Oregon Office of Economic Analysis

This post circles back on the recent Headwinds and Tailwinds presentation I gave at the Northwest Economic Research Center’s forecast breakfast a couple weeks ago. It also provides an update on previous work along these lines, and this topic is always included in the Extended Outlook portion of our forecast document.

Oregon’s industrial structure is very similar to the U.S. overall, even moreso than nearly all other states. That said, Oregon’s manufacturing industry is larger and weighted toward semiconductors and wood products, relative to the nation which is much more concentrated in transportation equipment (autos and aerospace). However, these industries which have been Oregon’s strength in both the recent past and historically, are now expected to grow the slowest moving forward. Productivity and output from the state’s technology producers is expected to continue growing quickly, however employment is not likely to follow suit. Similarly, the timber industry remains under pressure from both market-based conditions and federal regulations. Barring major changes to either, the slow growth to downward trajectory of the industry in Oregon is likely to continue.

Note: This chart compares expected job growth among Oregon’s traded sector industries based on their relative concentration in Oregon, or location quotient. The larger the location quotient the larger the industry concentration in Oregon compared to the U.S. overall. For example, industries in the top quintile (the red bar) are at least 2.7 times larger in Oregon than in the average state. Conversely, industries in the bottom quintile are at least 25% smaller in Oregon than in the average state. Also note that this chart focuses just on the traded sector whereas the chart from the presentation (link above) included all sectors. However, the overall story remains the same.

With that being said, certainly not all hope is lost. Those top industries in Oregon comprise approximately 25 percent of the state’s traded sector employment, and 7 percent of all statewide employment. Many industries in which Oregon has a larger concentration then the typical state are expected to perform quite well over the coming decade. These industries include management of companies, food and beverage manufacturing, published software along with some health care related subsectors.

The state’s real challenges and opportunities will come in industries in which Oregon does not have a relatively large concentration. These industries, like consulting, computer system design, financial investment, and scientific R&D, are expected to grow quickly in the decade ahead. To the extent that Oregon is behind the curve, then the state may not fully realize these gains if they rely more on clusters and concentrations of similar firms that may already exist elsewhere in the country.

All told, it is somewhat of a mixed bag in terms of Oregon’s industrial structure and expected growth. Many industries in which Oregon has a relatively smaller concentration, will grow quickly in the future. Some of Oregon’s largest industries will grow less quickly. With that being said, there is lots of good news for the state’s economy, and the good news outweighs near-term concerns. However, keeping these facts and trends in mind is important when thinking about the outlook and how it differs, or remains the same, from our history.

I will pull out at least a couple more of the Headwinds and Tailwinds slides in the coming weeks.