Oregon Office of Economic Analysis

While the macro outlook is more uncertain today, one item our office has tried to highlight is that current economic conditions are pretty good. The share of prime working-age Americans and Oregonians is relatively high and wages are rising. Importantly, consumers will continue to spend until given a reason to be scared, which usually means job losses or the specter of job losses. As the labor market marches on, so too does spending and the overall economy even as storm clouds gather on the horizon.

Here in Oregon, these labor market improvements have outpaced the nation during the current expansion. Most encouraging are local wage gains. Today, Oregon’s average wage is at 94% of the U.S. average. This is the highest relative position Oregon has seen since the height of the timber industry in the late 1970s, when Oregon was 96% of the U.S. average. During our most recent forecast release, the discussion on this centered around how widespread these gains have been and whether they are keeping up with the cost of living.

To help flesh out these points, I pulled nationwide county wage data from 2014 to 2018 (the most recent full year). I chose 2014 in part because I wanted to look at wages since rural Oregon began adding jobs, which was around 2013 for most counties. The map below looks at annual wage gains across the country, broken down into quintiles. A few things stand out. First, one thing the map clearly shows is the oil crash that started in late 2014. Mining regions and the oil patch of the U.S. saw wage losses or minimal gains (lightest shading). Second, wage growth along the Left Coast has been particularly strong, outpacing the nation throughout the region. Third, similar gains are seen in the heartland and patches of the south.

Importantly, as shown in the map above and the graph below, stronger wage gains are seen across the entire state of Oregon. Most counties are above the U.S. average and those that are not, are not far behind. There are no stragglers in Oregon in recent years. These gains outpace inflation as well, meaning real, or inflation-adjusted wages are rising statewide. More on this in a minute.

Now, why are wages rising? It could be that Oregon, or a specific area is adding a lot of high-wage jobs which drives the average higher, while current workers see few gains. Or the state could be adding lots of jobs in high-wage counties, while the rest of the state sees minimal improvements. These types of compositional shifts could mask underlying weakness or overstate growth.

Fortunately this is not the case. At the statewide level, neither the shift in industrial structure nor the regional composition of jobs impact Oregon wage growth in recent years. At the county level, industrial shifts matter more but are not the biggest source of wage gains. Take Hood River for example. The county is leading the way in recent years, but every industry is seeing gains. In decomposing the Hood River wage growth, I find that 92% of the gains are due to higher wages in all sectors, while 8% of the gains are due to the county adding a lot of jobs in high-wage industries. In Wasco, I find the split to be more like 95/5. Morrow’s wage growth is entirely due to broad-based gains as the industrial shifts actually weigh on growth (possibly due to the winding down of construction projects).

Overall, this is highly encouraging. Workers in every industry and in every county are seeing wage gains. These gains are all outpacing the Federal Reserve’s preferred measure of inflation (personal consumer expenditure, or PCE) and are meeting or exceeding the more commonly used measure of inflation (consumer price index, or CPI).

Sadly, Oregon lost its own inflation measure as BLS dropped the Portland-Salem CPI in 2018. This past legislative session, HB 2118 standardized inflation calculations throughout state laws to switch from the old Portland-Salem CPI to the West Region All Items CPI. Our office’s forecast now includes the West CPI in our models and tables.

To help put local wage growth in perspective relative to inflation, the last chart shows annual percent changes in the different components of inflation. Wages have increased faster than inflation, but the pattern varies across categories. Obviously the big one is housing, which has outpaced wage gains. However every other component of the CPI basket has increased at a substantially slower pace. In particular, tame food and energy costs hold down overall price increases.

Stay tuned for more on household finances in the coming weeks.