Oregon Office of Economic Analysis

One of the major drivers so far in recovery has been Professional and Business Services as discussed previously. This sector is also expected to outpace all others over the coming decade according to our office’s forecast, plus it carries a lot of weight in the economy as it accounts for 12 percent of all Oregon jobs. Within this employment supersector, the underlying driving force has been Professional and Technical Services — see the Bonus Graph of the Week — which pays nearly 50 percent above the statewide average at $65,000. Needless to say, this industry is a cornerstone to the economic outlook and the Oregon economy moving forward. There’s just one potential problem. In terms of relative size, Oregon’s Professional and Technical Service employment is 20-25% smaller than the national average.

So why does Oregon lag in terms of the relative size of Professional and Technical Services? The following graph shows location quotients by detailed industry for Oregon relative to the nation. A value of 1 means the local employment in that industry is of comparable size to the U.S. average. Oregon has strong employment in the blue bar industries, average concentration in the grey industries and below average employment in the orange industries.

The reason Oregon is below average overall is that many of the orange industries happen to be the largest subsectors; in particular legal, accounting, engineering and computer systems. Oregon strengths in graphic design, veterinary, environmental consulting, architectural and market research are not large enough to offset the relative weakness in those orange industries. Is this a problem for the outlook? By and large, probably not. Many of the orange industries can also be thought of as Big City activities and while Portland ranks as the 24th largest metro, it is not really that big of city. Plus Oregon has a lower share of population in urban areas than the U.S. average. This certainly impacts our industrial structure as seen below.

Pile on top of this that the outlook for the legal industry is not so robust as employment is largely stable or declining with slow growth moving forward and if LSAT test takers are a leading indicator, fewer potential workers in the future. This is not to harp on the legal industry — far from it — but given this larger industry is a reason Oregon lags, it is important to examine to see if this will slow the state down moving forward. The one large subsector that is potentially worrisome, to me at least, is computer system and related, which includes a sizable portion of the state’s software employment. Here, Oregon’s relative employment concentration is 40 percent below the U.S. average. This should be a very high growth industry moving forward — and it already is, look at that growth, 47% since 2007! — but the state is starting from a lower relative base. This is also a growth driver in the High-Tech cluster as well.

Overall, while the top line look at the state’s industrial structure for a large industry like professional services may be a little worrisome, once you dig down into the weeds, the picture does brighten. I do think the state (and the region) is pretty well structured for growth moving forward, which is something I’ve been working on and will publish in the next couple of weeks.

Bonus Graph of the Week