Oregon Office of Economic Analysis

This morning I am giving a presentation at the SOREDI State of the Rogue Valley breakfast. Below is a short summary of my remarks, followed by a copy of my slides.

The issues, risks, and trends in Southern Oregon are quite similar to the state overall. The differences that arise are more about relative magnitudes. But at the end of the day, the region has seen good overall economic growth, and great income gains. Local household incomes have outpaced inflation and matched or exceeded the typical metro area nationwide. The Medford metro area (Jackson County) in particular has seen stronger income growth than 90 percent of metro areas across the country.

Local growth is driven more by strong productivity than by labor or population. Like the state, the region has seen slower population gains or even losses in recent years, depending on the dataset used. (Note Census is set to release the 2023 county estimates in March.) From a demographic perspective, the Rogue Valley labor market is even more challenging. The regional population skews older than other metros in the state, and is similar to rural Oregon. That means as the large Baby Boomer generation retires, it is economically difficult to replace them due to younger generations being smaller, and migration not being as strong.

However, employment and the labor force have recovered and the outlook is picking up. The reason is this demographic churn in the labor market is mostly, although not completely, finished. About two-thirds of Baby Boomers living in the Rogue Valley are no longer working, and labor force participation and employment rates among younger age groups has increased. This means the working-age population is set to grow again in the near future, especially if the region sees a modest rebound in migration like is included in the county forecasts from Portland State’s Population Research Center.

The slowdown in the labor market is more than offset by stronger local productivity gains. Real GDP per worker in the Rogue Valley outpaces nearly 70 percent of all counties in the country. Stronger productivity gains are needed, and expected in the years ahead. Investment in the different types of capital, along with the economic diversity of the region is, ultimately, expected to boost regional and household income gains.

Four main reasons for this are as follows. One is the tight labor market makes capital investment more attractive and profitable for firms. Two is the increase in start-up activity. While the increase in the number of businesses in the Rogue Valley is not as large as it has been statewide, it still is a noticeable increase compared to the years leading up to the pandemic. Three is the increase in private and public investment, including infrastructure. Four is the impact of generative AI on reducing time-consuming tasks, supplementing judgement, and upskilling parts of the workforce.

Finally, housing remains a key topic, risk, and opportunity. Like Oregon overall, housing affordability in the region is bad and depending upon the metric is a bit better or worse than the state. Rental affordability on a residual income basis is more severe locally. Homeownership affordability is a bit better compared with other metro areas in the state. That said, the share of local households in Jackson County who can afford the median sold home has fallen from 40% back in December 2021 to 27% in January 2024 as interest rates rose.

Looking forward, based on the latest population forecasts from Portland State, the region will need to continue to build about the same number of units it currently is. That maintains the status quo. Our office will be producing the first set of housing needs analysis figures later this year, which takes into account the projected future need, historical underproduction, the impact of second homes, and housing for our homeless neighbors. Like the state, housing production will need to ramp up moving forward to meet these needs.

A copy of my slides are below: