Oregon Office of Economic Analysis

Yesterday our friends over at the Oregon Employment Department released the latest jobs report. As I touched on the other day when the national data came out, it’s not good. We ended a bad year on a bad note. That said, the underlying dynamics are about what one would expect. The resurgent virus in the fall and into winter lead to consumers pulling back out of fear, and to another round of restrictive public health policies. The decline in employment in December is basically all in Leisure and Hospitality. Construction and manufacturing lost a few jobs, but are essentially flat. But all other major sectors from retail to finance to professional and business services to health care are all up. It’s not great to lose jobs during a recovery, but the report is not as terrible as the topline numbers would indicate. January will likely be more of the same given the virus-health policies-consumer fear dynamics are largely unchanged.

The key from a macroeconomic perspective is to look through this temporary malaise. Not only is there a lot of pent-up demand and excess household savings, but their is a second major federal relief packages passed just weeks ago. So while losing your job is never fun, nor good from a macro level, there is at least the extra $300 per week in unemployment insurance benefits and an extension of both PUA and PEUC as well. That will cushion this setback. Growth will return as new cases and hospitalizations continue to fall and vaccinations rise. Remember, this cycle is different. Both in the nature or cause of the recession, and in terms of federal policies. Now, on to a few charts.

First, here is a comparison of recessions in recent decades. We currently remain in about as deep a jobs hole as we’ve ever seen. Such a large setback during a recovery is pretty rare. In fact the only real examples we have seen are when there has been a double-dip recession like in the early 1980s (technically 2 separate recessions nationally, but really one long double-dip in Oregon) and following the dotcom crash. Of course the income story is different than the jobs story, due to the federal aid.

Second, when looking at employment across sectors based on wages, it is clear that the recent setback is in the low-wage industries. Middle- and high-wage industries are holding steady or growing every so slightly in recent months on net. The K-shaped cycle continues, at least until the pandemic is over.

Finally, I’m bringing back the core unemployment rate concept chart. Overall the tick up in the headline unemployment rate is due to an increase in temoporary layoffs, similar to what we went through back in the spring. On the better-than-feared news front, the core unemployment rate is holding steady in recent months. Now, the absolute number of Oregonians on permanent layoff or that are marginally attached (have looked for work in the past year but have recently dropped out of the labor force) are rising, which is never good. However when measured as a share of the labor market, it’s holding steady. Nearly a year into this cycle, it looks like there is “only” a few percentage points of pain that needs to be made up, despite the record highs set back in the spring. A key concern has been the amount of permanent damage, or economic scarring that occurs. So far it continues to be much less than feared.

Our office is currently working on the next forecast, which is scheduled to be released Wednesday February 24th at 1 p.m. Note the time change, to align with the revenue committee’s regularly scheduled hearings.