Oregon Office of Economic Analysis

The tightening labor market is driving strong wage gains throughout the state, leading to rising household income for those in the middle and lower parts of the distribution. As we have seen in the Portland region, poverty is now falling and showing sizable improvements. The rest of the state not so much. To show the underlying trends and the reason our office expects to see falling poverty in the near future outside of the Willamette Valley, I want to focus on the Grants Pass MSA, or Josephine County. I do think, however, these trends are more broadly applied to other regional economies across the state.

First, as Guy Tauer details recently, the Rogue Valley economy is growing and experienced impressive gains in 2015. Guy, of course, is the Employment Department’s regional economist for the area. This can also be seen in the employment data itself. While the Grants Pass metro area suffered a very severe recession – job losses twice the national average – strong growth has returned in recent years. Josephine County’s employment is now effectively back to pre-recession peak levels, as is the local unemployment rate.

The improved labor market is also finally impacting local incomes. Average wages in the county were essentially flat for 8 years (2006-2014) after adjusting for inflation. However as job growth returned, and the labor market tightened, average wages started to increase, as seen in the 2015 and 2016 data. The combination of more employment and rising wages is also finally lifting median household incomes above the range seen following the bust. The year-to-year data can be noisy given small sample size concerns, however it is very likely that local household incomes are now on a better trajectory, even as they remain considerably lower than before the Great Recession.

That said, there has been no measurable progress in local poverty rates and it looks like the 2015 data will actually show another uptick. It should be pointed out that the margin of error around these measures is at least a couple percentage points. It is likely that the actual poverty rate has been more stable on a year-to-year basis, but the overall pattern is clear. As our office has noted in previous posts, this is most likely due to the timing of the business cycle or where each area is in terms of the business cycle. The regional economy is just now at the point where the labor market is getting tight, incomes are starting to rise, however poverty has not yet declined. Provided the expansion continues, the next link in the chain is to see improvements in the broader measures of economic well-being such as the poverty rate, needs-based caseloads and the like.

Now, even as this is the natural progression of events over the business cycle, there are still a number of risks or events that can keep poverty higher than may otherwise be expected. First, and the most straight-forward would be that economic growth simply is not strong enough to bring down poverty.

Second, local demographics and population growth can shift the composition of local residents, leaving poverty rates unchanged even as economic growth continues. There are a few different ways this can impact the data. One way could be retiring Baby Boomers without enough savings for retirement. A larger share of low-income retirees could potentially leave poverty rates high. This goes for both local residents and new migrants. Furthermore there is a difference between levels — the actual number of people in poverty — and rates — the share of the total population in poverty. In an area with a growing economy and a growing population, the actual number of people living in poverty may not fall, or not very much, however the share of the total population in poverty should decline.

Third, which is related to the first possibility, is the impact of job polarization on the local economy. As the share of middle-wage jobs declines, a larger and larger share of the workforce is employed in low-wage jobs (and high-wage too, but such individuals are not in poverty). Losing a middle-wage job and only being able to find a low-wage one to replace it represents a downgrade and is why job polarization is such a concern. Furthermore, as our office has tried to detail over the summer, the vast majority of the “adjustment” to the lack of middle-wage jobs is for workers to drop out of the labor force entirely.

That said, in a soon-be-published article, Guy will be showing employment trends by wage level in the Grants Pass MSA. The actual local pattern is somewhat unique, relative to the general polarization story seen throughout the state and across the nation. Guy’s numbers show that low-wage jobs are on the rise, as they are everywhere. However, jobs in middle-wage industries are fully recovered and at all-time highs. This, obviously is great news and encouraging to see. That said, where Josephine County is also unique is that jobs today in high-wage sectors are actually fewer than before the recession. There are a lot of important details to this analysis, which you will be able to read soon, but the impacts of job polarization in general can and will likely influence regional poverty rates.

UPDATE: In the comments, Greg Tooman, who is the regional caseload forecaster for DHS/OHA has added some great insights. I have copied his comment here. The latest statewide forecast is available here, for those interested. And the regional outlook is here. In the post I tried to address some of what Greg talks about, but he obviously knows the details better than I and says it better and more succinctly. Thanks Greg.

As the regional forecaster for the Dept. of Human Services, I’ve come to understand that the relationship between poverty and jobs is weaker than most people think. It’s undoubtedly true that the employment picture is better in Josephine Co., but in most cases employment isn’t enough to move people out of poverty unless it’s full-time. Although Grants Pass has been recently reclassified as an MSA, the area has a lot of the features we see in a rural county – a high population over 65, unemployment historically higher than statewide, etc. You’ve talked about the rural/urban split here before. The pattern in Grants Pass/Josephine looks typically rural. And in rural counties, slow reductions in our means-tested caseloads are common. We expect SNAP to fall by about 18% statewide between now and the end fiscal 2019; we expect it to fall only 11% in Josephine Co. Similar story with TANF. Wages may be more the key here than employment itself, since that would signal the growth of full time employment necessary to pull people out of poverty and off of our services.