems despite the national recession, federal aid cutbacks, and high employment in some counties.

* Idaho, says economist Richard Slaughter of the state fQnancial management division, expected 2.1 percent economic growth in 1981; it will wind up with minus 1 percent. The chief reason for this loss, Dr. Slaughter points out, is the recession in the timber industry.

In the second quarter of 1981 there were 16,800 workers employed in the lumber and wood products industry in Idaho; the figure was down to 14,300 in the third quarter, and Slaughter expects it to drop to 14,000 in the first quarter of 1982.

Idaho lost $5 million in state revenues in 1981 because of a change in depreciation allowances, the timber slump, and the slump in the general national economy. But Idaho, unlike a number of other states, has not had to call its Legislature into special session to reduce the budget or pass new tax measures. Why? Because of what Slaughter calls ''conservative revenue estimates and budgeting.''

The administration of Gov. John V. Evans estimated revenues at $436 million, the Legislature passed a budget totaling $420 million, and Slaughter says revenue apparently will wind up at $427 million.

Economist Slaughter has two scenarios for the future of the housing industry and its resultant effect on Idaho: 1. If interest rates continue to drop and hold at lower levels in 1982, the housing market should rise as much as 20 percent in 1982 and 1983. This would lift Idaho's growth rate.

2. If interest rates do not decline, housing starts in the US may fall by 13. 5 percent in the coming year, with Idaho -- and other timber industry states -- losing more jobs.

Lumber industry jobless in Western states State Workers Layoffs Short-shifts Oregon 31,076 6,743 12,244 Wash. 20,218 4,387 7,966 Calif. 23,900 5,186 9,416 Idaho 9,400 2,040 3,703 Montana 5,400 1,173 2,127 Others* 12,305 2,670 4,850 * Arizona, Colorado, Nevada, New Mexico, South Dakota, Utah, Wyoming.