Oregon Office of Economic Analysis

Last week the Census Bureau gave Oregon a lump of coal*, I mean they released the 2022 population estimates for the nation and states. We need to talk about it. Consider this post a down payment, with future installments to come as we get more data and have more time to reflect on what it may mean.

First, there are two sets of population estimates for Oregon. Our friends at Portland State’s Population Research Center are the official arbiter of Oregon population estimates for the years between the big decennial censuses (so-called intercensal years). Top line figures are usually released in mid-November. The Census Bureau also produces population estimates for the entire country. State data is usually released in December with cities/counties/metros a couple months later. PSU provides a local, accessible set of numbers in a more timely and granular way. Census provides nationwide numbers using a consistent methodology so can more readily compare across areas. Both estimates have value, even if the PSU ones take precedent in terms of official and policy use in the state.

It’s important to keep in mind that at a big picture level, both estimates are in agreement at Oregon’s population is not growing quickly. The slowdown is coming from all the major components of growth including fewer births, more deaths, and less net migration. If there were any lingering questions about whether Oregon saw a pandemic-related migration boom to the state, those are now long gone. (I see this crop up in conversation quite a bit.) When we turn from the big picture to the specifics, we see clear differences in the sets of estimates. Portland State estimates show slowing, yet positive growth. Census estimates show a sharper slowdown with outright population losses in 2022.

I’m including our latest forecast in the chart about for a few reasons. One, our office’s job is to forecast the state economy and revenues. Population growth is vital to our economic trajectory as it allows local firms to grow and expand at a faster pace. Two, it also shows the subdued outlook our office already had for future population growth. Now, this outlook has been revised down relative to our pre-pandemic expectations, but even prior to the latest data release the outlook was much milder than I think the conventional wisdom realized.

Naturally the questions that follow are things like “what does the slowdown or even population losses mean?” and “how can you forecast a rebound in growth?” And as I led off with, consider this a down payment on the discussion.

As laid out a few months ago ahead of the data, our expectations were for a rebound in population growth in 2022. The reasons were twofold. Migration to Oregon is pro-cyclical. As the economy rebounds, migration has historically followed. The number of surrendered driver licenses at Oregon DMVs is running at a higher level than pre-pandemic, pointing toward a rebound of inbound migration to the state. Those conditions still exist today. So why the continued slowdown or even population losses? That’s hard to answer today. Here is a list that begs more questions than provides answers.

First, 2022 population estimates are a July 1st, 2022 number. The year-over-year change is from July 1st, 2021 to July 1st, 2022. That’s still a time period that was impacted by the fallout and recovery from the pandemic. As I wrote the other month, I’d really like to know the 2023 numbers to get a better gauge on what is more of a temporary disruption versus a fundamental shift. We don’t have that luxury of course, but there is a chance this is a factor.

Second, how much of this is driven by working from home (WFH) and/or housing affordability? Oregon has long been a national leader in WFH but we have among the worst housing affordability. When workers needed to have easier/more direct access to employers for occasional meetings, staying on the West Coast may have made more sense. Now, with more freedom to live anywhere and fewer requirements for in-person work or meetings, moving to a more affordable location is easier. At least this applies to the 1/3 of workers who can WFH and not to the 2/3 of workers who have to go into a place of business to cook a meal, provide care, or swing a hammer. I’ll have more on WFH soon as I’ve been digging into the ACS data.

Third, how much of this decline is driven by [insert favorite talking point here]? As I mentioned previous a lot has been made about the relative slowdown or losses in blue states with a corresponding increase in red states. As of the 2021 data it was very much an urban-suburban-rural dynamic rather than a red state-blue state dynamic. How does the 2022 data shake out when we get it in March from Census? The PSU estimates show the weakness is in Multnomah. I’m curious to see if the Census estimates think that weakness from urban cores has spread, or if it remains the urban-suburban-rural dynamic. The fact that Oregon’s largest metro area’s fastest growing suburb also happens to be located in a different state complicates our numbers more than in other states. But if the slowdown and population weakness has spread beyond the urban core, then I’d be much more pessimistic about the outlook. To the extent we are still seeing the fallout from the pandemic, WFH, and urban core issues then it’s a little easier to identify and address rather than a general, societal shift in preferences of where people want to live.

Fourth, along these lines why do people move? Well, at least pre-pandemic it’s important to remember that hardly anybody moves. Most people do not move, and if they do happen to move they do not move very far. A key reason is family, and ties to a community. An issue here for Oregon is our low birthrate, which both contributes to slower population growth and literally can mean less familial ties, or fewer reasons to stay or move here. Washington saw negative domestic migration in 2022 as well according to Census, but their higher birthrate was enough to offset those losses and see an overall population increase. Oregon does not have that demographic luxury.

For those who do move, they tend to move for jobs and housing. Jobs are plentiful today and our average wages are rising much faster than the nation’s. But the labor market is tight everywhere and it’s easier today to find a job pretty much anywhere than it was last decade. That likely erodes some of Oregon’s relative attractiveness, while housing affordability is a hinderance at best, or an outright repellent at worst. All of this matters, but so do broader societal preferences on where people want to live, which are in part driven by those fundamentals but also squishier subjects like quality of life, or [insert favorite talking point here]. And it doesn’t even have to be that Oregon is deteriorating or whatever, but even a relative shift in people believing better opportunities lie elsewhere could results in slower population gains locally.

Fifth, one area needed for more research and analysis is on the composition of the changes in the population. Are we seeing continuations of the household formation boom that offsets the slow-growing population in the housing market? Is the slowdown due to prime working-age population trends, or more about families and/or retirees? Given the traditional economic data on jobs, income, and sales it’s hard to see a fundamental shift in the working-age population. And some work I had been doing prior to the new estimates being released show that younger adults were still moving to Oregon on net during the pandemic, across all levels of educational attainment. Did this change in 2022? Or is the continued slowdown or losses more about families and retirees. Not that that would be good nor even a silver lining of sorts, it’s still an unpleasant conversation to have all the way around, but better understanding these changes is important.

Sixth, there are direct labor market impacts from slower population growth. It’s not necessarily about outright declines per se but rather smaller gains than anticipated. Comparing our office’s pre-pandemic forecast with current estimates from PSU shows 44,000 fewer neighbors today and at traditional LFPR for migrants there are 26,000 fewer workers today than expected. With current Census estimates the relative shortfalls are more like 84,000 fewer neighbors and 50,000 fewer workers than expected that firms could hire.

These are real impacts relative to expectations, even if they are not about outright declines. And should population growth remain subdued and not rebound, these relative changes would have a big impact on the trajectory of the state’s economy and associated tax revenues. That’s ultimately why our office is so focused on it. Overall economists believe incentives matter, and people vote with their feet. Right now, at least during the pandemic and its immediate aftermath, fewer people are choosing to live here relative to historical patterns.

*H/T to Tom Cusack on Twitter for the lump of coal analogy