Posted by: Josh Lehner | September 12, 2016

Careful with the Data, Job Polarization and Housing Math editions

Ahead of Wednesday’s forecast release, two quick notes on items that caught my eye recently.

First, as our office has written quite a bit about in recent years, job polarization continues to shape the economy and labor market. That is, jobs are increasingly concentrated at the low- and high-ends of the wage spectrum with shrinking opportunities in middle-wage occupations. The Federal Reserve Bank of New York, who pioneered the local and regional polarization work our office’s uses, has a very useful update they are using in their presentations. One key point when it comes to polarization is that these jobs do not decline forever, they do grow in absolute terms during economic expansions. In fact, as the NY Fed’s graph shows, middle-wage jobs increased in absolute terms faster than both low- and high-wage jobs in recent years. This is good news!


However this does not mean that job polarization does not exist. Middle-wage jobs should increase more in absolute terms given that they represent a larger share of all jobs. The problem with polarization is that middle-wage jobs decline the most in recessions and do not come back all the way during expansions. Thus as a share of the economy, middle-wage jobs are shrinking. This can be seen in the second graph which uses the exact same data and same categories but looks at growth rates instead. Clearly middle-wage jobs, while accelerating some, are still growing slower than both low- and high-wage jobs.


The point here is that it is important to look at both levels and rates. One can potentially be mislead when looking at just one part. The NY Fed did not try to mislead and I am not accusing them of that. Rather, I just wanted to flesh out the story a bit further. I also teach a data analysis and presentation module at Willamette University and this provides a good, new example to bring to class. There is considerably more art and less science than many think when it comes to data analysis and presentation. You need to understand the whole picture to know which parts you want to emphasize in your work. And emphasizing the fact that middle-wage jobs do not decline forever and are even doing much better in recent years is certainly important to do. That point does tend to get lost in the polarization discussion.

Item two is more of a funny data note. Coldwell Banker Real Estate crunched some numbers on the average list price for 4 bedroom, 2 bathroom homes across the country. As the Portland Tribune writes, in Oregon the highest list price is in Lake Oswego and the lowest average list price is in Klamath Falls. From this one can conclude that LO is the least affordable and K Falls is the most affordable place in the state, with the caveat you are trying to buy a 4 bedroom, 2 bathroom home today. Just to check, I wanted to see how these list prices compared with family incomes in the area. It turns out that the list price to family income ratio is nearly identical. While there are a variety of reasons that homes are more expensive in Lake Oswego and less so in Klamath Falls, one of the reasons is income. Just an interesting note on housing and affordability, or lack thereof.



Posted by: Josh Lehner | September 9, 2016

Graph of the Week: Housing Bust Metros Update

One of the defining features of the Great Recession is the housing bubble that preceded it and set the stage for the collapse. The regions of the county that experienced the biggest bubble, also experienced the largest fallout when it burst. One item our office has tracked over the years are the Housing Bust Metros which are the 50 metros with the biggest run-up in prices and subsequent declines, per the FHFA home price data. While much of the focus of the housing bubble was on the so-called sand states (AZ, CA, FL, NV) which experienced tremendous bubbles, unfortunately, two of the nation’s largest bubbles were here in Oregon. Bend and Medford’s experiences are right there with the worst of the worst in terms of the bubble and bust. In short, that’s not good.

In terms of the economic fallout, only 1 percent of the nation’s metros overall saw larger employment declines than Bend experienced and only 7 percent saw worst declines than Medford. This is certainly part of the story for why Oregon’s Great Recession was worse than the nation overall, besides our general volatility due to industrial structure and migration flows. And when a region suffers a decline like Bend and Medford a few years ago, it does not bounce back right away. The only thing comparable to these losses in Oregon’s modern history is what happened to Coos Bay in the 1980s. So, it takes awhile to adjust and recover. We know both Bend and Medford are growing again. Bend is off like a rocket once more, adding jobs at a 6-8 percent annual pace in recent years. Medford is seeing solid growth, if not spectacular.

All of this brings us to this edition of the Graph of the Week. A simple update to our housing bust metros graph. The typical housing bust metros saw employment declines that were twice as large as the rest of the nation. Medford was a little worse than that while Bend’s decline was nearly three times the rest of the country. In recent years, the housing bust metros have added jobs at a faster pace and are making up lost ground, even if that gap has not fully closed as of this summer.


When looking at all the various housing bust metros, it is not true overall that the farther you fell the stronger your rebound. This was clearly not a V-shaped recovery. In general, the farther you fell during the bust, the slower and weaker your recovery. There are a few exceptions here that have shown tremendous growth despite the severity of the recession. These outliers include Bend, in addition to both Cape Coral, FL and St. George, UT. Medford for it’s part is outperforming around 1/3 of these housing bust metros and has essentially regained all of its lost jobs today. While a bit slower than typical/historical growth in Medford, this performance outpaces the rest of the State of Jefferson. Stay tuned, I will have an economic update on the State of Jefferson in the near future.

Posted by: Josh Lehner | September 7, 2016

In The News: Private Education

It’s been more than three years since our office released an Oregon look at student loans, defaults and the economy. We are working on updating parts of the report, more in the near future. However the big education news this week is the closing of ITT Tech, following the closure of Corinthian College last year. One item that really stood out, or at least surprised us when we last looked at student loan defaults was that many of these proprietary (career and technical, by and large) did not have extremely high default rates. Yes, they were significantly above default rates from four year universities and even a bit higher than beauty schools, however below the culinary and art schools and community colleges. The graph below is an update using the latest data from the U.S. Department of Education.


Now, just because default rates are not exceptionally high does not mean they are great education bets. The biggest issue here is not only that some rely heavily upon federal student loans for their revenue, but also whether or not students actually complete the degree/training programs and whether or not such degrees/training actually improve labor market outcomes. That is, are these schools actually improving employment rates for their students and are the students earning higher wages after completion then they would have without the program? That is what we care about from an economic perspective. Clearly in some cases the answer is yes, however not always.

In terms of the outlook, this latest news raises an interesting question. IHS and some other macroeconomic forecasters have the outlook that private education employment will decline in the near future. In conversation with IHS their reasoning is due to things like the ITT Tech closure where some of these schools’ underlying business model falls apart. This has been their employment outlook for a number of years now, however with each passing quarter and year where employment does not fall, they simply shift out the decline. This may be the correct long-term view, it’s an interesting and open question. However it also has not been very accurate lately. Our office’s view is that these private sector education jobs will grow more in-line with population growth over time and school- and college-age population. There is more to these jobs than the career and technical institutes, as it includes private K-12 schools, private universities and the like.


Overall private education is a relatively small employment sector in Oregon and nationwide. The big news today is not whether or not these jobs will grow slowly or decline slowly in the future. The potentially big news is making sure that students actually graduate from their training programs and get better jobs than without the programs. That would be the best economic outcome and help with future growth.

Posted by: Josh Lehner | August 29, 2016

More on Prime-Age Workers – The Housing Bubble Edition

Earlier this summer we highlighted the ongoing challenges prime working age Oregonians without college degrees face. The decline of middle-wage jobs has significantly impacted both men and women alike. While some have found work in either high- or low-wage jobs, the vast majority of the adjustment has been an increase in nonemployment with most not even looking for work. It is true, however, that the stronger economy today is pulling some of these workers back into the labor force. Not all, and not even most, but some, which is still good news.

One item that got left on the cutting room floor of the previous work but is still very important is how the housing boom masked the longer-term structural decline in manufacturing. Kerwin Kofi Charles and Erik Hurst of the University of Chicago and Matthew Notowidigdo of Northwestern University have had a working paper along these lines for a number of years now. However they recently published an article in the Journal of Economic Perspectives that furthers their research.

The upshot of the work shows that the temporary boom in construction jobs helped to offset the loss in manufacturing jobs for prime working age males without college degrees. However the housing boom was a bubble and temporary. Once the bubble burst, the lack of employment opportunities for such workers became starker with the longer-term trends “unmasked” to a greater degree. From a broader perspective, the author’s discuss how this fits into the framework of reallocating workers and resources away from industries in structural declines. This process is not very well understood today. However the temporary housing boom was not all bad news. It did provide jobs for some workers, even if just for a few years, and did allow regional economies some time to try and diversify and invest in other sectors to support future growth. Obviously this did not happen everywhere or nearly enough, but is an interesting and important point the authors make.

The graph below is an Oregon version of the author’s national work, that shows the share of prime working age Oregon males employed in construction or manufacturing. There was a slow erosion from the 1970s through the 2000s, but not a big change overall. However since the Great Recession employment has fallen considerably in these occupations and nonparticipation has increased.


Four items of note relating to the outlook.

  1. Job polarization and the changing landscape of job opportunities is more structural than cyclical, or more permanent than temporary. Economists (rightfully) continue to call for higher levels of educational attainment in response. This goes beyond college degrees to include training programs, certificates, apprentices and the like.
  2. The best news for discouraged workers and those who do want a job is the tightening labor market. Businesses can be choosy when unemployment is high and they are flooded with applicants. Today they must broaden their hiring patterns to include the long-term unemployed or those without the perfect skills or training already.
  3. Middle-wage jobs are on the upswing today. They are unlikely to full regain their share of the economy overall but they are growing in absolute terms. This is particularly the case for construction workers and teachers which were hit disproportionately hard this business cycle.
  4. Unfortunately, some of the damage done is permanent. This is one reason our office’s baseline outlook for labor force participation never gets all the way back to where it was, even after controlling for the aging population.
Posted by: Josh Lehner | August 24, 2016

Oregon’s Tightening Labor Market

We know Oregon’s economy is booming today. Job growth is outpacing the typical state by a considerable margin. These gains are strong enough to make up the recessionary losses and keep pace with population growth. As labor becomes scarce in a tight market, wages rise. Businesses must compete more on price to attract and retain the best talent. One positive result of these dynamics is the growing labor force and increasing participation rate as more Oregonians look for work.

Even as all these good things are happening, a common question from businesses and in terms of the macro outlook is “where is the labor going to come from?” Our office’s view is that the stronger economy will continue to pull Oregonians into the workforce, in addition to the influx of young working age migrants. If you dig into the job opening surveys themselves, they show that a lot of the underlying difficulty in filling positions isn’t just about the number of applicants but also things like requiring experience and not training workers plus low wages, odd hours and the like. All that said, it does not mean there cannot be issues in specific industries or regions of the state, however.

Take the case of low-wage workers for example. As the Wall Street Journal reports, across the nation low-wage workers are seeing the strongest wage gains today (admittedly after a long spell of no gains). This is the result of businesses realizing they need to raise wages to get workers in a tighter market. The WSJ highlights the growing number of large corporations, like JP Morgan Chase and McDonalds, that have announced higher pay levels for their workers. However this is happening in Oregon as well. Two weeks ago the Governor’s Council of Economic Advisors took a trip to Newport to meet with community leaders and local businesses (more on the trip soon). One interesting topic was that of the new minimum wage law. Laura Anderson, owner of the fantastic Local Ocean Seafoods restaurant and fish market, noted how she and other businesses were initially worried about the new law and increased business costs. However, as the economy gets tight, wages do rise. Laura noted that today on the coast the effectively minimum wage is $11 per hour. Anecdotally this can be confirmed by the giant banner hanging outside the Newport Taco Bell advertising they are hiring, starting at $11 per hour.

All of this is to say that while Oregon is approaching full employment, we do not have great measures of full employment itself. It is more of a concept than a hard calculation. That doesn’t mean we don’t try. That is the entire purpose behind our Total Employment Gap work. Another, simpler and easier-to-understand way to gauge economic slack is to look at the number of unemployed per job opening. How large is the pool of available workers relative to what businesses need? Here, too, labor market slack is diminishing or potentially gone based on the historical patterns. This is true even if you add back in the “missing” workers who dropped out of the labor force.


There are myriad reasons this matters for the economy but I will highlight two interrelated items. First, full employment matters for businesses because it does become harder to attract and retain workers when labor is scare. Second, a stronger economy and tighter labor market is great for workers as wages rise. One of the biggest issues with stagnant wages in the 2000s was the fact that the economy never fully tightened. Even with the housing bubble, the mid-2000s expansion was too short and too lackluster for the economy to reach full employment in many places, Oregon included.

This also matters for our office’s forecast. Oregon’s gains of 5,000 jobs per month over the past couple of years is not a sustainable rate. Those are peak growth rates. They eat up the economic slack. However as the economy approaches and reaches full employment, growth will slow to a sustainable rate. Right now our estimates show that Oregon needs about 2,000 jobs per month to keep pace with population growth. The exact timing of this transition, or slowing is an open question that we regularly discuss with our advisors. It must also be pointed out that the economy does not typically transition to sustainable rates of growth. It usually slams down into recession and the cycle starts anew. That said, there are not a lot of worrisome signs on the horizon right now and our advisors remain bullish.

Note: We are using our office’s blended help wanted ads figures which combines historical newspaper ads with today’s online help wanted. This is important to be able to look at historical patterns. Even as the online help wanted ads data starts in 2005, newspapers were still important than. So simply using just the online data from 2005 through today can be misleading.

Posted by: Josh Lehner | August 18, 2016

Oregon Income Update, 2016

As we work on the next economic and revenue forecast (release date September 14th), I just wanted to share a quick update on Oregon personal income. Just as the economy and labor market are doing well, personal income is growing fairly quickly too. Gains today are as strong as those seen during the housing boom. Right now Oregon’s income growth over the past year ranks 5th best among all states and DC.

Note 1: Actual data from BEA for Oregon goes through 2016q1. Given we have US income through 2016q2 plus Oregon employment, population, housing permits and the like, we can impute reasonable estimates for Oregon’s 2016q2 income. Note 2: The sharp drop in income growth in 2013 is due to the expiration of the payroll tax cut and of the Bush tax cuts on the highest income households which pulled forward their investment-related income into 2012.


So what is driving Oregon’s stronger income growth? Pretty much everything. The biggest component here are wages, which have been consistently growing 6 or 7% annually in recent years. Withholdings out of paychecks have been even stronger, which matters for our revenue forecast. Right now Oregon’s total wages are increasing at the 6th fastest pace nationwide. Other income components are growing, albeit slower than wages. See the table below for the details.


All of the above looks at total income in the state or total wages or total dividends and the like. Given Oregon also sees faster population growth and faster employment growth during expansions, you should expect to see some better total numbers in Oregon relative to the typical state. Unfortunately that has not always been the case.

Looking back at the first graph reveals that since the Asian Financial Crisis in the late 1990s, Oregon’s personal income has grown right around the national average each year. If we have the same income growth but faster population growth, that means Oregon’s per capita personal income is eroring relative to the national average. (Math!)

Similarly, Oregon’s employment and total wages typically outpace the nation. However if wages are not growing disproportionately faster than the typical state, Oregon’s average wage relative to the nation does not improve. This has also been the case for much of our recent history.

However these patterns have flipped in recent years. Oregon’s per capita personal income is on the rebound following the big losses since the mid-1990s. Some of this is due to slower U.S. income growth (not ideal) but some is due to strong Oregon growth (which is ideal). However where the biggest improvements are seen are among average wages. We regularly write about this in our forecast reports and in our public presentations, but it’s worth highlighting again.

Oregon’s average wage, at least in the past 50 years, has always been below the national average wage. We took a huge step back during the 1980s when the timber industry restructured. Oregon lost 12% of its jobs in the early 80s recession, whereas we “only” lost 8.5% of our jobs in the Great Recession. During the technology-led expansion in the 1990s, we regained about half of the decline in average wages and that held steady for more than a decade. However, since the Great Recession Oregon’s wages have outpaced the nation’s by a considerable margin. Oregon’s average wage today is at it’s highest relative point in more than a generation. Or put differently, Oregon’s average wage today is at it’s highest relative point since the mills closed in the 1980s. Some of this is due to the fact the recovery in Oregon has been led by high-wage jobs, even to a larger extent that nationally has been the case. But this industry or occupational mix can only explain a portion of our relative wage gains. The bulk of Oregon’s improvement here is due to stronger wage gains within industries and occupations. This is great news. It must also be pointed out, however, that national wage growth has been lackluster at best. So Oregon’s decent wage gains — they have not been particularly robust, but they are decent — look great in comparison.


In terms of the outlook, our office expects continued improvement in the per capita personal income measure as our economic expansion is likely to continue to outpace the typical state. Yet our baseline outlook does not have Oregon’s per capita income converging with the U.S. The gap is large and would take a long time to close even during a strong expansion.

In terms of wages, our office does not expect too much further improvements. This is for a couple of reasons. First, we have already seen average wage growth in Oregon pick up in recent years. We have a little more acceleration built into the outlook as the economy reaches full employment but not much. So Oregon wage gains are expected to hold relatively steady. Second, the U.S. outlook we use from IHS Global Insight does have wage growth accelerating in the coming years. So when you combine our steady Oregon outlook with an accelerating U.S. outlook, Oregon’s average wage does not continue to improve relative to the national average wage. (Again, math!)

For more on Oregon’s income relative to the nation and why per capita personal income misses the mark as the benchmark comparison, please see our previous post.

Posted by: Josh Lehner | August 16, 2016

Oregon Unemployment, Deja Vu?

The unemployment rate in Oregon has increased from 4.5% to 5.2% in the past two months. What is going on here? Well, regular readers know it always important to take real-time economic data with a grain of salt, but the so-called household survey from which the unemployment rate is calculated has been particularly noisy in recent years. Let’s take a quick stroll down memory lane.

Exactly a year ago we wrote the following in our September 2015 forecast document, released in August 2015 (PDF page 11).

As our office warned three months ago, the large declines in the unemployment rate to start the year likely overstated the strength in the labor market. As the unemployment rate has increased over the summer, it has now returned to its post Great Recession trend, and likely understates the improvements in the labor market.

And last quarter we wrote the following. (Also PDF page 11.)

…The pattern of unemployment rate changes does not likely reflect the overall pattern of growth in the Oregon economy…While there is no question Oregon’s economy continues to improve, future revisions may reveal a somewhat different, and smoother path for the unemployment rate.

So once again we find ourselves with a plunging unemployment rate early in the year, only for the summer months to pull it back up, more or less to the post Great Recession trend. The month to month fluctuations can be noisy but the overall improvements are certainly real and noticeable.


For the record there are zero conspiracy theories here. The underlying samples used in these surveys are small. The unemployment rate, labor force participation rate and the like are derived from responses by about 1,000 Oregon households each month. (Update: As Guy Tauer points out in the comments, besides the sample data these calculations also pull in other administrative data like UI claims, payroll employment and the like. Thanks Guy!) The 2010 Census pegged the total number of households in Oregon at more than 1.5 million and that was six years ago. Samples can be tricky and noisy. That is what is going on here by all accounts.

As for how this impacts our office’s forecast, in short it does not have much of an impact. Our office’s baseline outlook calls for Oregon’s longer-run, or steady-state unemployment rate to be about 5.4%. So our forecasts in the past year or two have actually had an increase in the unemployment rate built into them.

The reason is our original Return to Normal Labor Market Dynamics work. First come more job opportunities — employment growth continues to outpace population growth. Second wages rise as businesses must compete on price to attract and retain the best workers in a tighter labor market. And third, individuals return to the labor force in search of these more-plentiful and better-paying jobs. Right now Oregon’s labor market has returned to these normal types of dynamics seen during expansions, even if it took a few years following the fallout of the Great Recession.

One potential downside to the noisy data is the labor force participation rate itself. While it has turned the corner, the gains seen so far in 2016 have been particularly strong. This big improvement, like the noisy unemployment rate, has been in the unrevised or unbenchmarked data. It is certainly possible that future revisions will tamp down the participation rate gains seen in recent months. However this is likely a noisy data issue. Our office’s forecast, shown below for comparison purposes, calls for LFPR gains as the strong economy continues. A larger share of the population really is working and looking for work. Now the expansion cannot fully overcome the demographics over the medium and longer term but it can when we are adding jobs at a 3% or higher rate like we are today.


Where the noisy household survey data will impact our office’s work is in our Total Employment Gap estimates. The rising unemployment rate and flattening LFPR in the past couple of months does indicate the gap is slightly larger in the current data than we had thought just a couple months ago. While monthly data can be noisy, the Oregon economy is still doing well and we are on track to reach full employment in the near future. Furthermore our office does expect job growth to slow in the future after the economy reaches full employment or shortly thereafter. Right now we have the slowdown happening in 2017 but this is an open question that we regularly discuss with our advisors. Right now none of them are seeing any particular weakness in their individual industries or regions of the state.

Posted by: Josh Lehner | August 9, 2016

Oregon Regional Update, Summer 2016

Just a quick update on regional employment in Oregon over the past decade or so. Right now five of the state’s nine regional economies — per our office’s groupings — have regained all of their Great Recession job losses and are currently at all-time highs for employment. Two additional regions are nearly there and will be in the coming months. The two nonmetro or rural regions in the southern half of the state are recovering today but still have a long way to go to regain all of their lost jobs (more on that in a minute).


While the actual number of jobs matters a lot, what we also care about is employment relative to the population. Are there enough jobs for everyone? That is why our office continues to use demographically-adjusted potential labor force figures to gauge the Jobs Gap. This looks at employment relative to the size of the population that would likely be working or looking for work if the economy was firing on all cylinders or at full capacity. The key technical point here is that it adjusts for the aging Baby Boomers as they are entering into retirement in greater numbers these days.

In terms of the Jobs Gap the state overall just last month finally has added enough jobs to catch back up with population growth since the onset of the Great Recession. Two other regions — the North Coast and the Portland Metro — have also closed their Jobs Gap. Two additional regions — Northeastern Oregon and the Columbia Gorge — are close. The remainder of the state has larger Jobs Gaps but they are closing as the economy improves. Central Oregon in particular is seeing robust gains — Bend is adding jobs at a 6-8% annual pace — but given the severity of the Great Recession and the fact that the population continued to increase, the Jobs Gap has yet to fully close.


Just a reminder of how the aging demographics can impact the potential labor force. In rural Oregon in particular we know the potential labor force has been shrinking and in some places will continue to for a few more years. However much of this adjustment has already occurred. Demographics are not expected to weigh on the rural economies nearly as much moving forward, if at all. However, as an example, the Jobs Gap can close both from more jobs and also a smaller potential labor force. So far in Southeastern Oregon the gap has fallen nearly in half since the worst of the Great Recession and its aftermath. This improvement has come, roughly, three-quarters due to employment growth and one-quarter due to the smaller potential labor force.


Overall the economy continues to improve. The majority of the state is seeing a record number of jobs and the growth is finally catching back up to accommodate all the new residents and workers over the past decade. This is certainly good and welcomed news. Even so, the recovery continues to be uneven with rural Oregon, particularly southern counties, still facing the largest Jobs Gap in the state. Growth has returned, these regional economies are on the mend, but further progress is still needed.

Posted by: Josh Lehner | August 2, 2016

Educational Attainment by Generation, Graph of the Week

It’s well documented that college graduates overall have better labor market outcomes than those without degrees. They participate in the labor force more, have a lower unemployment rate and earn higher wages. And in the context of job polarization, a college degree is the surest path to one of those high-wage jobs. In fact, if you dig into the Oregon Employment Department’s latest occupational projections, 79% of the growth in high-wage jobs requires a college degree for an entry-level candidate. If you want to be a competitive applicant for the high-wage jobs, a full 90% of the expected growth requires at least a Bachelor’s degree.

While our office is working on updating some trends and outcomes in higher education — it’s been more than three years since our report on education and student debt in Oregon — I wanted to share some more life cycle work I’ve been doing. This compares trends over one’s lifetime but also across generations or birth cohorts in the state. Previously we looked at how younger generations in Oregon spend more on housing than previous generations did at the same point in their life cycle.

How you read this graph is that each colored line represents an age or birth cohort. These are really 5 year groups, so the 1960 cohort is people born between 1958 and 1962, for example. As you move from left to right, the graph shows the share of the population with a Bachelor’s degree or more across the state. The higher the line the larger the share with a college degree.


The good upshot is educational attainment in Oregon continues to increase. Millennials are, and continue to be on track, to be the best educated generation on record. This is due to the continued increase in the share of young adults enrolling in school. Some of this increase is due to societal trends but some is influenced by the business cycle as job opportunities dry up during recessions, thus reducing the opportunity cost of attending college. However attainment in Oregon also increases due to migration, which disproportionately consists of those with college degrees in recent decades. All told, attainment is increasing with each successive generation which bodes well for future economic growth.

The one exception is the 1960 cohort (gray line). Here the share of the population with a college degree is lower than the 1950 cohort (green line) at every point in the life cycle. I honestly am not sure what is going on here. The national figures show educational attainment flattening with a small dip, but not this large of an effect as seen in the Oregon data. This decline is visible in the published Census 2000 tables, so it’s not just a sample size issue of examining the microdata either.

My initial guess would it has something to do with the timing and the business cycle. The 1950 cohort came of age in the 1970s; a time when Oregon was booming and there was a massive wave of domestic inmigration to the state. The 1960 cohort came of age in the 1980s. Of course in Oregon the 1980s were a much darker economic period and the state actually lost population due to the severity of the early 1980s recession. I suspect this difference is driving these results, however I am not 100% certain here and it’s hard to tell based on the data. Even so, the fact that the college degree gap between the 1950 and 1960 cohort in Oregon has persisted ever since is rather fascinating.

Stay tuned for our higher education update in the coming weeks.


Posted by: Josh Lehner | July 28, 2016

U.S. Regional Job Growth Update, July 2016

Job growth nationwide so far in 2016 is a bit lower than in 2015 but essentially remains on par with recent years overall. However, our office, in addition to the Liscio Report, is hearing increasing chatter among some of our counterparts nationwide about disappointing revenue collections for both withholdings out of paychecks and also retail sales. These data series are very important; they are as real-time as it gets and not subject to revisions barring a banking/accounting error at the Department of Revenue. However they are incredibly noisy.

The question becomes is there a more pronounced economic slowdown taking place or are the disappointing revenues more a function of forecast errors? Below I provide a tl;dr summary for jobs and wages across the country. Sales taxes are a different animal that faces fundamental base erosion in addition to online competition and thus I will demur for the time being. See here for previous thoughts on sales vs income taxes and the impact of aging on revenues. Full slides at the end.

Summary of Key Findings

  • The Oil Patch slowdown is very real.
    • Job growth has slowed considerably in both the West North Central and West South Central regions.
    • Big oil metros are slowing too. Houston has decelerated from about 4% y/y to less than 1%. Oklahoma City has gone from 2% to 1%. Yet the impact is not everywhere. Dallas and Denver continue to see strong gains.
    • Rural counties in the Oil Patch are contracting. Job losses of 2% y/y to end 2015.
  • All other regions are seeing steady job gains, which are typically as strong as those seen during the housing boom, if not stronger
    • Exception is the Mountain division which is both outperforming the nation today and still below its mid-2000s pace.
    • South Atlantic and Pacific divisions are accelerating. Population growth has returned. Housing has turned from drag to driver. This acceleration is offsetting other weaknesses.
  • Nation’s biggest metropolitan areas still driving growth and outperforming rural areas in addition to small and medium sized cities.
    • The typical large metro is growing faster today than during the housing boom.
    • Large metros overall adding jobs nearly on par with the late 1990s growth.
    • Most big cities seeing steady gains in recent years. Some acceleration in places like St. Louis and Philadelphia are offsetting the slowdown in Houston and Oklahoma City overall.
    • Rural America outside of the oil patch counties continues to add jobs, albeit around 0.5% annually so far in recovery.
    • The growth rate differential today between the biggest metros and rural areas is the largest seen since the 1990 recession or the mid-1980s commodity bust.
  • Average wage growth is picking up.
    • However, only East North Central and Pacific wages are growing today about as quickly as during the mid-2000s, in nominal terms.
    • All other regions’ average wages, while improving, are increasing at a slower pace than last expansion, in nominal terms.
    • In real terms, New England, East North Central, West North Central and Pacific divisions seeing stronger average wage gains today.

Please browse our slides of updated regional comparisons our office tracks on a fairly regular basis. This work helps us place Oregon’s performance in perspective across the nation. One of the biggest benefits when it comes to regional economies and tax revenue is knowing what are national or macro trends seen everywhere and what are state-specific trends or issues. Will provide an update to state level Total Employment Gap work next week.


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