Oregon Office of Economic Analysis

This morning we got the July 2020 jobs report from our friends at the Employment Department. July brought another good month in terms of adding jobs and unemployment declining. The recovery still looks good as of last month, even if the pace of the recovery did slow some from May and June. Even so the economy remains in a deep hole. The current state of the labor market in Oregon is about as bad as it was at the worst of the Great Recession. The data is no longer apocalyptic, or nearly so. It’s just really bad.

One silver lining continues to be that much of the job loss and corresponding increase in unemployment still looks to be temporary in nature. Or at least that’s how it’s showing up in the survey data. Oregon’s headline unemployment rate has dropped more than 4 percentage points since April. That means it is about 40 percent of the way back to where it was pre-COVID. That said, Oregon’s core unemployment rate ticked up a bit in July. This measure excludes those on temporary layoff and includes folks who have recently given up looking for work. July’s increase is one indication that the amount of permanent damage, while still relatively small, isn’t seeing improvements like the headline rate suggests.

*As always, 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 look at core unemployment in Oregon. Thanks Tracy!

Over on Twitter dot com, Jed Kolko — Indeed’s chief economist and creator of the core unemployment rate concept — notes there are some big differences in changes in the headline vs core unemployment rates across different groups. Specifically Jed finds that while the headline unemployment rate increased the most for those with lower levels of educational attainment, the core unemployment rate has increased the most for college graduates.

That brings us to the industry pattern of employment we are seeing here in Oregon.

We knew the recession would hit a lot of the service sector the hardest, given the shelter in place style policies and social distancing. These industries — bars, restaurants, hotels, nail salons, gyms, some forms of retail, etc — tend to be lower-wage sectors. As the economy reopened and households and businesses grew more comfortable and confident, some portion of these lost jobs would come back relatively quickly. After that our office thought we would see slower growth until the pandemic is managed and brought under control. That’s the underlying nature of the Square Root Recovery. Our biggest concerns have been on the amount of economic damage that builds up in the form of business closures and permanent layoffs.

Keep in mind that we are still only a few months into this cycle. The data is still preliminary and has not been benchmarked. But so far it is clear that the lower-wage sectors have borne the brunt of the recession to date. It is also among these sectors where the rebound in growth is occurring, as expected.

On the other hand, middle- and high-wage sectors have seen sizable declines in employment and no real rebounds. Make no mistake. While the job losses in these industries are not as severe as those among the low-wage sectors, they are still quite large. Look at the first chart above. Job loss of 5% or so is worse than Oregon experienced in the 1973, 1990, and 2001 recessions. What is a bit more concerning is the lack of growth in recent months. It is still early and this is preliminary data. However this could be one aspect of that permanent damage we are concerned about. And it speaks directly to Jed’s finding that the core unemployment rate has risen the most for college graduates, who tend to work in the higher-wage industries.

Bottom Line: Oregon’s economy continues to recover over the summer. Employment is up and unemployment is down. Overall the state has regained about 40% of it’s lost jobs due to COVID. The economy is doing noticeably better than expected. This is good news and what matters most today. And while I hate to be a bit of a downer, it does only take a little digging beneath the surface of the data to paint a potentially worrisome picture. When combined with the worse public health situation, and lapse in federal assistance, it makes the outlook uncertain. As always our office will continue to monitor the data. We are currently developing the next economic and revenue forecast, due out September 23rd, and meeting with out advisors in the near future to discuss.