Posted by: Josh Lehner | July 8, 2022

Update on State Economies

Happy Friday everyone. Just a quick update on the economic recoveries across the country and how Oregon stacks up. We know that Oregon suffered a pretty typical recession compared to other states, whereas we normally are more volatile when we look across recessions historically. One question was if we did not see a larger than average recession this time, would we still experience the typical stronger expansion or would Oregon be more in-line with the rest of the states. The jury is still out on that, but we are starting to get more data to do a proper comparison.

Right now, it’s clear that Oregon’s labor market recovery is right in-line with the typical state. As of the first quarter, Oregon’s payroll employment was 1.8 percent below pre-pandemic peaks. Oregon’s recovery ranks 28th highest across all states and DC. Numerically this is two tenths of a percent below the median. With the slowdown in population growth and the fact Oregon was a two shutdown state due to public health policies — which did achieve better health outcomes — this should not be unexpected as of today. Our office’s expectations are that as population growth rebounds this year and next, Oregon’s relative employment performance should improve in the years ahead.

Turning to economic output — or in the case of state GDP it is officially a value-added measure — Oregon fares a bit better than most states. Today, Oregon’s state GDP stands 3.2% above the pre-pandemic peak after accounting for inflation. This ranks 18th highest across all states and DC.

Lastly, but most importantly for all of our pocketbooks, Oregon’s personal income growth shows the strongest relative performance across these high level metrics. Today personal income in the state is 15% above where it was prior to the start of the pandemic. This ranks 15th highest across all states and DC. Oregon’s income growth continues to be above average and is translating into higher wages for workers, and higher household incomes across the entire distribution.

The two main reasons Oregon’s economy has historically been more volatile than the typical state is due to migration and our industrial structure. These factors could be working in opposite directions moving forward, although we shall see. In terms of slowing, we know goods-producing industries are more sensitive to interest rates. As rates increase due to Fed policy trying to head off inflation, we could see a slowdown in construction, manufacturing, and natural resources. Our forecast is for very modest gains in these industries moving forward as a result. To the upside, population growth should be rebounding today and in the years ahead. This will provide a larger labor force for local businesses to hire and expand from, even as demographics make the labor market structurally tight. Over the long run, it’s really that faster population growth that drives Oregon’s faster economic performance. We will get 2022 population estimates from Portland State in November, and from Census in December.

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