Oregon Office of Economic Analysis

This morning the BEA released 2021q2 state estimates for personal income, which included some noticeable revisions which we’ll get into. As expected, incomes are down from the first quarter when the last of the recovery rebates was disbursed. However, incomes remain strong, and above pre-pandemic expectations even excluding the direct federal aid. Here is how our office wrote up the income situation in our latest forecast.

The primary reason for the strong economic outlook are household balance sheets. Consumers today have no shortage of firepower when it comes to their ability to spend, if they want to and/or feel safe enough doing so. Current incomes are higher than before the pandemic. Much of this increased income is thanks to direct federal aid. Here in Oregon, unemployment insurance has boosted incomes by more than $11 billion while the recovery rebates added nearly $13 billion. Combined this represents about an 11 percent boost to incomes in the state in the past 18 months. Federal policy has accomplished its job of keeping households above water during the pandemic. More encouragingly, underlying income that excludes the direct federal aid has not only recovered but has nearly regained its pre-pandemic trend.

Keen-eyed observers may notice that the 2020 cycle looks a tad weaker than in previous iterations of the chart. It is. A couple months ago the BEA incorporated the latest round of revisions at the U.S. level and they were negative. Those downward adjustments are now feeding through into the local data. What’s of note here is these adjustments are almost entirely to non-wage income, just as they were to the national data. Dividends, interest, and rent have been revised down over time, while nonfarm proprietors’ income over the 2018-2021 period. The proprietors’ revisions in particular are counter to the ongoing strength seen in Oregon business-related taxes paid. Both the traditional corporate and the pass-through revenues have been stronger than anticipated, especially during the pandemic. Given the BEA eventually uses tax returns to help benchmark the data over time, our office anticipates these income estimates will be revised higher in the years ahead, but for now this is where they stand. Note the gray, All Other line in the chart. This is the usual pattern you see in the BEA data where there are slight adjustments to the past couple years of data. Nothing really to note here other than both wages and unemployment insurance have been revised up somewhat.

Finally, any time there are revisions it’s important to check out they play out locally versus elsewhere around the country. By and large, Oregon’s income revisions match the patterns nationally. The big improvements Oregon has experienced in our relative incomes in the past decade remain intact. Over the past year, Oregon’s per capita personal income is 94.7% of the U.S., the highest positions we have seen since the mid-1990s. Oregon’s average wage is a bit stronger, standing at 96.1% of the U.S. This is effectively as strong as Oregon has ever been. The absolute peak in the relative wage data was 96.5%, reached one time in 1980 — really the 1979q2-1980q1 average — and never to be seen again as the bottom was about to fall out on the timber industry. With this in mind, I’m dusting off the following passage talking about these wage trends.

Oregon’s average wage, at least in the past 50 years, has always been below the national average wage. We took a huge step back during the 1980s when the timber industry restructured. Oregon lost 12% of its jobs in the early 80s recession, whereas we “only” lost 8.5% of our jobs in the Great Recession. During the technology-led expansion in the 1990s, we regained about half of the decline in average wages and that held steady for more than a decade. However, since the Great Recession Oregon’s wages have outpaced the nation’s by a considerable margin. Oregon’s average wage today is at it’s highest relative point in more than a generation. Or put differently, Oregon’s average wage today is at it’s highest relative point since the mills closed in the 1980s. Some of this is due to the fact the recovery in Oregon has been led by high-wage jobs, even to a larger extent that nationally has been the case. But this industry or occupational mix can only explain a portion of our relative wage gains. The bulk of Oregon’s improvement here is due to stronger wage gains within industries and occupations. This is great news.

Looking forward our office expects Oregon’s underlying incomes excluding the fading federal aid to continue to growth strongly, and to hold our relative position compared with the rest of the country.

Note for those interested in further reading, our office wrote a more detailed post on income, spending, and the outlook last quarter. Along with a look at how the federal aid muted the economic impact of job losses during the pandemic.