Oregon Office of Economic Analysis

Over the past year our office has developed a demographic alternative scenario to assess the state’s economy and public revenues should migration not rebound as expected in the years ahead. We included a preliminary assessment of the economic impacts back in our May 2023 forecast document. We continued to work on it and to incorporate the expected impacts on state revenues. This full-fledged scenario was included in our December 2023 forecast. We also discussed this with the Legislature at our forecast release. You can watch that discussion here (starts at the 52:55 mark and goes for about 30 minutes). The Executive Summary is copied below, with the full report linked at the bottom.

Population growth is the main reason Oregon’s economy outperforms the typical state over time. The influx of young, working-age residents allows local businesses to hire and expand at a faster rate. During the pandemic, population growth in Oregon slowed as it typically does during recessions, but so far in expansion it has not picked up. In fact, the Census Bureau estimates Oregon lost population in 2022 and 2023. These are the first estimated losses in nearly 40 years. And would be only the fourth and fifth losses since World War II.

Our office’s baseline forecast calls for a modest rebound in migration and population growth in the years ahead. Oregon is still an attractive, scenic place to live and there are plentiful job opportunities. However, Oregon must be open to the possibility that even a modest rebound in migration may not materialize in the years ahead. The pandemic may be a structural break point from an historical perspective, even if it will take a few years to fully realize it. Over the past year our office has developed a Zero Migration, demographic alternative scenario to scope out the potential changes the lack of migration will have on the state’s population, economy, and public revenues. For now it remains just that, an alternative scenario. It will take time to gather the complete data, and to assess future expectations.

In a Zero Migration scenario, Oregon will not change overnight. Each year, the relatively small differences between no net migration, and the modest rebound in the baseline may be hard to see. However, these seemingly small differences do accumulate over time. A decade from today, the state’s population would be outright smaller than it is today. The labor force likely would be smaller as well. Local businesses will have significant difficulty finding workers. That said, with increased participation rates among existing Oregonians, particularly those that help reduce historical disparities, the labor force could continue to increase even as the working-age population declines.

Even so, the state’s economy will not crater. Rather, Oregon would be on a slower growth trajectory. In terms of personal income, consumer spending, and public revenues, those will not decline outright. This is due to ongoing wage and income gains for existing residents, in part due to inflation, and also due to rising asset values over time. That said, the cumulative difference between the baseline outlook and the Zero Migration scenario does add up. Over the decade ahead, state revenues are expected to be $8.6 billion (-4%) below the baseline.

Such an impact is certainly large, and would require future budgetary adjustments. However, it is not insurmountable either when considering a smaller population will also have less demand on certain public services. One reason why the Zero Migration scenario impacts may be less severe than our office initially feared is that the baseline outlook is already weak from an historical perspective. Removing modest population gains has less of an impact than if the baseline called for strong growth. A second reason is the rising, nominal incomes and taxes paid. A third reason is timing. Our office produces a 10 year forecast. And in the first decade, the largest changes would be among younger populations. Oregonians in the late 40s through early 60s have the highest incomes and tax bills, suggesting the Zero Migration impacts would be larger in the second and third decades than in the first.

Full Report: