For decades, the county economy rested on timber,directly through logging and milling and indirectly through Forest Service employment. Timber-related employment began to decline in the 1980s, dropping from 820 in 1979 to 620 in 1988. At that time, harvest restrictions were placed on federal lands, limiting local timber supply and raising log prices. Timber harvest from federal lands dropped from an average of 250 million board feet to less than 5 million in 1996. Scarce timber and competition from chipboard substitutes led to the closure of Stevenson Co-Ply, the largest mill remaining in the county, in early 1992. The job loss was accompanied by loss of savings because the mill was a co-op. By 1993, only 180 timber jobs remained in Skamania, and federal employment has fallen from a peak of 420 to only 240 in 1996.

While most of Skamania is in forested, mountainous terrain, the bottom strip of the county borders the Columbia Gorge. The Gorge has influenced the county economy in two major ways. In the 1978-82 period, construction of a second powerhouse at Bonneville Dam boosted county construction employment, chiefly through construction workers commuting into the county. This had the unfortunate side effect of skewing county labor force estimates in the 1983-89 period; through use of a faulty commuting ratio, the labor force size was underestimated and the unemployment rate overestimated.

In 1986, about 15 percent of the county was made part of the Columbia Gorge National Scenic Area. Creation of the NSA, while placing some restrictions on development in the Gorge area, has helped augment the county’s growing tourism industry. Federal subsidies helped build Skamania Lodge, a conference center/destination resort, now the largest private sector employer in the county. An interpretive museum is now in operation, and other retail and service spin-offs have come on line. In addition, a number of manufacturing jobs related to windsurfing have been created.

The transition from timber to tourism has had a number of effects. Population growth began picking up in 1990, as did labor force growth. Because of fewer job opportunities, almost half of Skamania County's labor force commutes to work outside the county. Unemployment rose sharply in 1992 with the mill closure, reaching 18 percent before declining to the current 6.9 percent.

Only a few years ago, one-third of the jobs in the county were in manufacturing; by 1996, the number had fallen below 15 percent. With the advent of the Skamania Lodge, trade and service employment rose from 19 percent to a 36 percent share, while the public sector accounted for 43 percent.

The annual average wage for jobs in Skamania has fallen steadily over the past two decades (with the exception of the powerhouse construction years). In 1996 the average was $20,896 per job. In comparison, inflation adjusted wages in the early 1970s were $30,000 per job. Per capita income has not declined; mainly because of increases in investment income and government transfer payments. But, at $22,758 (2003), it remains 32 percent below the state average.