Oregon Office of Economic Analysis

Happy Friday everybody! Two quick items of note and a Graph of the Week.

First, the U.S. Bureau of Economic Analysis just released a new report on the digital economy. BEA published a working paper I am still digging through, but as you would expect, the research finds the digital economy is growing significantly faster than the overall economy. They dive into the different components of the digital economy like digital-enabling infrastructure – computers, software, telecomm – in addition to e-commerce and digital media. The BEA has data to download on how the digital economy impacts different industries in the economy as well. Here is a bottom line summary from the paper:

From 2006 to 2016, BEA estimates that digital economy real value added grew at an average annual rate of 5.6 percent, outpacing the average annual rate of growth for the overall economy of 1.5 percent. In 2016, the digital economy was a notable contributor to the overall economy – it accounted for 6.5 percent of current-dollar GDP, 6.2 percent of current-dollar gross output, 3.9 percent of employment, and 6.7 percent of employee compensation.

Second, I had the fortune to be a part of a panel discussion and work group at the Urbanism Next conference last week in Portland. Urbanism Next is part of the Sustainable Cities Initiative and the University of Oregon. Their big focus is on how technology is changing cities and includes some fascinating research. Where I come into this discussion was one session that focused on the intersection of technology/automation and public sector finances. How do autonomous and electric vehicles, e-commerce, and yes, even the hard-to-define-yet-even-harder-to-see-in-the-data sharing economy impact both public sector revenues and expenditures. Getting to hear the thoughts and strategies from urban planners, developers, and transportation folks was enlightening and added depth to these issues in terms of how we economists think about them. CityLab’s Laura Bliss didn’t write about the session I was a part of, but she did write about the long-term outlook for suburban retail and some of the new research on this.

All of that brings us to this edition of the Graph of the Week. The key point I tried to make at the conference, and in other presentations is about the size and scope of the retail landscape. Yes, e-commerce type jobs are growing briskly — nearly 8 percent annually in recent years. However they remain considerably fewer in number than the classic brick and mortar retailers, let alone compared with all other retailers. In fact, those other retailers continue to add significantly more jobs in recent years. The retail apocalypse narrative is overdone, even with the Toys “R” Us announcement this week – it was less their sales and more their debt from a leveraged buyout a decade ago.

It is easy to fantasize about drone deliveries eliminating many retailers and simultaneously relieving traffic congestion, but the path from today to this yet unknown future is likely to be longer and more meandering than the conventional wisdom suggests, at least as I read it. I really try to avoid being Abe Simpson and the “old man yells at cloud” guy, but these technological changes and economic transformations are usually slower-moving but very profound forces over the long-run. This isn’t to suggest that we don’t have too much retail space. One big issue there is the type/size of retail space and its location. We’re certainly seeing some mismatches on those fronts that are likely to continue. Similarly our office expects retail employment in Oregon to continue to grow, due in large part to our population, but at considerably lower rates than those seen in the typical industry. Retail over the next five years will add jobs at less than half the rate of the economy overall. Wholesale and transportation, warehousing, and utilities will see somewhat better growth rates, however the components within that tied more directly to e-commerce should continue to see stronger gains.