Oregon Office of Economic Analysis

Between the mill closure in Coos Bay, downsizing in Forest Grove, and the lively cap and trade discussions, there has been a renewed interest and focus on the timber industry in Oregon. Our office has fielded nearly a dozen requests recently to speak about the industry, historical changes and the outlook. As such, I have fully updated and expanded our office’s Historical Look at Oregon’s Wood Products Industry which we originally published in 2012 and last updated a couple years ago. See those posts for a more complete summary of the industry’s history. An updated full set of slides are at the bottom of this post, but first I wanted to re-up some work that we have touched on a few times over the years.

There’s no question that the loss of good-paying jobs has a big, negative impact on a regional economy. The question is what comes next? The answer depends.

First at the statewide level, Oregon has seen the Changing of the Guard where the high-tech industry has essentially offset the decline of the timber industry. This is good news for Oregon as a whole and many other places around the country that experienced large manufacturing losses did not have something like this to help balance out their economies.

But we know that even if these trends offset at the statewide level they certainly did not at the regional level or for individual workers. In the 1970s, timber was important statewide but particularly so outside of the Portland region. Even so, Portland had a timber concentration two and a half times the national average, but Lane County’s was closer to 20 times and Douglas was 40 times the national average. Timber accounted for 20-30% or more of all jobs in most eastern and southern counties. Fast forward to today where the geographic distribution of high-tech jobs is very different. Nearly 80% of tech jobs today in Oregon are in the tri-county Portland area.

If not tech, what? As discussed before, many consultant studies point toward health care and tourism as growth opportunities for rural communities and those who have lost manufacturing jobs. This does work for some locations but, unfortunately, the successes are not necessarily replicable everywhere due to differences in scenic amenities, logistics, etc and due to the clustering of more advanced medical care in larger population centers. If the neighboring city gets a Level I trauma center, chances are you will not due to the close proximity.

Even so, travel-related industries and health care are growing in most locations due to Americans going out to eat more and an aging population. But these jobs are not always a 1:1 replacement, particularly in terms of wages and skills. As detailed before, the changes we’ve seen among working-age Oregonians without a college degree over the past generation are not good. If we look at the employment situation and how that has changed, a few such Oregonians were able to enter into a high-wage jobs, but the vast majority either ended up in a low-wage job or out of the workforce entirely. Now, a tight labor market today is pulling workers back in, so the situation is improving and not deteriorating every year, but the big picture shifts remain.

Regarding travel and tourism I would draw a distinction as best one can between travel/tourism and outdoor recreation. The former is really about providing services and meeting the needs of people visiting an area. This includes renting bikes, putting roofs over their heads, and feeding them. The economy is naturally creating a lot of these jobs due to Americans traveling and going out to eat.

However outdoor recreation is, for lack of a better description, a more classic business sector that just happens to focus its products and services on customers for outdoor activities. When it comes to insulated bottles, vehicle mounted tents, and the like they are your classic traded sector manufacturing items which can be sold across the country and around the world. The distinguishing line can be fuzzy but I do tend to think about them a bit differently in terms of the nature of the work performed, the local economic impact, and the outlook.

Lastly, the good news for the Timber Belt is that even though it suffered an economic shock on par with what the Rust Belt experienced, people did not pack up and leave in search of better opportunities. Now, some did and Oregon lost population in the early 1980s, but overall this has not been the case. This influx of new residents is good news. People are voting with their feet, saying they want to live in our communities. This also helps support the local economy. For example, while the decline in manufacturing and farm (think forestry here) jobs as a share was comparable, total employment in the Timber Belt has increased more than twice as much as total employment in the Rust Belt over the past generation or two. This is in no small part due to the population gains.

Now these employment gains overall are not always a direct replacement for the lost jobs. And as detailed in our recent look at industrial diversification, part of the reason Oregon’s industrial structure is changing is not just the good growth in new industries, but also the losses in some of our historical strengths. This will have implications for future business cycles here in Oregon and when coupled with local demographics, implications for the different regions with the state as well.

In terms of the outlook, our baseline is for stability and just a little bit of growth as the housing market improves. This stability is expected until something changes, be it a recession, higher harvest levels or the like. I think it’s clear that if we cut more trees, we’d get more jobs. However even if we saw 1970s harvest levels again, we wouldn’t see 1970s employment due to automation and mechanization within the industry.