Oregon Office of Economic Analysis

The public health situation continues to evolve in recent days. Equity and bond markets are dropping, signaling elevated concerns, to say the least. Here at home Governor Brown declared a public health emergency over the weekend, which helps fund state health programs and bring additional health care professionals into the fold.

As our office noted last week, the health care system is likely to be stressed. While the industry has grown quite a bit in recent decades, much of those gains are simply keeping pace with population. According to data from the Kaiser Family Foundation, hospital beds per 1,000 residents has fallen by 20% in the past two decade across the country and here in Oregon. Total health care capacity is up, but relative capacity maybe hasn’t increased all that much. Now, from an industry efficiency perspective, this is likely good news. To the extent this means more individuals are being kept out of hospitals and being treated by primary care physicians, then it would be a big public health policy win. That said, in a pandemic where the caring capacity of the system may be put to the test, it is one potential limiting factor.

Update: This chart highlights changes in health care capacity relative to population growth since 2000. The total number of health workers in Oregon has risen faster than population, however it is largely keeping in-line with growth among the older population.

In recent days our office has been thinking more about the economic fallout from the virus. We have been digging into workforce and Census data to get a better gauge of how we, as Oregonians, live and how we work. What follows are some rough cuts of the data and how we are currently thinking through some of the implications. Of course we are not medical professionals. We are not offering medical advice, nor are we sharing this Census data to be alarmist. We are trying to wrap our heads around the potential demographic and economic data and are sharing it here for those interested.

First, we know that humans are social animals. Our ability to work together is one of our greatest strengths. It helped us run mammoths and buffaloes off of cliffs to survive. More recently the agglomeration effects of regional economies propel growth and increases in living standards. However, by building communal networks, it does put us in close proximity to one another. While this is greatly beneficial as a species, it can be problematic when facing a pandemic.

This first table takes a rough cut to gauge how many Oregonians live in close proximity to others. The answer is about 1 in 3 of us do, or about 1.3 million Oregonians. How I come up with this estimate is I included everyone living in what are called Group Quarters (dorms, nursing homes, prisons, etc) where individuals have very little personal space. Next, I included everyone living in medium or large apartment complexes, where interactions with neighbors are more common. After that I added in everyone enrolled in school who was not already counted. Again, this is a rough cut. Your mileage may vary. I think this probably represents a reasonable lower bound on Oregonians living in close proximity.

Second, if someone in your household becomes sick, one precaution some medical professionals have recommended is to isolate them within your home the best you can. Ideally this would include having their own room to rest/sleep and their own bathroom to use. This should reduce contagion. But of course not everyone has a spare bedroom or an extra bathroom. Combining American Community Survey data with American Housing Survey data, we’re able to look at these types of situations in the Portland MSA.

The next table estimates what I am calling cramped quarters living in Portland. What I am trying to estimate is how many people would struggle to isolate someone in their own room and also only have one bathroom. My quick definitions here are really if the number of household members outnumbers bedrooms by 2 or more. As an example, a household of 4 living in a 3 bedroom unit does not count. That could easily be parents sharing a room and one kid in each other bedroom. However a household of 5 living in a 3 bedroom unit would likely struggle more to isolate an ill member of the household.

All told, the data show that nearly half a million Portland area residents live in a situation described above, or about 20% of the total population. Next, we layer on the fact that 30% of all housing units in the Portland region only have one bathroom, although this varies by unit size of course. When combined, the data indicates that about 125,000 Portland area residents live in cramped quarters, where they would be unable to successfully isolate a sick member of their household. All told this is about 3% of all households or 5% of the overall population.

Next we’ll take a few looks at the economy and workforce.

Initially, we were focusing almost entirely on the supply side impacts of COVID-19 back in late January and early February. The disruptions to global supply chains are big due to the outbreak and shutdowns in China. However as the situation evolves, economists are increasingly worried about the demand side implications as well. This is one reason the Federal Reserve acted between meetings last week, and may well act again this month.

The main issue here is that the consumer has been key to economic growth in recent years as the trade war zapped the manufacturing industry. So if consumers pull back on spending out of fear, then growth would slow even further. To the extent they cancel vacations, go out to eat less, and really avoid anything with large crowds — these are all part of what is generally called social distancing — then sales drop for these types of firms, and paychecks shrink for these workers. Typically households spent so long as they are confident and much of that confidence is driven by jobs and income. However, should incomes weaken and job prospects dim due to lower consumer spending, there is a chance a negative, recessionary cycle ensues.

Two related notes. Obviously recommendations are that if a worker is sick, they should not go into work to help prevent contagion. Similarly folks should work from home to help prevent contagion. The problem here for the workforce is these are easier said then done.

For instance, in the table below I have tried to highlight in yellow some of the fringe benefits that are most applicable to workers staying home. This comes from the good survey work our friends over at the Oregon Employment Department have done in recent years. Many firms simply do not offer time off, either paid or unpaid, and rarely do they offer telecommuting. Rightly or wrongly, all of this does make it harder for employees to not go into work. This is obviously something to track as the health situation evolves and to see how employers respond.

As you can see at the bottom of the table, these time off benefits can vary greatly across different industries. It’s these variations that are important to keep in mind. As our office noted last week, it will likely be the service workers who bear the brunt of the slowdown in consumer spending as their shifts are potentially cut or reduced.

UPDATE: I have simplified the following chart to better drive home the point. Instead of looking at all 22 occupational groups, the updated chart groups the occupations as we do in the job polarization research.

The final chart below shows Oregon workers by occupation and just how many of them actually work from home. (See our office’s previous work for more.) All told, about 7% of Oregon’s workforce currently works from home, meaning just over 100,000 workers of so, out of nearly 2 million. Now, BLS surveys show that about 30% of workers nationwide can work from home. However the variations across occupational or income groups, largely based on educational attainment are notable at the same time. Simply put, the vast majority of the workforce cannot work remotely. Their jobs require operating machines in specific locations, interacting with customers at a given facility, or the like. There are only so many data monkeys like myself who can crunch numbers pretty much anywhere with an internet connection.

Bottom Line: Humans are social creatures. Our ability to build community is inherently valuable. However even our greatest strengths are not without weaknesses. About 1 in 3 Oregonians live in close proximity, while about 1 in 20 would be unable to isolate an ill member of their household should they need to. Combine these facts with a workforce that largely needs to be in a specific location to earn money, with benefits and protections that may be lacking, and it’s easy to see downside risks emerge. This is one reason why it is important — socially and economically — to make sure we are taking necessary precautions if we do become sick. It is still too soon to know any potential economic fallout of COVID-19. The backward looking economic data all still looks good. Initial claims for unemployment insurance in Oregon are still at or near record lows with data available through February 22nd.

Finally, federal stimulus policies are being debated in terms of supporting workers and firms. We shall see how that plays out. Here in Oregon, there is one silver lining today. The state is currently distributing a $1.7 billion kicker this tax filing season. As a form of stimulus it is only timely by happenstance, and not particularly targeted at those likely to be most in need. Remember this kicker was 3 years in the making, and is paid out proportionately based on tax liability. Households in the bottom half of the distribution will receive a couple hundred dollars at most. Even so, the kicker credits should help support consumer spending, and to the extent they are saved, improve household liquidity in these uncertain times.

Our office’s next forecast is scheduled for May 20th. At that time we will have another couple months of economic data plus public health updates that we will incorporate into the economic and revenue outlook. Until then our office will continue to monitor the data and look for impacts.