Oregon Office of Economic Analysis

The latest June Oregon job report released Tuesday morning gives us little indication to either cheer or cry.  Seasonally adjusted jobs dropped by 3,600, though an expected drop of 2,600 temporary Census workers lessens the blow.  May employment, which previously indicated no job change from April, was revised up to a gain of 2,600.  But no cheering here, the gain was all due to hiring temporary Census workers.  It looks like we hit bottom in terms of the job loss trend since the start of this year and have been fishing there this first half of the year.   Since December of 2009, we have added (on a seasonally adjusted basis) 4,100 jobs, a miserable average of just 683 jobs a month.

The Oregon job market went bottom fishing back in 2002.  Then in the first half of 2003, jobs losses started again before reversing trend, rising in August and into 2008.  The full story is still not clear as to why Oregon’s job market appeared to have bottomed out in 2002 and then declined again in the first half of 2003.  At the federal level, we had the Bush tax rebates during the third quarter of 2001 and the Federal Reserve was lowering interest rates throughout 2001.  Now interest rate changes take some time to impact the economy while the tax rebates may not have been as strong as hoped for.  But, you could say that the combination helped stop the recession and bottomed out the fall in jobs both in the nation and here in Oregon.  But the stimulus stopped in 2002 with no new tax rebates and interest rates holding steady throughout 2002.  With the one-two punch for the economy waning in influence, the job market turned sour once again as we entered 2003.  The Federal Reserve responded with further interest rate cuts and the bottom fishing came to an end.  The new bait on the hook was the housing market, and a speculative wave took us off the bottom and job growth surged forward.  From the low job count in July 2003, it took Oregon just 17 months to regain the same level of total employment that we had at the start of the job recession in November 2000.

It’s tempting to wonder if today, we are at the same place as back in 2002.  Is this really the bottom of the job market decline or will we have a second fall as in 2003?  We just had tax cut programs, federal stimulus packages, and lowering interest rates to combat this recession.  And the push from these programs (including the inventory cycle) is not providing the same juice to invigorate the economy.   Analysts, including those from this office, expected the priming pumps to lessen and thus slower growth for the economy, a growth rate that would make job creation difficult.  Here we are, pretty much no action for the Oregon job market the first half of this year, bottom fishing once again.

Further stimulus type measures for this year seem unlikely.  Congress is worried about the budget deficit and the Federal Reserve can’t really lower interest rates below zero.  Last time around, we baited the hook with housing, which worked well until unfair fishing practices took over.  It’s difficult to see what bait we have today.  Housing will not lead us out this time around.   International markets have helped Oregon’s exports but the strength of our trading partners is at question.  At least for Oregon, the risk is greater in the Euro Zone compared to our largest trading partners in the Pacific Rim.  Many businesses have run low on inventories, even in wood products, and this has spurred some business activity.  But the inventory cycle is also running its course.

A robust recovery in jobs in the second half of this year appears to have a low probability of occurrence.  The more likely scenarios point to a very slow job recovery or a repeat of the last recession where Oregon jobs take a second fall.  Unlike the job recovery period of 17 months in the previous recession, our office is forecasting the recovery to take 48 months, if the job bottom was March of this year.   No secret bait or lure is out there to get us off the bottom rapidly hauling in jobs.

Yes there are some parallels to the 2002-2003 period and we will carefully watch the data for signs of a second drop in Oregon jobs.  For now, we have the present period being the bottom of the job market, but we stay here for an extended period.