Posted by: Josh Lehner | February 11, 2015

Graph of the Week: Alcohol Cluster

Still working on the start-up brewery report, which will hopefully be out in about a month. For now, here’s a quick update on the alcohol cluster. This is our office’s working definition of the cluster, based on detailed employment sectors. See the note at the end for specifics.

While Oregon’s overall employment just returned to pre-Great Recession levels a couple months ago, a few of our clusters have outperformed and done considerably better. One in particular is the state’s alcohol cluster — the group of breweries, wineries, distilleries and their distributors and retail outlets. Since the start of 2008, these jobs in Oregon have increased 46 percent (!), or about 5,200 jobs. This is also an undercount of growth as some breweries (or brewpubs) are classified as restaurants and pulling their information is difficult, although the Employment Department does an annual beer report.


Fun Fact: In general, when looking at Oregon as a share of the U.S. we are usually 1.2 to 1.4 percent of the total — be it population, jobs, exports, etc. However in terms of the alcohol cluster, Oregon is 2 percent of the U.S. which is quite large relative to all of our other rankings. In terms of a location quotient, Oregon’s alcohol industry is a 1.6 (2014 data), indicating Oregon’s alcohol cluster is 60 percent larger relative to the typical state, after adjusting for size.

Alcohol Cluster definition: Breweries (NAICS 31212), Wineries (NAICS 31213), Distilleries (NAICS 31214), Beer, Wine, Distilled Alcohol Beverage Merchant Wholesalers (NAICS 4248), Beer, Wine and Liquor Stores (NAICS 44531), Drinking Places, Alcoholic Beverages (NAICS 7224)

Posted by: Josh Lehner | February 5, 2015

Population, Demographics and Generations

I don’t know if it’s paternal instincts or not, but I’ve been thinking a lot more about generations and demography lately. I just wanted to share some of graphs our office uses and talk briefly about why this is so important from an economic point of view.

First, a recent PEW report discussed how Millennials are now the largest generation in the U.S., overtaking their parents, the Baby Boomers. The same is generally true here in Oregon as well, although using our definition of generations, Millennials overtook Boomers back in 2008. This is in large part due to Oregon’s strong in-migration trends, which drive the vast majority of our above average population growth rates. In both good times and bad, people move to Oregon and younger adults have higher migration rates than older adults.  Oregon Generations

Here’s another way to look at the generations in Oregon over time. Two notes. First, the very small dark gray portion in the lower left hand corner of the graph refers to the Lost Generation, born in the late 1800s. Second, given the lack of definitions around Gen Z (iGen, post-Millennials or whichever name demographics settle on) I am simply cutting off their age cohort at 2020 and starting a new one. OregonPopGen

More importantly, why does this really matter for Oregon and the economy? Well, it has been said that demography is destiny. Additionally, Mark talked at length in his Destination Oregon speech about how if an aging and retiring population is the issue, then young, working age households are the cure. We have highlighted previously the impact of individuals in their root setting years, generally 25-34 years old. During this time many begin their careers in earnest, get married, buy a house, start a family and the like. Oregon — and our metropolitan areas in particular — have a long history of attracting these types of individuals and households, which is a boon for longer run economic growth. However, even with these strong migration trends, Oregon, much like the nation, is now seeing its working age population decline as a share of the overall population. Now the absolute total number of working age adults continues to increase, but as a relative share of Oregon’s overall population, it has been falling the past few years and will continue to do so over the next decade. This directly feeds into the potential capacity of the economy. Such trends led Bill McBride over at Calculated Risk to say “2% is the new 4%” referring to real GDP growth.

WorkingAgePop Call it secular stagnation, or whichever term you prefer, but the combination of slower population growth and a relative decline in the working age population directly feeds into our office’s long-run economic and revenue forecasts. We are expecting growth to be slower this decade than in past expansions. However these bigger picture, longer-run trends do not rule out a year or three of relatively robust growth in the near term. 2014 was actually a pretty strong year, even relative to Oregon’s history. There is no reason 2015 and 2016 cannot be just as strong, before the demographics weigh more on the longer-run outlook.

Finally, it is important to note that even with slower job growth moving forward, it does not necessarily mean there will not be enough jobs available. About 60 percent of the job openings this decade, according to the Oregon Employment Department, will be generational or occupational churn. The other 40 percent will be new job openings. So there will/should be enough jobs, even if net growth rates are lower. The generational transition as the Boomers age into their retirement years will be at least a decade long process.

Posted by: Josh Lehner | February 2, 2015

Graphs of the Week: Oregon MSA Employment

Below is one quick graph per MSA to help put the strong employment numbers from the past year in better context.

Bend is Rising. Not only did Bend suffer a more severe recession than anything seen in Oregon since Coos Bay in the early 1980s, job loss in Deschutes County was much worse than even in the other housing bust metros across the country. These comparison metros — the 50 largest boom and bust housing metros — are the worst of the worst in terms of the bubble and its aftermath. Even so, Bend is rising and now playing catch-up to the state and nation overall. Job growth of 4-5 percent in each of the past couple of years will do that.


Corvallis: Stable and Growing. Benton County is generally more stable economically than the rest of Oregon and the Great Recession was no different. The city has also been more stable than most of its western state peers, as seen below.


Eugene is growing, following structural changes. Lane County employment overall is now growing 1.5-2 percent annually the past couple of years, however the region underwent a major structural change during the Great Recession. In particular the losses of major manufacturing operations. It is not easy for a regional economy to shrug off such impacts and it takes time to readjust and begin to grow again. Over the past couple of years, all other industries in Lane County have regained nearly 70 percent of their recessionary losses. During this time, state education employment (mostly University of Oregon) has been largely unchanged, after growing strongly in earlier years, so the growth is coming from other private sector industries.


Medford leads the State of Jefferson. At times it appears that Medford and Jackson County get the short end of the stick. University of Oregon’s regional indices continue to show the metro is growing slower than in past expansions and the recent cover story of Oregon Business asks “Will Medford Ever Be Cool?” The region does make for a challenging comparison given it is a growing metropolitan area that receives a good influx of migrants, however it is more geographically isolated and historically tied to manufacturing than a lot of other metros at the same time. Another way to look at is to compare Jackson County with its counterparts in the State of Jefferson. Meford — another housing bust metro — suffered severe job loss during the Great Recession however its growth in recent years is leading the regional recovery. It’s two sides of the same coin: Medford is growing faster than its peers (mostly nonmetro counties) but in-line or maybe a hair slower than many of its metro peers up and down the West Coast or even across housing bust MSAs.


Can Portland take another step up? To me, this is the key to the statewide outlook. Right now all of Oregon’s metros excluding Portland are growing about as fast as they can, or as fast as they have in decades, collectively. It is unlikely they will accelerate further, so if Oregon’s job growth is to pick up even more, it is likely going to be due to stronger growth in and around Portland. Here the story is a bit more mixed. The more reliable, but not as timely QCEW data shows Portland’s 5 Oregon counties both accelerating and decelerating since the last benchmark, while the officially published BLS figures for the entire 7 county MSA show growth holding steady at nearly 3 percent job growth. There is no question that Portland’s regional economy has outperformed the state and about in-line with other big cities across the country. The question is whether or not it can grow faster and sustain rates closer to 3 percent or more.


Salem is rockin’. This may come as a surprise to some, but in the past 2 years, Salem’s job growth has been even faster than the housing boom era, but without the bubble this time, we think. You have to go back to the early to mid-1990s to see such sustained growth rates in Marion and Polk counties that are higher. Salem has now regained about three-quarters of its recessionary losses in terms of employment.


Stay tuned for more regional economic material in our next quarterly forecast, to be released on Thursday, February 19th.

Posted by: Josh Lehner | January 28, 2015

Oregon’s Labor Market and Wages

As our office has discussed over the past year (HERE and HERE, e.g.), the expected pattern for the economy would be first more jobs, then higher wages due to a tighter labor market and then more individuals in the labor force looking for these more plentiful and/or better paying jobs. As the overall economy continues to improve and jobs are at an all-time high, more and more focus is being paid to wage growth. In particular, the Federal Reserve is closely monitoring wages and inflation to determine the underlying strength in the economy so they can begin raising interest rates (aka, normalizing monetary policy.) Well, the good news for Oregon is that these expected patterns of growth or labor market dynamics are emerging locally and may already be here.


While we know job growth accelerated back in 2013 and the labor force followed suit in late 2014, the wages are a bit more of a muddled picture. We know for sure aggregate wages are doing well. Unfortunately for the typical worker though, the wage picture depends on which measure one uses. Below are 5 various measures of wages or earnings per worker and their cumulative change since the Great Recession. For our office’s core purposes (the state budget) we track the monthly withholdings out of Oregonian paychecks (this is the largest component of the state’s personal income tax collections) and use BEA wages in our economic forecasts. The good news is that we are seeing growth above and beyond the rate of inflation across most measures. One missing piece here for the red line is that if employees aren’t seeing real hourly gains, but seeing more hours worked, their total paychecks are still going up, which matters most for household budgets, and state tax collections.


A key piece to the outlook is average wage growth. Below is what our office currently has in the forecast. In brief it shows growth picking up over the next couple of years and reaching rates approximately on par with the housing boom expansion. These rates of growth are lower than those seen in the 1990s. Some improvement in wage growth is to be expected given the tighter labor market. However is this outlook too optimistic? Too pessimistic? This outlook is going to be a big part of our preliminary forecast meetings this week with our advisors.


Posted by: Josh Lehner | January 26, 2015

2015 Outlook – Energy Prices

One big development for the 2015 economic outlook is oil prices and more importantly for households, the price at the pump. Below is a quick summary of the developments and a collection of these various impacts from other sources.

The steep drop in the price of oil and by extension, gasoline, is a big development for the near-term economic outlook. The combination of increased production — mostly North American shale and oil sands — and weaker global demand has sent oil prices into free fall in recent months. The price per barrel of oil is down over 50 percent in the past six months with gas prices following suit. On net this development is expected be a positive for the U.S. economy as lower energy costs free up disposable income for households. GDP, employment and consumer spending are all expected to grow faster, according to IHS Economics.


However these positive impacts are muted somewhat by two big factors. First, energy intensity or the amount of energy used relative to output is much smaller today than a few decades ago. That means, both to the upside and downside, the U.S. economy is less sensitive to price movements than, say, back in the 1970s. Second, as the U.S. has become a larger producer of oil in the past decade, some regions of the country are expected to be negatively impacted with any slowdown in production and/or new drilling activity. Oregon does have some ties to the mining industry in terms of machinery and equipment manufacturers, however the state should see an above average positive impact due to increased discretionary spending by households.


All told, lower oil prices are a net positive to the U.S. and Oregon economies, but also even more for lower income households, which spent a higher share of their income on energy costs. The key question is how long will low oil prices stay. As in good times and bad, energy price forecasting yields a wide range of opinions and current events are no different. Markets are building in only small increases in the price of oil for the next few years, while some prominent forecasting units are predicting larger gains. The U.S. Energy Information Agency’s near-term outlook, the IHS forecast and the WSJ economic forecasting survey (not shown here) all are indicating larger gains than the futures market.OilForecast

Posted by: Josh Lehner | January 23, 2015

The Manufacturing Renaissance in Perspective

Besides the references in President Obama’s State of the Union speech earlier this week, there has been much discussion (and consternation) of the so-called manufacturing renaissance in recent years. It’s hard to put a formal definition of what people mean when they say manufacturing renaissance, but in general it certainly means growth of manufacturing jobs in the U.S. Some of the reasons economists give for such growth include increased U.S. competitiveness from low energy costs (natural gas in particular due to fracking) and relatively lower wages (U.S. manufacturing wages aren’t growing much while those in the developing world are increasing fast), rules/regulations increasing abroad, intellectual property rights concerns, publicity for U.S. made products, a relatively weaker U.S. dollar, to name a few. So how is the so-called renaissance going?

First, manufacturing jobs are increasing in recent years, nearly 8 million 800,000 from the depths of the Great Recession through today. Of this, there is no question. However, how do you place these gains in context of the overall economy? One common way is to show manufacturing jobs as a share of all jobs.USMfgShareThis is the graph or measure many use to dismiss the concept of a manufacturing renaissance or proof that is isn’t happening. However, while the share of jobs isn’t increasing, the movement sideways is a historical outlier. The fact that manufacturing jobs are growing just as fast as the overall number of jobs is fundamentally different than the past 60 years in this country. So does that mean the renaissance is real? Maybe. In a Twitter exchange yesterday with Josh Zumbrun of the Wall Street Journal, I shared a few of the ways I try to characterize the manufacturing rebound.

The first graph shows the share of lost jobs regained during the subsequent expansion. In this context, our recovery so far doesn’t look so impressive. However it must be pointed out that U.S. manufacturing jobs peaked in 1979 and have largely been flat to down since. The current gains are considerably better than the mid-2000s recovery.USMfgJobs While that shows the share regained, it’s also important to look at how many jobs were lost. The next graph shows both the lost jobs and subsequently how many were regained over the expansion.USMfgJobs2

Finally, as our office has pointed out previously, manufacturing in Oregon typically outperforms the average state. Manufacturing jobs today are in a very similar position coming out of a deep recession as they were back in the 1980s. More importantly, Oregon’s share of all U.S. manufacturing jobs is increasing over time. Much of this has to do with the fact that Oregon manufacturing is not tied as much to what we call old-line manufacturing which has been hit harder in recent decades. This would primarily be auto makers, steel makers, textiles and the like. Of course wood products and paper mills would be here as well, which have not fared well over the past 30 years. The reason Oregon outperforms is that a large amount of our manufacturing can be considered new-line, such as our semiconductors and aerospace firms. Plus food processing has done extremely well over the past decade.

ORUSMfgRegainedAll told, the manufacturing sector certainly is recovering, however not significantly out of line from the previous 4 business cycles. Even with the impacts of globalization and technological change which impact nearly all industries but manufacturing the most, expectations were and are that U.S. manufacturers would add back some of their lost jobs. It is very unlikely that all of the lost manufacturing jobs will be regained, just as they have not for 35 years. Even in this realm of ever increasing output and higher productivity (which results in fewer workers needed to produce the same amount of goods) it is beginning to look like the mid-2000s recovery is the outlier here where essentially none of the lost manufacturing jobs come back. Moving forward our office expects many of these trends and pressures to continue. Production jobs will not keep pace with output, but employment will continue to grow. We’re on the economic upswing today and progress will continue to be made. At least until the next recession, when this cycle begins anew.

Posted by: Josh Lehner | January 21, 2015

Oregon Employment, December 2014

With the December jobs report, another year is in the books for Oregon’s economy. Preliminary estimates show December was another big month (more on that in a minute) but for the year overall, 2014 was actually quite strong. 43,500 jobs on an annual average basis for a growth rate of 2.6%. Both of which are the strongest since 2006. However, more importantly, progress continues to be made across the broader measures of the labor market, see the Economic Recovery Scorecard. While Oregon’s economy, number of jobs and the like have never been larger, we know that the economy is still not fully healed some 7 years after the onset of the Great Recession (primarily due to it being a financial crisis.)

With that being said, December brought to close a solid year in terms of the Total Employment Gap. The unemployment rate remains in the high 6 percent range, but labor force participation is increasing and those working part-time but want full-time work is slowly declining. The Total Employment Gap closed nearly 2 percentage points in 2014, the best year so far in recovery, but the state still is just about 60 percent of the way recovered.


On the monthly jobs figure, December’s gain of 8,200 seasonally adjusted along with strong October and November figures makes the 3 month average the best on record according to our friends over at Employment. Good news, no doubt. However our office has some very technical concerns about these numbers. In particular the seasonal factors used by the Bureau of Labor Statistics, which presets the monthly seasonal factors a year or so in advance. For a recent example, think back to June when the preliminary estimates said Oregon lost 4,300 jobs over the month and everyone freaked out. Well June’s revised (and preliminary benchmarked) data shows gains of 1,500 jobs. At that time our office pointed out that the seasonal factors did not make sense and it was highly unlikely the state lost that many jobs. Today we’re talking about the reverse of that. No doubt the economy has improved, and job growth has picked up. However the headline monthly employment numbers are likely overstating the growth purely due to the seasonal factors from BLS. To try and make this clear, below I show the job gains over the past year from both the not seasonally adjusted data and the seasonally adjusted data.

The differences here work out to over 500 jobs per month. These numbers should be the same, and after annual revisions and benchmarking, they will be. However in real time the data do differ, due to the preset seasonal factors. The story isn’t these technical issues. Let me make that clear. However, don’t be surprised that once revisions are taken into account Oregon saw good, strong job growth to end 2014 but maybe not quite record setting.

All told, 2014 has been a good year for the economy and labor market. Much progress has been made as the state has finally regained all of its lost jobs due to the Great Recession, middle-wage job growth returned and the like. Our office expects 2015 to more of the same, with some expectations for better wage growth as well.

Posted by: Josh Lehner | January 15, 2015

2015 Outlook: Reaching Full Employment

This week we already took a look at the middle-wage job outlook in Oregon. Today we’ll introduce a new measure called the Total Employment Gap and examine when Oregon may hit full employment, or when the labor market is fully healed. Get caught up to speed with the Economic Recovery Scorecard.

What the Total Employment Gap illustrates is how far away the economy is from full employment. There are a few differing and technical definitions of what full employment is and the term is also generally used interchangeably with the so-called natural rate of unemployment, or the non-accelerating inflation rate of unemployment (NAIRU). However for these purposes, we are defining it in a broad sense to mean the condition where all or nearly all persons willing and able to work are able to do so, which is also the level of employment rates when there is no cyclical unemployment. The Total Employment Gap was originally developed by IMF economist Andrew Levin (see HERE and HERE for more) at the national scale.

Now, to answer this question, economists have historically turned to just examining the unemployment rate itself, relative to the natural rate of unemployment to gauge the health of the labor market. With the U.S. unemployment rate now at 5.6 percent and many economists’ estimates of the natural rate of about 5.5 percent, the old style of analysis would indicate that the economy is getting tight and is relatively healthy. However, we know that this time really is different than anything we have seen since the Great Depression. Labor force participation rates are down substantially, the share working part-time but want full-time work remains really high, plus the other measures such as the number of long-term unemployed and the like still indicate the economy is not all the way back to being healthy. Economists realize all of this and are trying to assess the amount of slack or under-utilization in the economy. Fed Chair Yellen has been pointing to many of these variables for years (Tim Duy has the Yellen Charts) and the Fed has gone so far as to introduce a new labor market conditions index to try and assess the labor market’s health. In the same vein, what Levin’s work on the Total Employment Gap does is try to incorporate these other factors that we know are going on into a clear and concise measure to gauge the strength of the economy. I find his work quite useful and informative and it really does incorporate some of these broader labor market issues economists are discussing. So much so that I have created an Oregon version of the Total Employment Gap. See footnote [1] for more on the methodology.

First I want to go over a measure that is both very important and misleading: labor force participation. It’s important because more workers, or more potential workers can raise the overall productive capacity of the economy. Conversely, fewer workers can shrink the capacity of the economy. However in today’s economy, the overall labor force participation rate can be misleading because of how it is mathematically computed and the demographics in the U.S. and in Oregon. Just look at the graph below, where I have plotted both the actual LFPR and one that is fixed at 2000 rates for each age cohort, from which I simply adjust for demographics over time [2]. From the start of the Great Recession through today, the adjusted LFPR was expected to decline 2.4 percentage points. Thus it is not an intellectually honest argument to say that the actual LFPR decline of 3.8 percentage points over the same period is due to an underperforming economy, because the rate is falling due to aging, regardless of the strength of the economy.ORLFPRAdj

However, one can compare the differences between the actual LFPR with the adjusted estimates to get a sense of the participation gap in the economy. This participation gap is something that is missed when just examining the headline unemployment rate. So, combining the participation gap with the cyclical unemployment rate and underemployment rate — those working part-time but want full-time work — results in the Oregon Total Employment Gap.


According to this measure, Oregon’s labor market, and economy, is just over half-way back to pre-Great Recession levels. Looking across the host of metrics in the Economic Recovery Scorecard, that seems about right as well. The unemployment rate, currently at 7 percent in Oregon, is relatively near the natural rate of unemployment for the state, likely around 6 percent or so, if the U.S. is more like 5.5 percent (unfortunately this is more art than science.) The underemployment gap is slightly smaller today, however many more Oregonians today are working part-time but want full-time work than prior to the Great Recession. However the largest contributor to Oregon’s Total Employment Gap is the labor force participation rate gap as discussed above. In November, this gap accounted for about two-thirds of the Total Employment Gap (3.1 of the 4.7 percentage points.) Historically Oregon’s LFPR was much higher than the typical state, however it has fallen significantly further in recent years, and is currently well below the national rate. That being said it has likely overshot to the downside and while it is rebouding in recent months, our office’s forecast expects it to increase even further over the next few years, slowly closing that participation gap.

All told, Oregon is likely about two years away from reaching full employment, based on our office’s latest forecast. Economic growth — jobs in particular — accelerated in 2013 and have held steady at about three-quarters throttle throughout 2014. Similar rates of growth are expected for 2015 and 2016, although the gains are becoming more broad-based in nature (e.g. middle-wage jobs, stronger growth outside of Portland, and the like.) Stronger job growth is resulting in the labor force response our office had hoped for/expected and along with an improving economy and tightening labor market, should come better wage gains, which may be the last piece of the puzzle to fall into place before most Oregonians believe the economy is all the way back.

[1] Unemployment Gap is actual unemployment rate relative to the Congressional Budget Office’s estimate of NAIRU plus 0.75% due to Oregon’s higher unemployment rate. Participation Gap is actual labor force participation rate relative to 2000 rates adjusted for demographics. Underemployment Gap is full-time equivalent number of Oregonians working part-time for economic reasons as share of labor force relative to 2.0%, a full employment estimate level.

[2] These are just our office’s estimates and others do exist. The Oregon Employment Department’s report on LFPR has their own. The White House’s Council of Economic Advisors’ report last year on LFPR has a round-up of many national estimates, including their own as well. Overall the same general trends are evident in these various estimates, even if the very specifics do differ.

Posted by: Josh Lehner | January 13, 2015

2015 Outlook: Middle-Wage Jobs

This week we’ll take a look at both the middle-wage job outlook in Oregon, and examine when the state may hit full employment, or when the labor market is fully healed. Get caught up to speed with the Economic Recovery Scorecard.

Our office defines the much-discussed category of middle-wage jobs as follows, based on our job polarization work (see full report, see short update.) It is important to point out that this analysis focuses on occupations and not industries of employment. Job polarization is occurring at the occupational level and is present across nearly all industries and firms. From our report:

Although [middle-wage jobs] still represent a majority of the workforce, their share of the job market is shrinking rapidly. For the past three decades, employment growth has become polarized, with the majority of job gains occurring at the high and low extremes of the wage distribution. The primary factors contributing to this polarization, including the effects of both technology and globalization, are expected to continue throughout this decade.


Middle-wage jobs accounted for over 8 out of every 10 job losses during the Great Recession in Oregon and only a small minority of the job gains through 2013. However 2014 was a much better year with middle-wage job growth of 2.7 percent, along the lines of overall job gains in the state. This means Oregon has regained 40 percent of its lost middle-wage jobs so far, even as the overall number of jobs in the state is currently at an all-time high. This is the typical business cycle pattern seen in each of the past 3 recessions where many middle-wage jobs are eliminated during downturns and are not replaced to the same degree as both high- and low-wage jobs during the subsequent expansion. What is the outlook for these jobs more broadly, especially considering the processes of polarization are expected to continue?

Key Middle-Wage Outlook Points

  • Middle-wage jobs are not going to be eliminated completely. Polarization results in a smaller share of middle-wage jobs as growth is strongest at the high- and low-ends.
  • Much of the recessionary losses and recent gains can be tied to two occupational groups: construction workers and teachers. As the housing market continues its rebound and as public sector budgets improve, so too will middle-wage jobs.
  • Key question is how fast (or slow) will polarization occur this decade. It is likely to be muted in the near term as cyclical gains in housing and government support jobs, however there remain structural impacts due to globalization and technology. The error bars in the graph below show jobs under various polarization scenarios.
  • Middle-wage jobs in Oregon are expected to reach pre-Great Recession peak numbers in 2017. However at that time they will represent 61 or 62 percent of all jobs, whereas back in 2007 they accounted for 66 percent of all jobs. Even under a reasonable, best-case scenario, the share will not return.


Additional thoughts on the drivers of middle-wage job growth from our report.

While the upper middle-wage jobs can be considered as being driven by population growth, these lower middle-wage jobs can broadly be considered as business support occupations. Administrative Support, Sales and Transportation all act as suppliers of labor and services to other businesses or employees. With increases in business operations, including headquarters, the demand for such occupations will increase even if technological advancements continue to eliminate a portion of these jobs. This provides an opportunity for continued investment into activities that foster both an entrepreneurial business climate and also recruitment and retention efforts of existing firms. The loss of significant headquarter operations in Oregon over recent decades has decreased the demand for some of these business support firms and workers.

All told, the outlook for the number of middle-wage jobs in Oregon is relatively bright today. Growth will likely be slowest among the production and admin/office support occupations but for the rest, 2015, 2016 and 2017 should all be pretty good growth years as the cyclical gains continue as the recovery becomes more broad-based in nature. However, over the longer term, the relative share of jobs is expected to continue to decline as high- and low-wage jobs see stronger growth.

Posted by: Josh Lehner | January 12, 2015

Ron Swanson Inflation

We’re going to start Monday off with something fun. Tomorrow starts the 7th and final season of NBC’s Parks and Recreation, which is one of my favorite shows. Ron Swanson, the libertarian Parks Department Director not only is comedic gold but has many fascinating personality traits. Chief among them are his eating habits and his lack of trust in fiat money (he has no bank accounts and stores his money in gold.) Now that the aging middle-manager is approaching retirement, I was wondering how well he is set-up for the next phase of his life. In particular, what has the price of gold done to his household budget and how have commodity prices impacted his favorite foods? (There’s quite a bit to analyze here. I did this for fun recently. Ask my wife.)

Ron is possibly best known for his love of breakfast foods, specifically bacon and eggs. Unfortunately for him, the real price of bacon and eggs in the Midwest is about as high as it has ever been. 2 lbs of bacon and 2 dozen eggs retails for about $14 today, up from around $10 for much of the past 20 years. However, even with the recent uptick in grocery store prices and decline in gold prices, the cost of bacon and eggs as measured in ounces of gold is still considerably lower than in recent decades.


Another Swanson favorite is the Turn ‘n Turf. Here, similar to bacon and eggs, the real price has increased considerably in recent months. Prices are back to the mad cow disease scare days of the early to mid-2000s. However Ron’s long-run game of investing in gold is still paying off for him so far, as Turn ‘n Turf measured in ounces of gold is still lower than in much of recent years.SwansonTurf

However, while the libertarian Ron may dislike the government in principle, his household budget is being squeezed from all sides. The costs of his favorite foods are increasing, while the price of gold is falling, however so are his real wages. Local government wages in Indiana are effectively flat in the past decade and down about 3 percent in recent years. As such, Ron needs to spend a higher share of his current income on his food than ever before.


To sum up, Ron is currently in pretty good shape although recent trends are worrisome. He faces two major risks to his outlook for both his current lifestyle and his retirement.

First, commodity price swings can wreck havoc on not only food prices but also the overall value of his assets since he is clearly not diversified in his savings and investments. Food prices are notoriously volatile, but do represent a risk nevertheless. However the price of gold is the lynchpin for Ron’s savings and lifestyle. So far his gold investments over the years have served him well, however the price of gold is falling — down about one-third in the past couple of years — but it still remains higher than in the 1980s and 1990s. Second, while public sector budgets are coming back, local government employment in Indiana isn’t growing (about 5% below pre-recession levels) and wages are falling. Furthermore, while many states’ pension funds are underfunded, Indiana’s appears to be in worse shape than the typical states according to a Morningstar report. Ron may be living the good life now in a cushy middle-manager job, big gold investments and a new family, however the outlook is highly uncertain.

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