Oregon Office of Economic Analysis

This morning our friends at the Oregon Employment Department released the June 2020 employment report. The data continues to show about as good of economic readings as one could hope for. Yes, the economy remains in a deep hole. However about 1 in 3 jobs lost earlier in the pandemic have now been regained. Similarly, the unemployment rate continues to fall and is about one-third of the way back down to where it was pre-COVID. This is all good news.

The key issue is trying to decipher what it means moving forward. Monthly data like employment, but also household income and consumer spending at the U.S. level, is traditionally the gold standard for high-quality, timely data. But given how fast events are moving, even monthly data may feel a bit backward looking today.

The reason I bring this up is that it is clear the economy continued to do better than expected a month ago, but whether that progress and the recovery continued at the same pace since then is a bit up the air. COVID cases are rising (and not just due to more testing) and some consumer indicators are leveling off in recent weeks. Keep in mind that this remains a public health crisis. There is no trade off between the economy and the virus. And then if we layer on the potential fiscal cliff impacts of federal assistance to firms and workers going away, it can be hard to know how much the June data really tells us about where the economy will be in a month, let alone the end of the year.

That said, I wanted to provide a few updates to some items our office is tracking. On the economic side of things, the key remains how much of the temporary pain we have experienced turns permanent. The more firms that close or the more laid off workers who aren’t recalled the slower, and harder the overall recovery will be.

The first chart is an update our of standard comparison of recessions in Oregon. The current cycle does not look like past recessions given the sudden nature stop of economic activity due to the pandemic.

The second chart really shows what is going on here. There are a handful of sectors that are most impacted by social distancing. They experienced larger job losses due to the pandemic, and as social distancing restrictions lifted in recent months, workers are being recalled. These sectors account for about 45% of employment overall, so their rebound really drive statewide gains. Most of the industries aren’t a surprise, although I would say construction is. I will have more thoughts on construction in a couple of weeks, but wanted to note it too is a rebounding sector in the past couple of months.

Now, all other industries in the state have seen sizable job losses and no real rebound as of June. I’m not trying to cherry pick the data here and have some gains and losses offset each other. When it comes to natural resources, manufacturing, government, transportation and warehousing, professional and business services and so forth, there really hasn’t been much rebound, if at all.

This distinction between the cyclical rebounds as social distancing lifted, and broader trends in other sectors of the economy is a key issue to watch moving forward. Does the rebound stall out as consumers pull back due to the pandemic? Do the other sectors start to grow again? Or does ongoing economic weakness spill over and these other industries start to see more layoffs in the near future?

Similarly a key distinction for the recovery is gauging the impact of temporarily laid off unemployed workers versus a more fundamental increase in unemployment due to permanent layoffs and businesses hiring less overall. The last chart today updates a new measure pioneered by Jed Kolko and discussed more in depth last month. A huge thank you to Tracy Morrissette over at the Oregon Employment Department for his great work digging into the detailed data so we can get this Oregon specific look.

In short what the core unemployment rate does is strip out those temporarily laid off from their jobs to get a better gauge of permanent damage. Here in Oregon we have seen the core rate rise around 1 percentage point, but hold steady the past couple of month. So far the data indicates the vast majority of the changes in the headline unemployment rate are due to temporary layoffs and some of those workers being recalled. The fact we are not, or at least not yet, seeing a big rise in the core unemployment rate is another good economic indicator.

Bottom Line: Oregon’s labor market looked to be as good as one could hope for in June. Growth is driven by workers being recalled to their jobs as social distancing restrictions lifted and the pandemic looked to be improving. However given the uptick in new COVID-19 cases, and the uncertainty surrounding federal aid to businesses and households, there remains considerable uncertainty surrounding the overall economic outlook.