Posted by: Josh Lehner | May 8, 2019

Labor Supply Update and Thoughts on the Outlook

As Oregon’s labor market continues to transition down to more sustainable rates of growth, our office and our advisors keep coming back to the question of where the labor will come from. Obviously there are two main sources: current residents who are not working today and new residents moving into Oregon. The real question is how much labor can we reasonably expect from either group as we enter into the eleventh year of the expansion? We’re releasing our latest forecast next week, so you’ll have to wait until then to know for sure. However this post will highlight the latest data and some of the conversations we have had recently with our advisory groups.

First, the share of prime working-age Oregonians with a job today is back to where it was prior to the Great Recession, and even a bit higher. This is tremendous economic news and one big reason Oregon’s job gains have outstripped the average state. That said, job growth among this age group in the past couple of years has essentially matched population gains, meaning the employment rate has held fairly steady. And this steady employment rate is a key driver in the slower statewide job gains in recent years. This largely reflects the fact that much of the slack is gone. There is no longer an army of unemployed Oregonians waiting around for a job. Firms must cast a wider net in recruitment and dig deeper into their resume stack to fill open positions. (Note that the Oregon data is based on a smaller sample size and can be noisy.)

Steady prime-age EPOP suggests job growth moving forward will be more closely tied to the underlying gains seen in the population. Now, there does remain some room for further improvements as the employment rates were higher back in 1999 and 2000, or the peak of the technology-led expansion. Regaining such employment rates would keep Oregon’s job growth stronger, for longer, and mark further economic improvements. However, even regaining the 2000 rates of employment would not likely alter our baseline forecast too much given the aging demographics, increasing retirements, slowing migration patterns and the like. That said, economically, we would love to see further gains in EPOP and as the expansion continues, we likely will to some degree.

Previously, our office dug into 3 potential pools of underutilized workers which should they return to the workforce in greater numbers, would push Oregon job growth rates higher. These groups include: teenagers, stay-at-home moms, and those with self-reported disabilities.

Second, population growth, and migration specifically, slows in a mature expansion. People follow the jobs. 60% of new Oregon residents say they moved here for a job or in search of work. So as job growth slows, so too will migration. This slowdown has been built into our office’s forecast for some time now. However the exact year-to-year changes can be noisy and hard to predict. Overall our office’s population forecast has been raised relative to a few years ago due to stronger-than-expected migration in 2016 and 2017. That said, population growth in 2018 was a noticeable step down relative to recent years. A sharper deceleration than expected. But what is very clear in the data is how widespread this slowdown was last year. (Note the following charts are based on data from our friends at Portland State’s Population Research Center, who provide the official state estimates between each decennial Census. The Census Bureau has its own set of Oregon estimates.)

Slower gains were seen across age groups. The exception being older cohorts for the most part which is about Baby Boomers aging from their 50s into their 60s and 70s, and not about retiree migration which is small. Also, the number of children in Oregon is largely holding steady or declining somewhat. As promised before, I will come back to the birthrate issue at some point in the near future.

The slower population growth was also seen across all regions of the state. Even Bend is slowing some.

Additionally, given that underlying working-age population growth is a key determinant in labor supply and the economic outlook, our office recently dug into expectations for county level growth in the 2020s.

Bottom Line: Job growth in Oregon has been slowing down to more sustainable rates in recent years and is expected to continue to do so. Eventually, once all of the slack is gone from the economy, job growth will match population gains. This has been the nature of our outlook for some time. The tricky part is figuring out how long and to what degree this transition takes place. There is still room to run for this economic expansion and the longer it lasts the more progress we should see. Our office will release a new forecast next Wednesday and this, being the May forecast in an odd year, will also set the revenue bar for the 2019-21 BN budget and form the basis of any future kicker calculations.


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