Oregon, like the rest of the country, is stuck with a stubbornly slow economic growth rate, said state economists during August's revenue forecast, and it's behind the national curve for recovery. But there are some bright spots that hint at an end to the slump.
Oregon experienced its third straight quarter of job growth, the longest growth streak since 2007. The bad news is the rate of growth is tiny – just 0.7 percent in the second quarter. Normal job growth is almost twice that rate.
The bad economy has caught up with the public sector, which employs around 18 percent of Oregon's workforce. According to the Office of Economic Analysis, budget shortfalls in the last few years are now converting to layoffs, especially in local government and education. That's put a drag on overall job growth in the near term.
The other major factor affecting job growth is the continuing failure of the housing market, according to economists.
Other economic factors help to paint a bleak picture. In the first half of 2011, estimated GDP growth was 0.8 percent. Personal income growth in June was only 0.1 percent and consumer spending fell 0.2 percent. Chief Economist Mark McMullen told legislators Oregon's economy could suffer as consumer pessimism from the East Coast moves westward.
The bright side? State economists don't think Oregon is headed back into recession. Remember, GDP actually is growing (at a tiny rate), and it has been for a while. Oregon isn't in a recession anymore; we're just still feeling the symptoms.
Risks for the future
The Office of Economic Analysis always lists risks to the economy – the things most likely to send the economy back into a recession. At this forecast, economists said the likelihood of returning to a recession is a little stronger, due to the following factors:
- Contagion of the credit crunch and financial market instability: While credit markets finally are easing, the Congressional deadlock over the debt ceiling could have lingering impacts on the national economy.
- Prolonged housing market instability: The housing market looks like it finally hit bottom in Oregon. Foreclosure rates are high and economists expect to see major corrections to the housing market this year.
- Commodity price inflation: The supply chain crisis caused by Japan's natural disaster is starting to ease and oil and food prices are coming down. Industrial and precious metals prices are on the rise, however, and economists warn there could be a commodity price inflation spike.
- Loss of federal timber payments to Oregon counties: The 2012 federal budget includes reduced timber payments, which will make it more difficult for some rural local governments to balance their budgets.
- Global trouble: The European debt crisis, political unrest in the Middle East and property bubbles in South America and Asia are affecting the American economy; by how much remains to be seen.
- State and local governments: Balancing the budget continues to be a problem at the state and local levels, where tax revenues continue to fall.
- Undoing the federal policy used to combat the financial crisis and recession: Economists warn the government needs to be smart about its exit strategy from the recent bailouts, tax cuts and stimulus initiatives or else recovery could be stymied and inflation stoked.
- Initiatives, referenda and referrals: This is a perennial issue for the state budget. The state cannot budget for unforeseen state mandates at the ballot box. Economists warn they could have sweeping impacts on the Oregon economy.
From the vantage point at CFM's downtown Portland office, we've seen a few positive signs: A new Starbucks is opening in a commercial space that's been vacant for almost two years; NikeTown is moving into a bigger and better space, and Pioneer Place mall doesn't feel quite as empty.
On the flip side, though, the construction crane for the proposed Park Avenue West building behind Nordstrom has been idle for more than a year. It's one of downtown Portland's biggest construction projects, reminding everyone the effects of this recession still linger. It's one of downtown Portland's biggest construction projects, reminding every one the effects of this recession still linger.