Posted by: Josh Lehner | November 22, 2016

Oregon at Fullish Employment, Redux

Over the lunch hour I will be on OPB’s Think Out Loud discussing Oregon’s economy that is currently at fullish employment. Recently we have highlighted that the state now has neither an unemployment nor underemployment gap. What remains is the participation gap.

First, however, let’s talk a little about full employment. Unfortunately there are a few different definitions and no specific data series that magically says when an economy is at full employment. While it is a very strong and powerful concept, actual measurement is challenging. Our office uses it in a broad sense to basically mean when nearly all persons who want a job are able to find one. This does not mean the unemployment rate is zero. There will always be some level of unemployment. But it does mean that cyclical unemployment is gone and structural and frictional unemployment are low.

Our office uses the Total Employment Gap because the headline unemployment alone does not tell the full story. In particular, labor force participation has been weak in the past 15 years or so. Some of this is due to the aging population but some is due to the weak economy. This is important because fewer people looking for work will bring down the unemployment rate, even as the state of the economy may not be improving. So using a broader measure like the Total Employment Gap helps get around these issues to a certain degree.

Today the Total Employment Gap is less than one percent in Oregon and signals the tightest or best labor market Oregon has seen since the 1990s. While that sounds impressive, and it is good news, keep in mind that the economy never fully healed from the 2001 recession, or at least not for any sustained period of time. We really haven’t been at full employment since 2000. Even so, significant progress and growth has occurred in the past few years. And today, our relative position isn’t that different than back in the 1980s when Oregon suffered its other severe recession.empgap1016

The graph below compares the three components of the Total Employment Gap today with the 1980s. The real difference and issue now is the participation rate.


Statistical analysis and estimation are all well and good, but at some point the proof is in the pudding. And economist generally use wage gains as proof of concept. Average wages today in Oregon are increasing at roughly 4 percent annually. Given that inflation remains lower today than in recent decades, 4 percent nominal growth translates into better inflation-adjusted gains than during the housing boom and nearly on par with the 1990s.

While Oregon’s seeing 4 percent average wage growth, the U.S. is seeing more like 3 percent, or a bit under that. This growth advantage is raising our average wage relative to the nation to its highest point in more than a generation. Or since the mills closed in the 1980s. Oregon’s average wage remains lower than the typical state, however significant progress is being made in recent years.


Full employment has significant implications for the outlook. First, our office is expecting job growth to slow, but for a good reason. 5,000 jobs per month, or 3-3.5% annual growth is not sustainable. We need half of that to keep pace with population growth and it looks like the Oregon economy is currently transitioning toward a more sustainable rate of growth.

Second, a tight labor market is great for workers. It means businesses must compete more on price to attract and retain the best employees.

Third, an economy at full employment is overall a good thing for businesses. It means more customers, higher sales, and larger profits (in aggregate, not necessarily as a share). But it does become more challenging to find workers to expand. Firms must cast a wider net to find employees and take chances on those without the perfect resume, experience or even an incomplete skill set. On the job training becomes more important as well.

Finally, while all of the above is true at the state level that does not mean each individual county or region of the state is at a similar point. Urban Oregon has seen a stronger recovery than has rural Oregon. Only today is poverty showing large improvements in the Portland region, after a few years of good growth. Such gains have only recently materialized in rural Oregon. Improvements in these broader measures of economic well-being are coming provided the expansion continues, but we’re not there yet in many parts of the state.


  1. […] via Oregon at Fullish Employment, Redux — Oregon Office of Economic Analysis […]

  2. […] Source: Oregon at Fullish Employment, Redux | Oregon Office of Economic Analysis […]

  3. […] and income gains are now seen among middle- and lower-income households as the economy improves and full(ish) employment raises […]

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