Oregon Office of Economic Analysis

Yesterday we got the September 2020 jobs report from our friends at the Employment Department. The topline numbers continue to be good, or at least probably good enough. The recovery is likely self-sustaining even as it slows as expected. That said, it doesn’t mean we’re out of the woods yet. There remains a Great Recession sized hole left to fill. And remember, the recovery from the Great Recession was self-sustaining too, it was just stuck in a low gear and we grinded our way out over the course of a decade. Our office expects this recovery to be faster, and more complete but that is largely predicated on limiting the amount of permanent damage in terms of business closures and layoffs until the pandemic is managed and brought under control, and a medical treatment of some sort becomes widely available by the middle of next year.

As we’ll get into more in the coming weeks, a few things are emerging in the data. First is there is a clear gap when it comes to employment among women and men. Second, now that we’re in the seventh month — how is it only been seven months? — of the pandemic, we are starting to see a rise in long-term unemployment, commonly defined as six months or longer. Third, the virus remains in control. Yes we are learning to grow around the virus and resume some activities. However large swaths of the economy cannot recover until the pandemic is over. This includes some sectors you may not fully expect, like local governments.

Overall, job growth was decent in September. The state added 5,100 jobs. Normally that’s about as strong as you would ever see, but today it represents a gain about 1/3 as big as Oregon saw in July and August. Overall the state has now regained 45% of its lost jobs. This truly does remain good news overall, even if the path forward isn’t well lit.

I’m switching up this first chart to include our office’s forecast. We fully expect growth to slow further in the months ahead. I suspect that some of the slowing in September is fire-related in terms of less economic activity due to many of our friends and neighbors being evacuated and the smoke keeping the rest of us indoors. Not so much as jobs were cut outright, but more in the sense Oregon saw somewhat fewer gains than the average state. If true, that relative slowing vis-a-vis the nation should reverse in the October data. Even so, its important to keep in mind that the baseline outlook calls for more slowing in the months ahead. That doesn’t mean the recovery is in jeopardy, even if it will feel that way. The combination of any seasonal component to the virus, plus the seasonal issues related to the colder, wetter months when we are forced indoors more, plus some hangover from the lapse in federal aid, and that underlying traditional recessionary dynamic will all weigh on growth in the months ahead. After that, growth should pick up and, again, provided the permanent damage is fairly minimal, the overall recovery will be faster.

One silver lining continues to be that much of the job loss and corresponding increase in unemployment still looks to be temporary. The headline unemployment rate is back down to 8.0% and the core unemployment rate — a measure of permanent layoffs and damage — ticked down as well, even as it continues to be somewhat elevated. This is the part of the recovery that will take the most time, even as many of those on temporary layoff continue to be recalled.

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!

Finally in a good news/bad news update, we continue to see a split in labor market outcomes. Low-wage industries suffered the most during the shelter in place phase of the cycle, given the sudden stop nature of the shutdown. It is here that much of the job growth in recent months is taking place. This is good news as those workers are brought back following temporary layoffs. The bad news is that middle-wage sectors are only seeing very modest gains and high-wage sectors are not seeing any growth in recent months. They may not have suffered as much to date, but they’re also not bouncing back. This is a concern and likely speaks to more permanent layoffs in these industries. Keep in mind that job losses of 5% are more severe than Oregon suffered in the 1973, 1990, and 2001 recessions. Further research shows that many of these layoffs in middle- and high-wage sectors appear to be lower-wage workers within those industries. But overall, the slowdown in the September data is very clear in the chart below.

All told, Oregon’s economy continues to recover and heal. Employment is up and unemployment is down. The recovery is likely self-sustaining but it is expected to slow in the months ahead. The virus itself and the amount of permanent damage that accumluates will determine the overall strength and duration of the cycle. Stay tuned for more next week on some of the issues related to the gender gap and local governments.