Central Oregon

We will begin this regional series of posts with Central Oregon, defined here as Crook, Deschutes and Jefferson counties. The region is likely the most interesting one in the state for the fact that over the past 35 years the local economy has been bookended by two massive recessions, however in between these episodes was a 24 year extended period of extremely strong growth.

The overall structure of this series of posts will be the following. First to geographically define the region. Second to examine its industry structure to find out what type of (employment) economy it is. Third to look at employment and unemployment trends over the past 35 years. Fourth to compare local recessions by examining each region’s employment return to peak graph.

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The Oregon Employment Department provides a very good, succinct summary on its regional page (Region 10):

The region’s employment historically was dominated by wood product manufacturing and natural resource extraction. This has changed in recent decades as employment in educational and health services; professional and business services; leisure and hospitality; and other types of manufacturing have grown. The employment diversification is partially spurred by population growth. All three counties have the fastest population growth rates in the state. Moreover, the region has become a tourist destination and currently is home to many national bike and ski races which attract competitors and spectators alike.

Even with these larger sectoral shifts taking place (health services in particular is growing strongly in all locations), it is important to take a look at a region’s industry structure. Below are 2010 location quotients for Central 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.

The one item that jumps out is the Construction location quotient. This indicates that construction employment in Central Oregon is 11 percent larger relative to the area than it is at the national level. Even with Bend (Deschutes) being the state’s largest housing boom and bust, the area still has a large concentration of employment in construction. Other industries the region has larger concentrations in are: beverage manufacturing (breweries, most likely, but also wineries, distilleries and non-alcoholic beverages), wood product manufacturing (still significantly above US levels), retail and tourism. Keep in mind that these values are for 2010 only, reflecting the area’s industry structure today and does not reflect the changes that have occurred over time, that is a subject certainly worth further research but is not examined here.

Now that we know where the region is and what it’s industry structure looks like, how has it fared in (un)employment terms over the past 35 years? As seen in the graphs below, Central Oregon employment clearly outperformed the state during the early 1980s to mid 2000s time period, however the housing bust has brought massive job loss and soaring unemployment.

While the early 80s recession took a heavy toll on the economy, the recovery, once started, quickly regained the lost jobs in a relatively short time period. The key feature of the intervening 24 years is the exceptional employment (and population) growth the region saw. From 1983 through 2007, Central Oregon’s employment grew by an astonishing 4.8% per year, on average. To help put that in perspective, Oregon grew 2.4% per year during the same time period and the state was one of the fastest growing in the nation. The U.S. overall only grew 1.5% per year. While the expansions were strong, another factor helping the region is that it did not really experience recessions in 1990 or 2001, more like slight slowdowns in growth (more on that later). Furthermore, the region’s population more than doubled during this time period, helping to contribute to the boom.

In terms of the unemployment rate, the region has generally been above the state and national figures. The exception being during the 2000s expansion (housing bubble) where the regional rate was just about equal to the state figures. The collapse of the housing industry and financial crisis sent the region’s unemployment rate well into double-digits and to historic highs (given data limitations). While the unemployment rate has begun to come down in the past couple of years, it remains approximately 3 percentage points above the statewide rate.

Finally, how do the different recessions compare in Central Oregon? The graph below, structured the same as our standard state return to peak graph, illustrates both the depth of job loss by recession and how long it took to regain all the lost jobs. The region has experienced two severe recessions, much worse than the statewide losses which were much worse than national losses, and two very minor recessions

The early 80s recession in Oregon is typically characterized as part of the timber industry restructuring and locally one of the sawmills in Bend did close in 1983 (the land today is now part of the Old Mill District), however notice the strong recovery. The state lost 12% of employment and it took a little more than 7 years to regain the peak. In Central Oregon, the region lost 15% of employment but only took 5.5 years to recover.

Both the 1990 and 2001 recessions had little net impact on local employment, partially due to continued strong population growth and also the industrial structure (there was not a lot of high tech to burst in 2001 in the area). However the collapse of the housing bubble brought extreme levels of job loss to the region. The path of the financial crisis job loss is nearly identical to that of the early 80s recession through the first three years, however since then the paths diverge. The region had stopped losing jobs in the past two years, however it has not added any net jobs, making the current business cycle the worst-ever in the region over the past 35+ years. As shown in a previous post, Central Oregon’s job loss of 16% this business cycle is by far the worst in the state and roughly double that of the statewide average.

Summary: Central Oregon has undergone three distinct phases in the past 35 years. A deep recession, followed by an extremely strong growth period lasting almost 25 years, followed by another severe recession. What exactly the future holds for the region is unknown, however it will likely built upon the area’s industry strengths.

For more information, please see the great resources provided by the Oregon Employment Department:

• Region 10 page
• Extensive list of articles by Employment’s regional economist, Carolyn Eagan