Back in late May I was fortunate enough to part of the Southern Oregon Economic Summit in Medford which was a joint venture by the Home Builders Association of Jackson County and the Rogue Valley Association of Realtors. Given the severity of the economic (and housing) cycle in Southern Oregon in the past decade coupled with the recent improvements, it made for a great time to hold the event. That, plus the big draw of the summit was that they were able to get both Lawrence Yun, Chief Economist for the National Association of Realtors and David Crowe, Chief Economist for the National Association of Home Builders. Plus me. It was a very informative session and I wanted to share both some highlights from the two presentations and copies of their slides for those of you interested in browsing a great treasure trove of facts and figures.
Posted in Demographics, Housing, News | Tags: 2013, buyer traffic, chief economist, credit conditions, david crowe, economic summit, economist, Forecast, home builders, home buyer credit scores, home buyers survey, home price forecast, home prices, homeowner households, homes, household formation, Housing, housing forecast, housing outlook, housing starts, housing starts by state, investment, lawrence yun, medford, NAHB, NAR, national association of home builders, national association of realtors, new construction, Oregon, outlook, Prices, REALTOR Survey, realtors, rentrer households, sales, seller traffic, shadow inventory, southern oregon economic summit, starts, vacation, what home buyers want
Due to life circumstances, I will be out of the office for a few weeks and then likely only back on a part-time basis through the summer. As a result, blogging activity is likely to be lower. However, I am working on writing and scheduling a number of posts in advance for your enjoyment while I am out. More importantly, I am getting Mark and Kanhaiya signed up as official blog authors so they can post as well. Hopefully all of this will still provide you with your latest and greatest look at the Oregon economy from employment to demographics to revenue and the like. In the meantime, I hope everyone is able to enjoy their summer.
Given that economists have two graphs to explain everything, I’ll leave you with this as the reason for my hiatus. The dotted lines are the original distribution while the solid lines are the updated probabilities conditional on the fact that it hasn’t happened just yet
In recent quarters, Andre Harboe has been doing good work in our office on creating and using some unique, or offbeat, economic indicators, or at least in terms of regional or state economies. For the March forecast, Andre worked on turning the Employment Department’s Around the State news publications into a good news – bad news ratio that does, in fact, lead the business cycle or at least employment in Oregon. This quarter, Andre disaggregated and reworked ODOT’s vehicle miles traveled (VMT) data into passenger vehicles compared with trucks and buses, and their longer-term trends and business cycle patterns. At the national level Calculated Risk tracks both the diesel fuel index and ATA trucking index. The purpose being that these are measures of business activity, and therefore economic activity. State level measures like this are not readily available that we could find, so Andre analyzed and reworked some of the Oregon data to produce the following. Furthermore, comparisons in overall VMT trends among western states is discussed. This is excerpted from the May forecast document, specifically the western section.
Vehicle miles traveled is an important measure to examine on a number of fronts as it is simultaneously a measure of economic activity (the movement of goods) and personal travel patterns. Given the data available, distinguishing between these two components of VMT is technically complicated, however important from an economic analysis point of view. In consultation with both the U.S. and Oregon Departments of Transportation, the following breaks down the available data for Oregon and then compares VMT trends across western states.
Divergence in Vehicle Miles Traveled
The [graph below] shows the growth in VMT in Oregon and nationwide. Historically, recessions would slow the growth in VMT or cause it to dip slightly, but it would subsequently resume its growth as economic activity rebounded and consumers drove more. This did not happen in the last recession. Even though Real GDP has rebounded from 2007 highs, VMT has not.
There are many theories for this lack of growth: high gas prices, a lackluster economic expansion, aging population, telecommuting, availability of mass transit, changing driving culture, particularly among today’s youth, etc. What is interesting is that Oregon began this trend well before the previous recession and diverged from the national trend in 2000.
From 1979 till 2000, Oregon’s VMT growth mirrored that of the nation. The divergence began in the 2001 recession and the trend lines have not met since. VMT at the economic peak in 2006 was essentially the same as that in 1999.
Breaking Oregon’s VMT numbers down by rural and urban roads reveal divergent patterns. Urban VMT is 15 percent above their 1999 base (which translates into an increase of about 2.4 billion miles) but has remained essentially flat since 2008. While growth in Oregon’s urban VMT was fairly slow overall, the lack of increased VMT following the recession mirrors the national trends. Rural VMT has lost about 20 percent since 1999 (this translates into a loss of 3.7 billion actual VMT) and has also remained fairly flat since 2008.
Deciphering economic activity from personal driving within the VMT data is difficult. However, a meaningful proxy is to separate passenger vehicles from larger trucks. Some passenger vehicles are used for business purposes and represent underlying economic activity, however the converse is not true to the same degree. Not many VMT by large trucks can reasonably considered personal travel. Overall in Oregon, VMT traveled by trucks and buses since 1999 has grown by 24 percent. A large increase in 2006 was mainly due to growth in combination trucks being driven on rural roads, i.e. logging trucks.
The Great Recession had a large negative impact on truck miles traveled as the movement of goods stopped as businesses sold fewer products and therefore did not need to replenish inventories as quickly. This large loss happened over a year before the recession began and the recovery commenced in the middle of the recession. This also occurred in the 2001 recession where truck and bus miles fell more than a year before the recession and was well into recovery during the recession. Since its low point in 2007, there has been a swift recovery in truck miles and in 2011 this category of VMT was 21 percent higher. Light trucks (under 10,000 lbs), passenger cars and motorcycles on the other hand are 3 percent lower than in 2008 and 7 percent lower than in 1999.
As with all data, there are some caveats. VMT is an estimate created by the Oregon Department of Transportation. Some 5,000 miles of rural roads have been removed from VMT calculations. In addition, 2,000 miles of rural roads were redefined as urban due to the 2000 Census, artificially lowering rural VMT miles.
Comparing Oregon to other western states in terms of growth in vehicle miles traveled illustrates the dichotomy between states. Each state has experienced its own path in terms of driver behavior, economic activity, population growth and the like. Oregon posted the lowest overall growth in VMT compared with regional neighbors. Oregon was also the only state to have growth below the national average since 1980. VMT growth in Oregon over this period was 75 percent – that is, VMT in Oregon today is 75 larger than in 1980 – while the nation as a whole experienced a 98 percent increase. Nevada had the highest growth among all western states at nearly 300 percent. Arizona was not far behind at well over 200 percent growth.
The above mentioned numbers do not adjust for population growth within the states, which is a large determinant of total VMT. When one looks at annual vehicle miles traveled per capita and chart out its growth, Nevada goes from having the highest growth to one of the lowest. The state underwent very strong population growth during this time period and even as VMT per capita remains relatively low, the fact that the population of the state increased approximately 330 percent led to the gains in VMT. On the other hand, Arizona experienced large population gains but an even larger increase in VMT. This results in Arizona being the only western state that is at or above the national average in terms of per capita VMT. At this point in time it is unclear, entirely, what constitutes the large gains seen in Arizona in the mid-1980s. A large amount of work on Interstate 10 in and around Phoenix occurred during this time, ultimately being completed through downtown Phoenix in 1990. These changes likely resulted in some of these gains.
Oregon Peaked in 1999 with an average of 10,218 vehicle miles traveled per capita. It has since fallen by 15 percent to 8,651 in 2011. Since the Great Recession, the average VMT miles traveled per capita fell by 7.3 percent since 2007.
Looking at VMT per nonfarm job, however, shows an opposite effect. As the Great Recession began, VMT per nonfarm job was an average of 20,600 for the western states. It grew to 22,500 in 2011. This makes sense as the number of jobs fell, vehicle miles traveled did not drop as fast as employment, increasing its ratio.
Following up on the previous overview of the latest state GDP release, the following provides a look into the manufacturing sector. One question commonly asked is “Why does Oregon rank so well in terms of GDP?” Our office’s reply is at least two-fold. First, state GDP is not the be-all end-all for economic measures when examining a regional economy. Oregon tends to rank low in terms of per capita income growth and the past few years around the middle of the pack for employment growth. The truth of the Oregon economy is somewhere in the middle between our lower income ranking and high state GDP ranking. Second, our manufacturing sector (durable goods, computer and electronic products, in particular) is very productive and on an economic, value-added basis really drives a lot of the growth.
When examining the state GDP figures, as the BEA noted, durable goods manufacturing was the leading driver of growth in 7 out of the 8 regions in the country and in Oregon it accounted for 2.9 of the 3.9% growth in 2012. As a share of the state’s economy, manufacturing output was 39% in the total in 2012 which is triple what the national average was last year (12.5%). The relative rankings among all states can be seen below. It must be noted that some of this Oregon figure has to do with the recent and on-going expansion at Intel. For example, back in 2007, Oregon’s manufacturing sector accounted for about 25% of output, double the national average. The 2012 figure of 39% reflects both a lackluster recovery in other sectors and the strong growth, partially driven by the expansion, in the manufacturing industry.
Not only does manufacturing account for a large portion of the state’s economic output, we also know it is a relatively large employment industry when compared with other states. In 2012 manufacturing jobs were 10.5% of the Oregon statewide total, compared with the national average of 8.9%. As seen in the scatter plot below, the share of employment in manufacturing is highly correlated with the share of a state’s economic output due to manufacturing. This should not be a surprise, obviously. However, what really jumps out is how far above the trend line Oregon is. Our economic output is significantly larger than our employment share alone would indicate. Again, recent years data is somewhat distorted due to the expansions (obviously this is a very good thing!), but if you were to use the pre-recession, 2007 figures as shown below, Oregon still outperforms the trend line by about 10 percentage points.
One reason for Oregon’s being significantly above the trend line (and why other states are further away as well, either above or below) is due to the composition within the manufacturing sector. Not all manufacturing industries are created equal in terms of employment, wages or output and in Oregon we happen to have a significant number of the highly productive types. The states above the trend line likewise tend to have a manufacturing breakdown of more highly productive sectors and less of the lower productivity sectors. The opposite is true for the states below the trend line. In terms of which sectors are more productive than others, the graph below shows economic output per worker for the nation overall. (Taking BEA industry output divided by BEA employment by industry)
Oregon’s manufacturing employment follows a somewhat similar pattern, with our largest sub-sector being the second most productive at the national level.
Putting all of the above together yields strong state GDP figures for Oregon. Moving forward, our office expects a) the economic expansion to continue and even pickup somewhat, particularly in terms of jobs and b) Oregon to continue to grow a bit faster than the average state. Also, as the economy strengthens across all sectors, the share of the state’s output due to manufacturing is likely to fall (likewise after the expansions are completed) but for good reasons, not bad.
Posted in Employment, Miscellaneous, News, State Comparisons | Tags: 2011, 2012, BEA, Comparison, computer and electronic products, economic output, Employment, employment share, GDP, gdp figures, high technology, importance of manufacturing, manufacturing, manufacturing employment, manufacturing productivity, manufacturing share, manufacturing size, Oregon, oregon economy, output, output per worker, productivity, relative rankings, scatter plot, State, State Comparison, state gdp, value added
This morning the BEA released estimates for state GDP for 2012, along with revisions to the 2009-2011 figures. The following takes a quick look at the latest figures and growth so far in recovery.
In 2012, Oregon’s real GDP grew 3.9% which ranks 3rd strongest in the country behind North Dakota (13.4%) and Texas (4.8%) and ahead of the U.S. overall (2.5%). Oregon’s economy, which is more volatile than the average state, has consistently grown faster than the nation in good times and performed worse in bad times. With the most recent economic expansion beginning in 2009, even as lackluster as it has been, the state has outperformed the average state each of the past 3 years with relative rankings of all states of 4th, 4th and 3rd strongest.
In terms of which industry or industries are driving the growth, it really has to do with our strong manufacturing sector. Not only does Oregon have a larger manufacturing sector, relative to the economy, it is also highly productive, particularly our computer and electronic manufacturing industry. With the rebound in electronics in recent years (even if PC sales are slipping) and both the first phase and second phase of the Intel expansion in Hillsboro, it is no surprise to see the industry driving growth in the state. According to the BEA release, Oregon’s durable goods manufacturing accounted for 2.9% of the 3.9% growth in 2012.
Overall across the country, manufacturing tended to lead real GDP growth with durable goods leading 22 individual states and 7 out of the 8 BEA regions. Financial Activites – particularly the finance and insurance portions – also was a strong contributor across the country. Finally, as can be seen in the relative rankings below, mining was a large contributor to a few states even if not to the nation as a whole. In North Dakota, according to the BEA, mining directly accounted for 3.3% of the 13.4% growth.
The last graph illustrates real GDP growth in expansion for all states.
Based on a media request, I am also pulling together a bit more on manufacturing and will post a follow-up shortly.
A common refrain one hears goes along the lines that the U.S. subsidizes rural areas and living, while the metro areas generate more in tax revenue than they receive in benefits, or something along those lines. There are multiple components and questions that go into such a statement: where does the revenue come from, where is the money spent, on which types of programs, are their “makers” and “takers” when looking at revenues minus expenditures, are we looking strictly at actual revenues and expenditures or are we debt financing some, etc. I do not have an answer to most of those, but what I do have are federal expenditures by type on a regional basis.
The following is based on a recent inquiry to our office and I have tried to produce a few summary graphs and maps. All the data comes from the Census Bureau’s Consolidated Federal Funds report however I am using the USDA’s categorizations of the data. Unfortunately Census program was terminated last summer and the latest data is 2010. This is my first real foray into this data so if you are more familiar with it and have good insights I am missing, please let me know and I will update. A complete set of slides, including more information and figures, is available here in PDF format: USDA Federal Expenditures 2010.
First a few caveats. The actual level of federal dollars does follow the population centers and in Oregon that means the Willamette Valley, in order to view regional differences I calculate all of the following on a per capita basis. I have also subtracted out direct federal wages and salaries. Oregon does not have much of a federal employment footprint, but to try and get at the underlying spending I am leaving out these employees’ direct wages. Finally, there are some issues with assigning all of the money to a specific county. About 6-7% of the money flowing to Oregon in 2010 was unallocated to a specific county, so there are slightly different numbers when looking at the statewide total compared with the county sum. Furthermore, it does appear that Marion county is pretty high on the list for a number of categories and I suspect that some of this is due to federal dollars transferring to Salem that state government would then redistribute across Oregon, but in the data counts as Marion dollars.
With all of that being said, per capita federal spending in 2010 looks like the following. Effectively, the counties that are green are above average in terms of spending per capita, yellow and blue counties are average, while orange and red are below.
The next graph looks at the same data but strictly on a regional basis. There are some variations across the state when looking at total federal spending, but not much, or at least not as much as I had suspected going in. The exception being Central Oregon, which is a third lower than the national average. The only real variations are that the South Coast, Willamette Valley and NE Oregon are a little bit higher, while Portland is lower. As we’ll see there are some clear reasons for this. Again, overall I think this federal expenditures per capita is consistent across regions, even if individual counties do vary a bit more.
The majority of the spending is in Income Security. At the national level, 54% of spending is in this overarching group while in Oregon it is 60%. Income Security includes medical and hospital benefits, public assistance and unemployment compensation, retirement, disability and survivors social security payments. In terms of how large each of these components are, in 2010 about 1/3 of Income Security was for the medical and hospital benefits (likely medicaid and possibly medicare), 1/6 for assistance and unemployment benefits, and 1/2 for retirement, disability and survivors social security. Spending in these components can be driven by different variables including, income levels, poverty rates, economic conditions and demographics. The larger metropolitan areas have higher per capita incomes, which result in lower per capita spending on need-based or income-based programs. Unemployment benefits largely reflect local economic conditions (which do impact income levels as well). Finally, retirement and social security payments reflect demographics and as some of Oregon’s rural areas are aging fastest (partially due to younger age groups moving away), on a per capita basis these payments are higher. I believe these factors can be seen in the regional differences below. Portland has the lowest per capita Income Security payments and it is not because they don’t have low income individuals, or unemployed individuals or old people, it’s that these populations make up a smaller share of the overall population than in other areas. Conversely, the Southern Coast has lower per capita income levels and the most pronounced demographic change in the state, resulting in higher per capita figures for Income Security.
In terms of the non-Income Security expenditures, the graph below shows per capita payments for Community, National, and Defense. Defense (it also includes Space) is probably the easiest to explain and overall Oregon does not receive much in the way of defense spending compared with the rest of the country. We do not have a large military presense in the state, however we do have some defense contractors in the Portland region, but particularly in the Columbia Gorge and then the higher levels of spending in Northeast Oregon is likely related to the Umatilla Chemcial Depot. National Function spending is for items like law enforcement, energy, higher education and all other spending. In Oregon the majority of this money is for higher education, which goes to Portland and the Willamette Valley given that is where the larger universities are located. Community consists of business assistance, regional development, environmental protection, housing and transportation. Again, the majority of these funds are in Portland and the Valley. 78% of the Community funds were related to housing with nearly 90% of this going to guaranteed loans for mortgage insurance. A couple of notes on this: it would be interesting to see how much this changes over time, given that the mortgage market today is effectively all government loans with the private market still not back very much and second, high spending on these in the Valley and Portland is not that much of a surprise given homes in these ares tend to cost more than other regions of the state, on average. Another 15% of Community funds were for transportation projects, mostly highway work.
The last category presented here is Agriculture. Oregon receives a bit more than the national average in terms of these expenditures. About a quarter of these payments in 2010 were for crop insurance, another quarter were in other assistance programs that support farms through various provisions when the harvest is poor or disaster strikes. Another quarter, approximately, goes to forest and land management which includes conservation work and wildfire funds, among others. The last quarter of these agriculture expenditures includes water and recreational resource programs. Given that the largest individual item within all of these groups is crop insurance, it is not surprising to see Oregon’s wheat counties rank highest. (Also the lower population counts in Gilliam and Sherman help with high per capita figures)
Finally, the last item of note is that all of the above refers to federal spending and does not discuss where the money comes from. If you look at the pattern of revenue collections they tend to follow where the higher incomes are. Higher income individuals and families pay higher tax rates and have larger tax bills, but they also buy more goods and services (for sales tax states) and tend to have higher valued homes (property taxes). Mixing apples and oranges a bit by bringing in state personal income tax collections as an example, but in 2010 the Portland MSA accounted for about 47% of the state’s population, 52% of the state’s adjusted gross income but 59% of its taxable income, as reported by the Department of Revenue. This, of course, ignores all the other fees, fines and taxes that are on a per transaction or per year basis (gas tax, e.g.) that are not income-contingent. Once you include these items, revenues are less of a function of income level but even still, more revenue tends to come from the larger metropolitan areas where incomes are generally higher.
A complete set of slides, including more information and figures, is available here in PDF format: USDA Federal Expenditures 2010.
Continuing with the regional series and following up on the recent posts on Oregon’s timber counties and their outlook and the South Coast economy, this post takes a quick historical overview of the Southern Oregon economy. From the 1970s through the mid-2000s the region kept pace with the state overall and actually outpaced it in some regards, even with some major structural changes occurring. The chief structural change being the decline of timber-related employment, however strong growth, particularly in Medford, helped to offset some of these losses in the region overall. In recent years, the housing downturn had a much more pronounced impact in the region than the average region or state for that matter with employment just now beginning to improve on a sustained basis.
The three county regional definition is how our office examines the various parts of the state while the Oregon Employment Department actually separates Douglas into its own region (Region 6) and Jackson and Josephine into one combined region (Region 8). Here is how the Employment Department summarizes the local economy:
…Among the major industries in Douglas County, lumber and wood products, which comprise about 10 percent of the county’s total private sector employment, is the largest in manufacturing. Douglas County contains nearly 2.8 million acres in commercial forest lands. The county is the second largest producer in the state with 13 percent of the total timber harvest for Oregon in 2011….
…Major industries in [Jackson and Josephine] include wood products, agriculture, and tourism. Employment in wood products has fallen in recent years, but an increase in food manufacturing employment has somewhat offset the loss. Growth of the retirement sector has added employment in retail trade and services, especially health care.
Even with these larger sectoral shifts taking place , it is important to take a look at a region’s industry structure. Below are 2010 location quotients for Southern Oregon. Location quotients compare the relative size of industries across locations allowing one to see which industries a particular area has a concentration in, or possibly a comparative advantage. A value equal to 1 means the percentage of employment in that industry is the same as the percentage at the national level, while values greater than 1 mean the local area has a higher concentration in that particular industry and values less than 1 are the opposite
In terms of historical employment changes, the graph below compares the relative performance in job growth between Southern Oregon and the state overall. At this top level employment look, there are really two time period here: pre-2000 and post-2000. From the 1970s through 2000, overall employment effectively grew right along with the state as a whole, even if the recessions of the early 1980s and 1990 were a bit more pronounced. This growth was much faster than the U.S. overall as during this period the state grew about 40% more than the nation.
From 2000 through today the region underwent a stronger expansion during the housing boom – partially a function of having a less severe dotcom bust – but then an even more severe housing downturn. Specifically, Medford’s experience during the Great Recession and so far into recovery has been at approximately the 10th percentile when compared with all the MSAs in the country. That is, Medford has outperformed about 30-40 other MSAs across the country but experienced worse conditions than the remaining 330, or so depending upon the data set used. Part of the housing boom leading up to the bust was influenced by an influx of new migrants, particularly from California. See the Oregon timber counties post for more on the influx of these migrants and the county population forecast post for more on the demographic outlook more generally.
The unemployment rate for the region largely follows a similar pattern but is generally higher than the statewide numbers.
The next graph compares the four recessions in the past 35 years and their impact on the region’s employment. The early 1980s recession in the region was certainly severe, with job losses reaching over 14%, while statewide losses were approximately 12%, however the growth coming out of the early 1980s recession was equally strong as the decline going in. While it took over 6 years to regain the losses in Southern Oregon, the overall pattern is more of the V-shaped recession, albeit a deep one. Contrast that with today, however, where the severity was nearly the same yet a sustained recovery has been lacking and today, employment is in a much worse relative position than the corresponding period back in the 1980s.
The lackluster recovery can generally be explained by two important industry trends in recent years – housing and government – both of which play a more prominent role in smaller metropolitan areas and certainly more rural areas. With housing just now returning to strong growth, from a very low base, and state and local governments stabilizing, growth is expected to return and pickup moving forward. In fact, as shown previously, the private sector in Medford has been growing pretty well over the past year and we expect that to continue moving forward. For comparison purposes, click here for the state equivalent of the graph.
Finally, these last two graphs illustrate the region’s personal income over the past 42 years. For those interested, this data comes from the BEA but is only available at the local level through 2011 at the moment. On an inflation-adjusted basis, regional personal income per capita has largely followed the pattern seen by regions of the state outside of Portland. Over the full time period, growth has been a bit faster given the relative differences seen in the 1970s compared to today, however there are no major discrepancies in the growth paths. In terms of recession comparisons, the second graph again illustrates the severity of the two major recessions in the region and the relative changes when compared with statewide trends. The Great Recession’s impact is more severe than the early 1980s for the region.
For much more information on the Southern Oregon economy, I would suggest reading and reviewing the Employment Department’s work. They have two regional economists given their breakdown of the state. Guy Tauer covers Region 8 (Jackson and Josephine) and has written numerous articles over the years (see here for a list), in addition to also covering Region 7 (Curry and Coos). Brian Rooney covers Region 6 (Douglas) and likewise has written lots of good articles over the years (see his list of publications) that contain more information and data, while also covering Region 5 (Lane).
Lastly, I would also highlight a recent Feb 2013 set of slides (PDF) for Josephine county that contains recent trends of employment, travel spending, airport traffic, building permits, population changes and regional job vacancies.
Posted in Employment, Income, Miscellaneous, News | Tags: Counties, County, douglas, early 1980s, Economic, economic comparison, Economy, Employment, Expansion, gains, grants pass, Great Recession, Historical, History, jackson, Jobs, josephine, Losses, medford, Oregon, Recession, recession comparison, region, Regional, roseburg, southern, southern oregon, Timber
Following up on the recent post on Oregon’s timber counties and their outlook, and continuing with the regional series of posts, the following provides a quick, mostly graphical, historical overview of the Southern Coast. Similar to the rest of the state outside of Portland, the region has experienced two severe recessions – the early 1980s and the Great Recession – and two mild recessions – 1990 and 2001 – over the past 35 years. The key difference is the extent, severity and duration of the early 1980s recession in Coos County. That recession was the worst regional recession on record in Oregon’s history – for which we have data and we do not for the Great Depression – and the only thing that approaches it is the recent housing-led downturn in Bend. On net, the Southern Coast did not fully regain the total number of lost jobs from the early 80s recession until 1996, some 17 years after employment peaked in 1979.
The Oregon Employment Department has provides a very good, succinct summary on its regional page (Region 7):
Employment in natural-resource industries, such as wood products and fishing, has decreased in recent years. Of increasing importance are retirement income and tourism. Growth of the retirement sector has added employment in retail trade and services, especially health care.
Even with these larger sectoral shifts taking place , it is important to take a look at a region’s industry structure. Below are 2010 location quotients for Oregon’s Southern Coast. Location quotients compare the relative size of industries across locations allowing one to see which industries a particular area has a concentration in, or possibly a comparative advantage. A value equal to 1 means the percentage of employment in that industry is the same as the percentage at the national level, while values greater than 1 mean the local area has a higher concentration in that particular industry and values less than 1 are the opposite
In terms of historical employment changes, the graph below compares the relative performance in job growth between the Southern Coast and the state overall. The impact of the early 1980s recession is apparent, as is the recovery through the late 80s and into the 90s. It wasn’t until the housing boom, with an influx of migrants helping to contribute, that the region saw employment growth rates above the state average. See the Oregon timber counties post for more on the influx of migrants and the county population forecast post for more on the demographic outlook.
The unemployment rate for the region follows a similar pattern.
The next graph compares the four recessions in the past 35 years and their impact on the region’s employment. The aftermath of the housing bust and Great Recession has taken a large toll on the region, however job losses were approximately 5 percentage points worse during the early 80s. For comparison purposes, click here for the state equivalent of the graph.
Finally, these last two graphs illustrate the region’s personal income over the past 42 years. For those interested, this data comes from the BEA but is only available at the local level through 2011 at the moment. On an inflation-adjusted basis, the region’s personal income per capita has largely followed the pattern seen by regions of the state outside of Portland, albeit a bit slower in recent decades. In terms of recession comparisons, the second graph again illustrates the severity of the two major recessions in the region and the relative changes when compared with statewide trends.
For much more information, I would suggest reading and reviewing the Employment Department’s work. Their regional economist, Guy Tauer, has written numerous articles over the years (see here for a list) and I would also recommend two of his slide presentations. For the most up to date, see this Dec 2012 set of slides (PDF) that covers recent trends, travel spending and demographics. I would also highlight this Dec 2009 set of slides that also covers household income, poverty rates and historical population changes, for those interested.
Posted in Demographics, Employment, Income, Miscellaneous, News | Tags: 1980s, 80s, coast, coos, coos bay, curry, Demographics, early 1980s, economic comparison, Employment, Expansion, Great Recession, Historical, History, Income, industry, job, Jobs, location quotient, mill, Oregon, Personal Income, Population, Rate, recesion, Recession, recession comparison, Recovery, south, southern, structure, Unemployment
Given the importance of the ongoing discussions at the local, state and federal levels regarding timber payments and funding county governments, and the fact I was down in Medford last week for the Southern Oregon Economic Summit, I wanted to provide some updated research and an overview of the issue. I will have much more on the housing outlook from the summit, which was sponsored by both the home builders and realtors, but for now I want to concentrate on the timber payments issues, the regional economy and the outlook. For definitional purposes, I am defining Southern Oregon as Douglas, Jackson and Josephine counties while the Southern Coast is Coos and Curry counties.
First, a quick graphical representation of the changes in the wood products industry over the past 66 years in the state. These industry jobs are primarily the mills and loggers. For a more thorough look at the industry changes please refer to this previous post on the industry’s history or this recent Oregonian article. I will highlight just a couple items. First, the industry used to have 70,000-80,000 jobs that paid about 35% above the state average and was a major economic strength at that time. Following the early 1980s recession, when the industry underwent a major restructuring, the industry regained its level of output but not employment as the retooled mills were much more productive, automated and mechanized, requiring less workers for the same output. Obviously the environmental restrictions put in place in the early 1990s had a major impact on the industry as harvest levels on publicly owned lands declined substantially, however the process of technological improvement continued, resulting in less employment. The Great Recession and housing bust wiped out about one third of the remaining industry jobs however at least some are being added back today, with employment up about 2,000 from the recessionary lows.
While the above is for the state overall, the industry has a clear geographic footprint. In 2012, Southern Oregon and the Southern Coast accounted for 12% of the state’s population, 10% of employment but 31% of the wood products and logging jobs. Historically the local and county governments received a share of the timber harvest revenue however as harvest levels declined so too did this funding source. In its place the federal government instituted timber county payments to help support these local and county governments. As seen in the graph below, which comes from the Oregon Secretary of State’s 2012 county audit report (see PDF page 9) these funds comprised a sizable portion of the counties’ budgets, however these revenues have not been extended by Congress and are now gone, at least for the time being and possibly forever. While the graph illustrates just the BLM revenues, and there are other funding streams, it is representative of the regional impact. For more information on the history of and historical values of these timber-related revenues, see the previous post or Oregonian article linked above.
Another aspect of the timber-related revenues is it did allow for these counties to have lower property taxes. The map below comes from the Oregon Department of Revenue’s FY2012-13 property tax report (see PDF page 13). The numbers represent the effective property tax rate by county for all classes of properties, not just residential. With low property tax rates, and much of the land within these counties being publicly owned (about 61% on the Southern Coast, 51% in Southern Oregon), coupled with tough economic conditions, it makes it difficult to fully fund and provide public services today. That is why local counties have gone to the voters in recent years for different measures or levies. Recently Curry and Josephine county residents voted down public safety levies, however Lane county did pass theirs.
As part of the economic summit in Medford last week there was a panel discussion that included county commissioners from both Jackson and Josephine counties. Cherryl Walker, vice chair of Josephine county, was relatively upbeat and optimistic about their outlook. To paraphrase some of her comments, even with the recent vote, which at that time was little more than 1 day old, it is not like the county is going to give up and not provide services. They will continue to manage through the best they can and find it encouraging that the latest vote was decided by just a couple percentage points as opposed to the previous vote that lost by a wide margin.
In terms of the regional outlook, there are two primary factors our office is looking at: industry structure and population. Oregon has been and will always be to a certain extent a natural resource state. From the wheat out east to the crops in the valley to the fishing on the Columbia River or off the coast to the timber in the south, these industries will remain a fundamental part to the state and regional economies. With that being said, Oregon’s rural economy has been restructuring, and will continue to evolve, with service industries leading growth. When a smaller area loses its traditional economic base, the common refrain one hears from the development community is to become a tourism hub or to try to gain a portion of the growing medical sector as the population ages. Although these are often successful strategies, to be honest, not everywhere can become a hub for either or both of these things.
Industrial transitions are often a painful process and there will be localities that will make the transition better than others. So far, Jackson and Josephine counties are seeing stronger growth in the service industries than their neighboring counties, and therefore, not surprisingly, better overall job growth. Part of their relative strength is due to their institutions of higher education (Southern Oregon University and Rogue Community College) and expanding medical sector. This is not to say everything is perfect, but it does indicate that the fundamentals of growth moving forward are a bit stronger. Furthermore, continued investments in the local workforce via education and training, plus maintaining and upgrading infrastructure are vital for future growth.
In addition to the local industry structure, an important component of economic growth in Oregon is our net in-migration and growing population. At the May 2013 forecast release, Mark and the revenue committees discussed some of the demographic trends and concerns in the state and in particular the more rural areas where the natural increase in the population (births minus deaths) has already turned negative or is about to. These demographic trends are most pronounced along the Southern Coast but also prominent in Southern Oregon. As discussed in more depth previously, all of the population growth in these regions is projected to be due to in-migration.
In terms of migration, Oregon does attract both the young, educated workers but also some retirees or near-retirement age individuals. Overall in the U.S. there has been a many decades long trend in migration away from the northeast and mid-west to the south and west, however along the west coast the migration trends are northward. Oregon receives the vast majority of its net in-migrants from California and also loses population to Washington (and Idaho for that matter). This pattern of California in-migrants is even more pronounced in our southern counties, as seen below (data from the IRS).
One of the items our office has been following is migration patterns and flows over time. With the Great Recession and housing bust, overall migration flows are down as less people are moving given some are trapped in their underwater homes but also given the lack of job opportunities throughout the country (save for the energy states). What hasn’t really changed is the pattern of migration. Most in-migrants, again, come from California but the state overall does receive a little bit from everywhere else in the country. We find it encouraging that the patterns remain even if the flows are down. As the economy continues to recover and job opportunities increase, we expect the number of migrants to increase and drive population growth moving forward, which will further help economic growth.
Given all of the above, the economic outlook for the southern regional economies really does flow directly from these issues. As the economy continues to improve, so too should migration flows which will bring an influx of new residents. The housing recovery is here, which has a more pronounced impact on economic growth in the medium and smaller sized cities, and along with it the demand for wood products. With all this being said the longer term growth is likely to be driven by the service sectors of the economy. On the downside, the aging demographics in the state and the regions will weigh on growth and over time the manufacturing sector has not been a source of net employment gains. Finally, while our office expects state and local governments overall in Oregon to stabilize in 2013, the southern counties are likely to face at least another year of layoffs and cutbacks, particularly in light of the recent votes in Curry and Josephine counties.
I have a plethora of regional economic graphs for both Southern Oregon and the Southern Coast that I plan on posting in the next day or two. Given the length of this post, these will largely be without comment but should provide some more clarity in terms of historical trends and economic performance, including recession comparisons. In the meantime, for more information on these counties, please refer to the Oregon Employment Department’s website (click on the map in the upper right-hand corner).
Posted in Demographics, Employment, Housing, Miscellaneous, News, Revenue | Tags: California, california migrants, coast, coos, Counties, County, curry, Demographics, douglas, Economic, Economy, Employment, Forecast, Growth, industry structure, jackson, Jobs, josephine, Labor Force, loggers, Logging, migration, mills, Oregon, outlook, Payments, Population, property tax, services, southern, Timber, timber payments, Wood Products
- Personal income tax collections this filing season have been slightly ahead of forecast in recent months, resulting in an upward revision to the near-term revenue outlook
- Stronger Corporate tax collections now results in a projected kicker for 2011-13 as the May forecast projects corporate revenues to be 2.3% above the Close of Session
- This projected kicker, while small by historical standards, results in less available resources in 2013-15 BN when it is credited to corporations
- A slightly more optimistic economic outlook also contributes to an upward revision to the 2013-15 BN tax collections
- All told, 11-13 General Fund and Lottery Fund available resources are up $126.3 million relative to the March forecast, however due to increased expenditures the ending balance estimate is up $115.1 million
- 2013-15 BN General Fund revenues are revised higher by about $141.8 million and Lottery Fund resources are raised $14.6 million for a total revenue increase of $156.4 million
This morning our office released the May 2013 quarterly economic and revenue forecast. The full document, files and slides may be found over on our main website. You should also be able to follow along online in Hearing Room A.
Overall the outlook remains fundamentally unchanged, as seen in the first graph below. Our office projects that the economic growth will accelerate somewhat in the coming 2-3 years as three main things are happening. First, the two main drags weighing on recovery so far – housing and government – are lessening, which will boost growth. Second, the sentiment is changing for businesses and consumers alike and is now being reflected in the risks to the outlook for most economic forecasters. Third, balance sheets are in strong positions and continuing to improve, which should businesses and consumers feel more confident about their future prospects, will result in increased sales and economic activity.
The improved sentiment in economic forecast can been seen in this second graph illustrating the Wall Street Journal’s economic forecasting survey results. So far, most economists are sticking to their baseline forecasts and leaving growth rates unchanged, however the risks to the outlook have shifted. As shown in the green bars (measured on the right axis), so far in 2013 economists believe upside risks outweigh downside risks by about 60-40. This same pattern is true of our own Governor’s Council of Economic Advisors. The Council believes the baseline outlook is our best look, however there certainly is more upside risks than in recent years.
This improvement in the economy, particularly the projected pickup in employment growth, is built into the outlook. So far in recovery, Oregon’s private sector employment has increased at approximately a 2% annual rate, however our office expects this to increase to around 2.6% in the coming 2-3 years. Even so, these rates remain below the 3-3.5% rate Oregon has seen in past expansions. To the extent that some of these upside risks come to fruition – lower energy costs resulting in increased manufacturing activity, a stronger housing rebound, an increase in population, migration or the labor force participation rate – would likely increase the growth path, which would also increase the revenue outlook.
In terms of General Fund revenues for 11-13, these have increased $126.3 million, while Lottery resources are up $2.4 million. The increases in Lottery are due to stronger than forecasted sales in recent months. Our office built in weakness in sales in early 2013 following the expiration of the 2% payroll tax cut and sales were weak when compared with a year ago, however still above our baseline forecast. In terms of the General Fund for 11-13, the changes were nearly all in Personal (+$107.8 million) and Corporate (+$16.3 million). Personal tax collections are currently running ahead of forecast. Final payments this tax season are currently tracking just a bit ahead of forecast (and about 25% ahead of a year ago), however refunds are tracking low – which is a positive from a state revenue perspective. Corporate collections are projected to be a bit higher than in the March outlook, however this increase does puncture the 2% kicker threshold. Here is how this increase is characterized in the forecast document:
The rapid growth in corporate tax collections seen at the beginning of the year came to a sudden halt in April, leaving corporate collections very close to the kicker threshold (102% of the Close of Session forecast). The May outlook assumes that revenues will come in $2.7 million above the threshold, generating a kicker payment of $20.3 million. Although a corporate kicker is incorporated into the baseline outlook, it is far from a sure thing. The Department of Revenue is working through a processing backlog of refunds due to be recorded before the end of the fiscal year. Should corporate revenues over the last six weeks of the biennium fail to match their level of last year (as they have in recent weeks), no kicker payment will be required.
The following graph takes a look at the source of the revenue changes since the last Close of Session forecast back in May 2011. The dark blue bars on the left illustrate the composition of the General Fund while the red bars on the right show both the total dollar amount of the forecast change and the percentage increase this represents. Based on our office’s historical errors, this current biennium is somewhat of an anomaly. Personal and Corporate income tax collections are off, on net, about $20.5 million, or -0.2%. All other General Fund revenues are up $237 million or 25%. This is largely a reflection of the rebalance plan put in place after the February 2012 annual session. At that time the General Fund forecast had declined by approximately $300 million and the Legislature moved to back fill some of those projected shortfalls. In this case, our 2 year ahead forecast (May 2011) turned out to be more accurate than our 1 year ahead forecast, which is not usually the case. In addition the other revenues that are considerably above Close of Session are generally due to some administrative or policy changes when discussing the liquor apportionment (bottle surcharge) and state court fees. All told, given the current forecast, the smallest error is on the largest – by far – component of the General Fund.
Finally, the last graph shows the evolution of the 2013-15 revenue outlook over the past 11 quarters. In terms of the revenue outlook, it largely follows the overall economic outlook in terms of upside and downside risk. Again from the document:
Although the baseline revenue forecast has not changed significantly, risks to the forecast are becoming skewed to the upside. Despite a relatively weak long-term outlook, a year or two of strong growth remains possible. In particular, if Oregon’s traditionally strong migration trends and labor force gains reappear, additional jobs and tax revenue can be expected.
The primary downside risk facing the near-term revenue forecast is the uncertain future of the nationwide economic expansion. Should federal government austerity or economic weakness abroad derail the U.S. economy, the expected growth in Oregon’s tax collections will not materialize.
For much more information on the Oregon economy and state revenues, please refer to our full forecast document, over on our main site. In the coming week or so I will pull some of the information from the document and highlight it here on the blog.
Posted in Employment, News, Revenue | Tags: 2011-13, 2013-15, biennia, biennium, cigarette, close of session, corporate, corporate excise tax, corporate income tax, corporate kicker, Economic, economic analysis, Employment, excise, Forecast, gains, general fund, GF, Growth, Income, job, Jobs, kicker, kicker threshold, liquor, Lottery, Oregon, outlooks, Personal, Private, Revenue, revenues, sector, tobacco, WSJ survey