Oregon’s economy continues to grow, but questions abound as societal issues take center stage and futuristic technology becomes a reality.
On Thursday Portland Sate University’s Northwest Economic Research Center released its 2019 economic forecast. The report took a top-down approach to Oregon’s economy, examining an array of national and statewide trends, as well as factors specific to the Portland metro area.
“Portland MSA Economic and Population Outlook,” complied by economist Tom Potiowsky, found the Oregon economy firing on all cylinders. But it also contained less auspicious news: Homelessness, trade and automation all present challenges and opportunities for Oregon’s economy.
Here are 10 takeaways:
1. Overall the Oregon economy is rolling.
It’s been a decade since the Great Recession, a national economic slump caused by the subprime mortgage crisis. Oregon has experienced continued economic growth since June of 2011, a result of national economic stimulus efforts. If the Portland economy continues to add jobs throughout the summer, it would be the longest job expansion for the city on record.
While most of Oregon’s economic gains have followed national trends, there are certain areas in which Oregon has jumped ahead. Construction jobs surged 7.5% last year, while the national average was around 4%. Oregon’s thriving tech sector was also ahead of the national average, as were gains from finance, professional and business services.
The leisure and hospitality sector experienced puzzlingly slow growth, lagging behind the national average despite doing well in Clark and Yamhill counties.
Real wages also grew about 5% in 2018, meaning Oregonians have been able to take part in the shared prosperity, at least for the most part.
That said…
2. The boom is likely to slow soon, with a possible dip into recession.
While growth has been buoyed by the federal stimulus package, recent activity at the federal level threatens Oregon’s burgeoning economy. The Trump administration’s tax-cut spending bump has likely run its course and could now prove to be a drag on the economy, as the revenue generated was short-term.
The administration is now weighing a new spending package as part of the election cycle. Since economic gains from tax cuts have already played out, deficit spending is a likely outcome.
The second risk is the Federal Reserve increasing interest rates as the global economy strengthens. By 2020 the Fed expects rates to reach 3%, which will slow fast-growing economies like Oregon.
Another factor to consider is the nativist bent on the national level, which targets both skilled and unskilled foreign talent. The administration’s trade war with China could also create an economic downturn in Oregon as it has in other states, slowing growth and potentially driving recession.
The bottom line is that Oregon’s economy matches fairly closely to national trends overall, so national polcies (good and bad) tend to have a lot of impact. And speaking of national trends with the potential to have a big impact…
3. Self-driving trucks could reshape the economy.
Automation has already had large impact across the manufacturing industry. Between 1990 and 2018, manufacturing jobs fell nearly 27%, while manufacturing output increased 72.3%. The drastic change can be almost exclusively attributed to computers and technical automation, trends which show little signs of slowing.
Our economy now stands on the threshold of autonomously driving trucks, which have already begun to operate in select cites around the country. Truck driving is the most common occupation in Oregon, with more than 34,000 truckers employed across the sate.
Automation of truck driving would not only drastically reduce the number of truck drivers on the road, but also affect the roadside economies that revolve around truck drivers, such as motels and gas stations.
While this may seem like a far-off future, Daimler Trucks North America plans to hire 200 workers to develop self-driving semi trucks. Most of them will work at its headquarters in Portland.
Before you kiss your favorite roadside diner goodbye, the report mentions various legal and practical hurdles driverless trucks still face, including questions of safety and reliability.
The study goes on to mention similar worries about the bank-teller profession with the advent of the ATM, which turned out to evolve the profession rather than replace it directly.
4. Government solutions to homelessness have been a bust.
As of 2017, one in five residents in the Portland metro area reported that they had been personally homeless at some point in their lives. Furthermore, as of January, the report found 3,400 families living without a permanent housing solution, and those numbers only reflect families who have been documented.
The news gets worse, as the report found the impact of governmental rent controls and affordable housing efforts have had insubstantial effects on solving the homelessness crisis.
The report blames ineffectual rent ceilings and high rates of landlord exemption for the inefficacies. While lower rental prices are correlated with lower levels of homelessness, attempts by governing bodies to shift the market have been, and will continue to be, “of little avail.”
The study concluded the state legislature’s passing of the S.B.608 rent-control bill would not likely affect homelessness in an impactful way. There is reason to hope, however…
5. Housing subsidies can effectively fight homelessness.
The study found governmental housing assistance, such as housing choice vouchers or other rent subsidies, effectively reduce the rate of homelessness for participants.
The report found universal rental assistance to be a powerful tool to alleviate the financial burdens of the potentially homeless, but also found that a comprehensive approach would also require funding for shelters and transitional housing.
Furthermore, the study found the best way to prevent homelessness is to stop it before it starts by addressing the needs of at-risk households before their financial burdens overwhelm them. Much as that approach might sound like too little too late, the study ominously found 50,000 metro residents to be at-risk of homelessness.
Both governmental and nonprofit action will be necessary to end the homelessness epidemic. The business community also has a vested interest in helping the homeless become stable job seekers, bringing us to number six…
6. We could reach full employment any time (and may have already).
Job growth has begun to slow as the economy runs closer and closer to full employment.
Full employment does not mean that everyone who wants a job has one, only that cyclical reasons for unemployment have been mitigated, leaving only people who leave work voluntarily, those without the skills to fill available openings and those facing discrimination.
Slow rates of job growth are indicative of companies feeling the strain. While low unemployment is a good thing, as it means those looking for jobs will have more opportunites, once unemployment gets too low, business might struggle to find workers with the skills they need.
7. No surprise here: Amazon has transformed our spending patterns.
Distribution and product-clearing centers, like the kind used by e-commerce platform Amazon, have had big impact on Oregon’s economy. Transport, warehousing and utilities experienced a 3.3% increase in job growth, fueled in large part by Amazon distribution centers in Oregon.
Retail also suffered from competition with internet sales. Despite the surging national economy, retail jobs only grew 0.5% in Oregon.
8. The housing market is back to pre-recession levels, but lessons have been learned from last time.
The housing market in Oregon has blossomed back to pre-recession levels, but housing permits have begun to plateau, the opposite of what occurred during the 2008 financial crisis, when permits exploded well past sustainable levels.
The report also says “house flipping” has reached levels not seen since the peak of the 2006 housing boom. While the news might raise alarms, the report notes that “flippers” have a different financial profile this time around, and have less likelihood of causing economic havoc.
9. There are a ton of immeasurable factors that could come into play.
The report ends with a myriad of factors that could affect Oregon’s economy in coming years. These unknowns include potential boons, like planned expansion from Intel and Adidas, and precarious perils, like potential new tariffs. The report also mentions climate change, noting that while the changing climate has already had economic consequences, it will likely have an intensifying effect over time.
And finally, for a little feel good at the end of this big read…
10. Oregonians love to read.
Perhaps living close to nature sparks imagination, or perhaps Oregonians love Powell’s Books, but publishing grew a smidgeon in Oregon last year, despite an overall decline nationally.
While print is by no means booming in Oregon, it’s proven more resilient than the nation overall, perhaps indicating a cultural soft spot for the industry.
To subscribe to Oregon Business, click here.
