Posted by: Josh Lehner | September 3, 2020

New COVID-19 Data Tracking Page

Standard economic data like the monthly employment reports, quarterly GDP, and the like remain the best way to track what is happening in the U.S. and Oregon economies. However, COVID-19 and the pandemic has been moving so fast that trying to assess the current state of the economy is challenging with backward looking reports.

Our office has been tracking 10 real-time data points to help assess the current state of the pandemic and economy. Given our office expects this to be a multiyear recovery, we started a new page here on the blog. When in doubt we thought we should make this material easier for people to follow if they so choose.

You will find this new page at the top of where we have an “About” page and the new “COVID-19 Tracking” page. Or you can find it via a direct link here: https://oregoneconomicanalysis.com/covidtracking/ Our office plans on updating these charts every week or two. Given data release schedules, this will most likely happen on Thursdays.

Posted by: Josh Lehner | August 27, 2020

COVID Challenges Working Oregon Parents (Graphic of the Week)

As a new school year begins here in the weeks ahead, I wanted to circle back on some work our office did at the start of the pandemic and repurpose it to highlight the challenges facing a sizable share of the workforce. There is no question that online learning impacts how students learn, how teachers teach, it also has economic and racial inequities when it comes to access to technology and the like. However one additional challenge is how parents need to juggle work and helping their kids with school at the same time. This is especially true when daycares and after school programs are limited due to the pandemic.

After digging into the Census data again, 1 out of every 6 Oregonians in the labor force fits the following description. They have kids, work in an occupation that cannot be done remotely, and do not have another non-working adult present in the household. In other words these 350,000 or so Oregonians are in a bind.

Of course this doesn’t take into account the numerous creative/stressful workarounds households come up with like adults working different shifts or hours, one adult (mostly moms) stops working all together to provide care, having friends or relatives help with the kids, etc. Even so we know this represents a sizable share of the workforce, and another COVID-related challenge to overcome at the micro (family) and macro (labor supply) level.

Finally, the impact across the income distribution here isn’t as big as I would have thought. In fact lower-income households have the fewest share of parents in a bind. Yes, lower-income households are more likely to work in occupations that cannot be done remotely. However lower-income households are less likely to have kids, and those that do are more likely to have another non-working adult living there. Those two factors more than offset the occupational mix of not being able to work from home.

It turns out that upper middle-income households — broadly speaking those in the $65,000 to $110,000 range — are the most impacted. The main challenge they face is not necessarily the ability to work from home, but rather they tend to be dual earner households and have the smallest share of non-working adults present.

Higher-income household parents are in a bind an average amount, in large part due to their ability to work from home given their occupational mix. And this leaves to the side any discussion on the potential for “pods” or hiring outside assistance and the like.

All told the pandemic is taking a toll on our lives, the economy, and the choices we face as a society. This intersection of COVID, working parents, and school is just one example.

Posted by: Josh Lehner | August 25, 2020

Checking in on Oregon’s Regions, July 2020

This morning the Oregon Employment Department released county level data for July 2020. I thought it might be useful to take a quick look at how the initial stages of recovery are shaping up across the state. Keep in mind that this is predominantly preliminary data that will be revised and benchmarked in the months ahead. That said, looking at the high level data now does give us indications of the severity of the recession and strength of the recovery so far.

While I do not normally like to mix business cycles on the same chart like this I found it particularly impactful as I have been updating my files. The fact that rural Oregon, just before the pandemic hit, had finally returned to its employment levels seen prior to the Great Recession was a reason for celebration. However, the number of jobs across rural Oregon today is now the same as it was at the depths of the Great Recession. On the other hand, even with severe COVID-related job losses, urban Oregon’s strong job growth last expansion means there are still more jobs today than during the mid-aughts.

Now, urban Oregon and rural Oregon are not monoliths. There is tremendous variation across our communities that gets masked over when looking at these very high level cuts of the data. Even looking regionally, it is clear that parts of rural Oregon have seen more significant losses than others. In particular, job losses along the North Coast and in the Gorge (Hood River) were the most severe. On the other hand much of eastern Oregon has seen less severe losses, although nowhere is unscathed. Among urban areas the Rogue Valley is seeing better labor market readings, while the Portland area is a bit worse.

Finally, this last chart looks at the counties individually and shows how severe the initial shock was in dark blue, and how jobs current stack up to pre-recession levels in light blue.

Bottom Line: Across the state the economy is healing following the initial stages of the pandemic. The data will be revised some moving forward. Once it is, we will be better able to dig deeper and examine the severity across sectors for the different regional economies in the state. But for now this data provides a good, high level look at current state of the labor market. For more see our previous work for thoughts on the local level outlook, and the impact of federal programs like the PPP. We also have been working on local estimates of the impact of the household recovery rebates and expanded unemployment insurance benefits which we will share in the weeks ahead.

Posted by: Josh Lehner | August 18, 2020

Oregon Employment July 2020

This morning we got the July 2020 jobs report from our friends at the Employment Department. July brought another good month in terms of adding jobs and unemployment declining. The recovery still looks good as of last month, even if the pace of the recovery did slow some from May and June. Even so the economy remains in a deep hole. The current state of the labor market in Oregon is about as bad as it was at the worst of the Great Recession. The data is no longer apocalyptic, or nearly so. It’s just really bad.

One silver lining continues to be that much of the job loss and corresponding increase in unemployment still looks to be temporary in nature. Or at least that’s how it’s showing up in the survey data. Oregon’s headline unemployment rate has dropped more than 4 percentage points since April. That means it is about 40 percent of the way back to where it was pre-COVID. That said, Oregon’s core unemployment rate ticked up a bit in July. This measure excludes those on temporary layoff and includes folks who have recently given up looking for work. July’s increase is one indication that the amount of permanent damage, while still relatively small, isn’t seeing improvements like the headline rate suggests.

*As always, a huge thank you to Tracy Morrissette over at the Oregon Employment Department for his great work digging into the detailed data so we can look at core unemployment in Oregon. Thanks Tracy!

Over on Twitter dot com, Jed Kolko — Indeed’s chief economist and creator of the core unemployment rate concept — notes there are some big differences in changes in the headline vs core unemployment rates across different groups. Specifically Jed finds that while the headline unemployment rate increased the most for those with lower levels of educational attainment, the core unemployment rate has increased the most for college graduates.

That brings us to the industry pattern of employment we are seeing here in Oregon.

We knew the recession would hit a lot of the service sector the hardest, given the shelter in place style policies and social distancing. These industries — bars, restaurants, hotels, nail salons, gyms, some forms of retail, etc — tend to be lower-wage sectors. As the economy reopened and households and businesses grew more comfortable and confident, some portion of these lost jobs would come back relatively quickly. After that our office thought we would see slower growth until the pandemic is managed and brought under control. That’s the underlying nature of the Square Root Recovery. Our biggest concerns have been on the amount of economic damage that builds up in the form of business closures and permanent layoffs.

Keep in mind that we are still only a few months into this cycle. The data is still preliminary and has not been benchmarked. But so far it is clear that the lower-wage sectors have borne the brunt of the recession to date. It is also among these sectors where the rebound in growth is occurring, as expected.

On the other hand, middle- and high-wage sectors have seen sizable declines in employment and no real rebounds. Make no mistake. While the job losses in these industries are not as severe as those among the low-wage sectors, they are still quite large. Look at the first chart above. Job loss of 5% or so is worse than Oregon experienced in the 1973, 1990, and 2001 recessions. What is a bit more concerning is the lack of growth in recent months. It is still early and this is preliminary data. However this could be one aspect of that permanent damage we are concerned about. And it speaks directly to Jed’s finding that the core unemployment rate has risen the most for college graduates, who tend to work in the higher-wage industries.

Bottom Line: Oregon’s economy continues to recover over the summer. Employment is up and unemployment is down. Overall the state has regained about 40% of it’s lost jobs due to COVID. The economy is doing noticeably better than expected. This is good news and what matters most today. And while I hate to be a bit of a downer, it does only take a little digging beneath the surface of the data to paint a potentially worrisome picture. When combined with the worse public health situation, and lapse in federal assistance, it makes the outlook uncertain. As always our office will continue to monitor the data. We are currently developing the next economic and revenue forecast, due out September 23rd, and meeting with out advisors in the near future to discuss.

There continues to be a robust discussion around pandemic migration and working from home. Following our office’s most recent forecast for population growth, in addition to our updated report on Working from Home and new outlook for housing, I wanted to circle back and flesh out a few things.

First, a confession. I am basically on the record being a wet blanket to many of these discussions. I am also on the record saying I believe these are all upside risks and I hope I am wrong. One reason is that we rarely see massive shifts in things like population growth, particularly boosts to migration during recessions. The 1990 recession being the only prominent example in Oregon.

A second reason is that good, solid data remains a long ways off. All discussions to date are speculative. We won’t get 2020 ACS data until late September 2021, more than 13 months from today. We won’t get 2020 Oregon population estimates from Portland State until November 2021, some 15 months away. And this is to say nothing of the official 2020 Census numbers which serve as a key anchoring point to all of our demographic discussions. We don’t know how they will turn out given the pandemic and the, shall we say, lackluster administrative support. But between now and when we get good data, we will be scouring around for all relevant data. Please pass along anything you find useful! That said, we know most of the available data paints an incomplete picture at best. It will take a host of data points to try and fill in the gaps.

With that said, let’s take a couple looks at home sales. A lot of discussions point toward strong sales as an indicator of pandemic migration. No question home sales are a measure of housing demand and tend to be pro-cyclical, just like migration. But simply saying home sales are up isn’t quite the same thing as saying population growth is accelerating, which is really what a lot of the discussions I find myself in are actually trying to say. That may be the case. We just don’t know.

The key here is that migration generally slows in recessions. People follow the jobs. As job opportunities dry up, folks stop moving. So any pandemic migration would need to be strong enough to offset this normal cyclical pattern to show that 2020 population growth was faster than 2019. To our office, that seems like a heavy lift.

Specifically I am now tracking a few things. Send me your suggestions (and better yet any data sources) for additional items to track. The first is trying to parse out the city vs suburbs debate about people fleeing cities in search of more space to avoid the virus. As City Observatory has detailed, to date there is no indication this is happening. In the Portland region, home sales do not yet indicate a shift in preferences for the City of Portland versus the suburbs.

The second thing I’m tracking are home sales in a few popular, scenic areas. Bloomberg’s Conor Sen has a good article on remote work and housing in so-called “Zoom Towns.” Potentially this could be an indication of pandemic migration to smaller metros and/or rural areas. So far in the housing data we know that home sales have been strong in recent months. The key question is how much of the strength is simply making up for the weak spring when we were sheltering in place.

The year-to-date (YTD) numbers are solid, but not yet spectacular, in Bend and Missoula. In fact home prices are up ~6% in Bend and ~8% in Missoula, which is right in line with appreciation in 2018 and 2019. Given the very low inventory levels, I would expect these prices to continue to rise, but I am more interested in the number of sales over the course of the remainder of the year. Will they level off and show solid gains when the dust settles, or will they increase considerably due to pandemic migration?

Finally, I wanted to follow-up on some of the working from home discussions. I would recommend this Brynjolfsson et al paper, plus further research from Adam Ozimek at Upwork on the future of remote work, and Derek Thompson in The Atlantic on future workforce changes and their implications. Overall there is possibly a much larger change underfoot than many expect, myself included.

Adam’s report shows that businesses are finding remote work to largely be going better than expected and future expectations of telecommuting to increase. As such I thought it might be useful to take some of the new research and adjust it to the standard Census data we have. We know that the Census data is an undercount as some remote workers do so from co-working spaces, coffee shops and the like, plus a number of folks telecommute one or two days a week. Even so, doing a very rough projection based on the historical Census data and the new surveys yields something like the following. As out office noted the other week, remote work and working from home more broadly is a long-run growth opportunity, possibly an even more significant one than we expect.

These are important discussions to have and important topics to follow. Even as it will take some time before the good, solid data is available, our office will continue to track what information is available.

Posted by: Josh Lehner | August 7, 2020

Income, Spending, and an Uncertain Outlook (Graph of the Week)

To date the economy is a paradox in the sense that it is clearly in bad shape but also performing better than expected. One big reason for this better-than-expected economy is federal assistance. In particular the CARES Act provided support for small businesses, households, and laid off workers. This federal aid put a floor under the recession and kept firms and households afloat in recent months. In fact, while underlying personal income has dropped roughly as much as it did during the Great Recession, the federal assistance so far has more than made up for that loss. Total personal income is actually up in recent months which means households are able to pay bills, and spend money if they want to, or feel comfortable enough to do so. New data finds that total household debt in the U.S. went down last quarter, primarily due to credit cards being paid off (probably due to more income and less spending). Encouragingly student loan delinquencies plummeted as well, and there was a large increase in households who were behind on their mortgages being able to catch up and become current. Furthermore we know that bankruptcy filings are also down in recent months.

However the key question has always been what happens once that federal assistance runs out? The Paycheck Protection Program (PPP) loans/grants were originally designed to last 8 weeks, the one-time recovery rebates were mostly issued in April, and the expanded unemployment insurance benefits expired at the end of July. The CARES Act did it’s job, but unfortunately the pandemic is still raging. The economy needs more help to tide firms and households over until the public health crisis is managed and brought under control.

Our office is beginning to work on our next forecast, due out September 23rd. We are developing the preliminary forecast and meeting with our advisors here in a couple of weeks. The good news is that the economy is clearly doing better than we expected in recent months. In fact the economy is more in-line with our optimistic scenario from our most recent forecast. However the state of public health and uncertain federal policy is more in-line with our office’s pessimistic, double-dip scenario. Plus there are numerous indications that the economy has stalled out over the summer, everything from leveling off in restaurant demand, to ongoing large numbers of initial claims for unemployment insurance, to slower job growth in July. So far the data is shaping up like the Square Root Recovery, albeit on a faster timeline. How all of this affects the forecast is still a work in progress. The starting point of the recovery is better, but the outlook, if anything, is more uncertain.

Posted by: Josh Lehner | July 28, 2020

COVID-19 and Oregon’s Housing Outlook

This morning I am presenting a mid-year forecast for the Home Builders Association of Metropolitan Portland. A summary of my thoughts and a copy of my slides are below.

Due to the severe recession and pandemic, our office’s initial expectations were for housing and construction to see significant declines. Normally in a recession household formation weakens and incomes sag. However to date that has not happened. Housing has been stronger than most sectors overall. I think there are three main reasons for this strength in housing demand.

First is the nature of the cycle. If we’re being honest, it is clear that low-wage workers have borne the brunt of the pandemic and recession to date. High-wage and higher income households have fared better, and are predominantly homeowners.

Second are interest rates. Mortgage rates remain at or near historic lows. This keeps affordability issues at bay, and allows buyers’ budgets to expand. The outlook calls for low interest rates for years to come. The Federal Reserve is signalling they will not raise interest rates until the the economy is strong and actual inflation picks up.

Third is the big demographic tailwind for housing. In the decade ahead, Millennials will fully age into their 30s and 40s which are prime home-buying years. By one’s mid-30s in Oregon today we see a 50-50 split between owners and renters. Early 30s are a key cohort for first-time buyers, while early 40s are a key cohort for overall spending on housing (move-up buyers, young families furnishing homes, etc).

Now, while these strengths may be more structural in nature, uncertainty and risks remain.

The biggest risk remains the pandemic itself. There is no trade off between public health and the economy. It is not either/or. It is neither or both. And right now the worsening health situation increases the possibility of more permanent economic damage, a slower recovery, or even a double-dip recession.

As the recovery drags on — it may feel like years already, but we are actually only a few months into this cycle — it will likely weigh on household incomes and confidence. Some of the normal recessionary dynamics are likely to emerge. This will push back on those reasons for strength and optimism a bit.

Finally a wild card is working from home. There is a lot of speculation about how we will permanently alter our lives due to the pandemic. However it is much too soon to tell how it will shake out. It is possible that Oregon does see COVID-related migration, although unlikely to fully neutralize the cyclical swings this year or next. And household preferences may increase for single family homes, or larger homes, or ones with offices so they are better able to telecommute. To the extent any of that occurs, it would increase industry demand.

All told housing and construction are likely to be economic strengths in the years ahead. Housing is historically a leading economic indicator. Now, that doesn’t meant the industry isn’t impacted. Expectations should be for a couple soft years instead of large declines. The reason is those structural factors should be strong enough to offset some of the cyclical weaknesses.

As we touched on the other day, broadband and access to technology is increasingly important for social, economic, and education connections. We know the pandemic is impacting education considerably, and many schools will have increased distance learning this fall, if not entirely so. In a recent presentation a question arose about digging into the data further on kids with and without broadband at home. This edition of the Graph Table of the Week does just that for the Portland tri-county area.

We know there are inequities regarding broadband and technology more broadly. When it comes to households with kids at home these inequities break down along two main dimensions: economic, and racial and ethnic. A larger share of lower-income household do not have high speed internet at home. And households headed by Black, Indigenous, and People of Color are less likely to have high speed internet at home compared with their white, non-Hispanic neighbors. This is at least among low- and middle-income households. Households with incomes above $100,000 a year tend to have similar rates of high speed internet at home regardless of race or ethnicity.

A few notes and caveats with the data.

The breakdowns by race and ethnicity are based on the characteristics of the householder (formerly called the head of household, but is really about the adult who fills out the Census questions). As such it does not necessarily reflect how the kids identify, but is the best I can do relatively quickly.

There are sample size concerns, particularly as you slice the data to finer and finer levels. We know the Portland region is not especially diverse, so focusing on some racial or ethnic groups stratified by income likely yields estimates with larger margins of error. So take the particular percentages with a grain of salt, even as the overall patterns are likely correct.

Finally, one item that stood out to me with the standard Census tables on this subject is the impact of cellular only broadband connections. Statewide it was about 10% of households. I don’t know about you but I am both amazed and frustrated at my phone. I can do nearly everything I want on my phone, but at the same time the things I can’t do get me frustrated at times. As such, in the table above I only crunched numbers for high speed internet (cable modem, fiber optic, or DSL) as doing homework on a phone is likely less than ideal. Now, among Portland area households with kids, there are 12% that do not have high speed internet but do have cellular, bringing the percentage with neither down to almost zero (0.3%). Whether that is good enough I don’t know, even as we would expect it is not optimal for learning this fall.

Posted by: Josh Lehner | July 22, 2020

Working from Home and Broadband Access in Oregon

There is considerable speculation about how the pandemic will change the way we live. In particular our office is fielding a lot of questions about working from home and whether households may increasingly choose to live in the suburbs or rural areas as a result.

Solid data on 2020 migration patterns is a long way away. And early indications based on Zillow home searches show Americans are not increasingly looking toward the suburbs. However, time will tell to what extent we do alter our lives as a result of the pandemic.

With that in mind, our office has pulled together and updated some of our previous research on working from home and broadband access here in Oregon.

It is important to keep in mind that to the extent working from home represents a long-run growth opportunity, and it does, many of these changes tend to be incremental. Yes, there is a spike in working from home due to the pandemic. However, when it is safe to do so, most workers will likely be recalled to the office. Permanent massive, wholesale changes to they way we work are unlikely. That said, even incremental changes and evolutions can matter for regional economies, workforce needs, commercial real estate, and the like.

I want to highlight three main findings.

First, the reason we care from a big picture perspective relates to Oregon’s long-run outlook. One of our comparative advantages remains the state’s ability to attract and retain talent. To the extent that Oregon sees any sort of bump in COVID-related migration, that’s beneficial to the long-run outlook.

Second, within the state the folks working from home are diversifying our regional economies. Outside of the Portland area, those working from home tend to be concentrated in occupations that aren’t as prevalent locally as they are nationally. In essence these workers are voting with their feet, saying they want to live in our communities. However it is harder to find a job in their chosen field, so they are making it work by bringing their job with them, or starting their own business. This increase in economic diversification should make our regional economies more resilient and better able to withstand different types of recessions over time.

Third, broadband is a critical component for a number of reasons. On the economic side, having residents better connected to labor markets to search for jobs, and interact with co-workers and clients is important. It’s not just the availability of a broadband connection, but really about the speed, reliability and price of that connection. We know once you get outside of the major cities in the Willamette Valley, the speed and reliability can fall off, impacting potential growth opportunities.

However broadband access also matters considerably for social connections, and increasingly for education needs as students do more online learning due to the pandemic. We also know there a lot of inequities regarding access to technology. This goes for urban vs rural, young vs old, rich vs poor, and white vs Black. How all of those factors interact matters considerably for social, economic, and education connections in society.

Bottom Line: Oregon overall does better than much of the country when it comes to broadband access and working from home. There remains a lot of potential for future growth. However, expectations should be realistic. It is unlikely that we will see massive changes in where we live and how we work. Metropolitan areas still provide a lot of benefits, including thicker labor markets for future job opportunities. However, even ongoing incremental shifts matter and to the extent the economy continues to diversify, should pay long-run dividends for the state.

Download the slides here: Working from Home July 2020

 

Posted by: Josh Lehner | July 14, 2020

June 2020 Employment: More Good News

This morning our friends at the Oregon Employment Department released the June 2020 employment report. The data continues to show about as good of economic readings as one could hope for. Yes, the economy remains in a deep hole. However about 1 in 3 jobs lost earlier in the pandemic have now been regained. Similarly, the unemployment rate continues to fall and is about one-third of the way back down to where it was pre-COVID. This is all good news.

The key issue is trying to decipher what it means moving forward. Monthly data like employment, but also household income and consumer spending at the U.S. level, is traditionally the gold standard for high-quality, timely data. But given how fast events are moving, even monthly data may feel a bit backward looking today.

The reason I bring this up is that it is clear the economy continued to do better than expected a month ago, but whether that progress and the recovery continued at the same pace since then is a bit up the air. COVID cases are rising (and not just due to more testing) and some consumer indicators are leveling off in recent weeks. Keep in mind that this remains a public health crisis. There is no trade off between the economy and the virus. And then if we layer on the potential fiscal cliff impacts of federal assistance to firms and workers going away, it can be hard to know how much the June data really tells us about where the economy will be in a month, let alone the end of the year.

That said, I wanted to provide a few updates to some items our office is tracking. On the economic side of things, the key remains how much of the temporary pain we have experienced turns permanent. The more firms that close or the more laid off workers who aren’t recalled the slower, and harder the overall recovery will be.

The first chart is an update our of standard comparison of recessions in Oregon. The current cycle does not look like past recessions given the sudden nature stop of economic activity due to the pandemic.

The second chart really shows what is going on here. There are a handful of sectors that are most impacted by social distancing. They experienced larger job losses due to the pandemic, and as social distancing restrictions lifted in recent months, workers are being recalled. These sectors account for about 45% of employment overall, so their rebound really drive statewide gains. Most of the industries aren’t a surprise, although I would say construction is. I will have more thoughts on construction in a couple of weeks, but wanted to note it too is a rebounding sector in the past couple of months.

Now, all other industries in the state have seen sizable job losses and no real rebound as of June. I’m not trying to cherry pick the data here and have some gains and losses offset each other. When it comes to natural resources, manufacturing, government, transportation and warehousing, professional and business services and so forth, there really hasn’t been much rebound, if at all.

This distinction between the cyclical rebounds as social distancing lifted, and broader trends in other sectors of the economy is a key issue to watch moving forward. Does the rebound stall out as consumers pull back due to the pandemic? Do the other sectors start to grow again? Or does ongoing economic weakness spill over and these other industries start to see more layoffs in the near future?

Similarly a key distinction for the recovery is gauging the impact of temporarily laid off unemployed workers versus a more fundamental increase in unemployment due to permanent layoffs and businesses hiring less overall. The last chart today updates a new measure pioneered by Jed Kolko and discussed more in depth last month. A huge thank you to Tracy Morrissette over at the Oregon Employment Department for his great work digging into the detailed data so we can get this Oregon specific look.

In short what the core unemployment rate does is strip out those temporarily laid off from their jobs to get a better gauge of permanent damage. Here in Oregon we have seen the core rate rise around 1 percentage point, but hold steady the past couple of month. So far the data indicates the vast majority of the changes in the headline unemployment rate are due to temporary layoffs and some of those workers being recalled. The fact we are not, or at least not yet, seeing a big rise in the core unemployment rate is another good economic indicator.

Bottom Line: Oregon’s labor market looked to be as good as one could hope for in June. Growth is driven by workers being recalled to their jobs as social distancing restrictions lifted and the pandemic looked to be improving. However given the uptick in new COVID-19 cases, and the uncertainty surrounding federal aid to businesses and households, there remains considerable uncertainty surrounding the overall economic outlook.

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