Oregon Office of Economic Analysis

In our office’s Rural Oregon report we mention that much of the discussion focuses on data and trends that are backward looking. They indicate how many jobs were lost in the 1980s or how old the typical resident is and the like. While these statistics help describe the current lay of the land, they do not necessarily tell us what tomorrow may bring. To be sure, many of the more forward-looking indicators are also less bright in much of rural Oregon than in urban Oregon, but not all hope is lost. In fact, if anything, some of pessimism about rural Oregon today may be a bit overdone. The reason? Demographics. Yes, that’s right, demographics.

One aspect our office has been researching is potential economic growth and the impact of the aging demographics. Specifically we looked at rural counties and their potential labor force using the same methodology we did for the statewide demographically-adjusted labor force participation rate. What this does is take a more nuanced and I’d argue better look at what is essentially the working age population in rural areas.

What the analysis shows is that while the Baby Boomers’ retirement will weigh on net growth rates across the state, in much of rural Oregon this slowdown has already taken place. It is in the rear-view mirror. Moving forward, the potential labor force will pick up and in some regions it already has.

Why is this? What matters from an economic sense is when an individual ages from their prime-working and peak-earning years into retirement. Unless another individual takes their place, this represents a decline in the economic potential of the economy, everything else equal. And in much of rural Oregon there has been a decline in the potential labor force given demographic and population trends in recent decades.

However, rural Oregon is nearly all the way through this demographic drag. For example, Southeast Oregon is 80% of the way through their demographic drag. The North Coast is three-quarters of the way through theirs. Southwestern Oregon has seen the largest regional decline in its potential labor force, however this has already occurred. Further declines are not expected for the region overall based on our office’s population and demographic outlook, even as individual county performance varies (more on this below).

Some regions, like the Gorge and Northeast Oregon, experienced a slowdown in their potential labor force but the influx of younger individuals into these regions has been enough to offset the retirements. As such there has not been an overall decline in their potential labor force. This is the pattern seen among urban Oregon as well – a relative slowdown but not outright declines.

However, as mentioned above, individual counties do differ, even neighboring ones. Lets take a quick look at the demographics of Klamath and Lake. Here is the 2015 population distribution by age group. Both counties skew older than the state as a whole, but Lake considerably more than Klamath. In fact the largest age groups in Lake are all between 50 and 69 years old, or the transition period from prime-working and peak-earnings years to retirement. As such, Lake has so far not seen much of a decline in their potential labor force, but are about to in the coming decade or two. While Klamath’s largest age groups also are 50-69 years old, the younger demographic groups are considerably larger in relative size and when combined with the population outlook this results in a smaller potential decline over a shorter time period.

The last graph shows the potential labor force declines for each individual rural county in Oregon. Continuing with the Klamath and Lake example, you see that Klamath is about 85% of the way through their demographic drag while Lake is just 9%, due to the different demographic structures and outlooks.

As stated at the top, much of the focus on rural Oregon is about what has already happened in recent decades. There is no question that many of these trends paint a relatively bleak picture. However, when it comes to gauging the potential labor force, even one of the most commonly cited trends in rural Oregon, that of the older demographics, indicates that not all hope is lost. It is certainly possible that the actual number of jobs and the actual size of the labor force will remain smaller in the future than in the past. However demographic trends and the population forecast suggest that the outlook is brighter than the conventional wisdom suggests. Many challenges remain of course, but demographic pessimism is likely overstated.