Oregon Office of Economic Analysis

While most measures of regional economic performance tend to move together over an extended period of time, they do differ and occasionally tell somewhat different stories. Focusing upon one single measure or another can lead one to lose the forest for the trees. Such is the case in Oregon when one focuses solely on GDP by state or per capita personal income. Our office’s long standing position has been that the truth lies somewhere in between Oregon’s high-flying state GDP rankings and our declining per capita personal income relative to the U.S. One overstates our performance and one understates it. One reason GDP by state overstates Oregon’s performance lies in the way that the Bureau of Economic Analysis values the contributions of the Computer and Electronic Product industry (these are largely Oregon’s chip makers and their suppliers). Measuring the industry’s productivity is challenging. How can you value today’s generation of computer chips relative to 3 years ago, let alone 30+ years ago? The BEA does the best it can, however it likely does overstate the impact the industry has in Oregon. As seen below, one of these measures of Oregon’s performance is not like the other.

To be sure, technology producers are highly productive and Oregon captures a lot of economic benefits (employment, income, etc) from the industry. However some of the gains accrue outside the state, namely to shareholders and company headquarter operations. Overall, our office’s belief is that Oregon’s GDP does tend to grow more quickly than the average state and there is no question that our technology firms are very productive, however the specifics of GDP by state may overemphasize the gains. The relative patterns shown in terms of personal income above, or employment and labor force below are likely more indicative of the state’s relative economic performance in recent years.

The Oregon economy is more volatile than the average state, so during expansions we grow more quickly and fall further in recessions. Given that the 2000s were characterized by two recessions with a short and relatively weak expansion in between, Oregon largely followed the national trend when all was said and done.

However, over a longer period of time, Oregon does tend to come out ahead of the average state. The table below is a quick and rough summary of how Oregon has fared over the past 6 decades (based on the labor market). Moving forward, our office’s expectations are that Oregon will outperform the average state given that Oregon grows quicker on the upswing, where the economy currently is. Our exact position relative to other states will largely depend upon the timing of the next recession. Should it occur sooner, rather than later, Oregon will likely fare pretty average, however the longer the expansion, the better Oregon will do. A lot of our growth advantage in good times — our so-called beta — comes from the state’s ability to attract in-migration and our cyclical manufacturers and resource industries. These factors generally help reinforce economic trends and continue to fuel economic expansions. As population growth (in-migration) picks up and our manufacturers and good producing industries continue to expand, the overall Oregon economy will make up lost ground and eventually surpass the average state.

Our office has additional items in the pipeline when discussing these trends and how the state compares nationally or how recessions compare within Oregon over time. Specifically, we will compare the early 80s recession with the Great Recession and will also address some of the issues surrounding our per capita income that have largely gone undocumented in the reports in recent years.