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Oregon Outlook
Spring 2009
Misery Loves Company
 The Oregon economy is suffering the same serious recession disease experienced by the vast majority of states, as the combined impact of domestic and global recession, impaired domestic and global financial markets, and struggling consumer and corporate confidence has taken its painful toll. Economic weakness across Oregon is likely to continue well into 2010.
The weakest economic performance in Oregon in decades is a bit surprising since the state registered solid employment gains during 2004 through mid-2007. Those who believe Oregon is largely insulated from developments across the nation and around the globe merely need look at events of the past 15 months for a much different conclusion.
Job Declines
The Oregon economy suffered a net decline of roughly 91,000 jobs during the most recent 12-month period, a loss of 5.3%. Oregon joins more than a dozen states with at least a 4.0% decline in total employment during the same period, a list that includes bordering states of California, Idaho, and Nevada.
Job losses across the Oregon economy have left few sectors untarnished. The state’s goods production sector has seen 45,000 jobs disappear, led by significant losses in manufacturing and construction. The state’s larger service-providing sector has not fared much better. Service sector losses have totaled roughly 46,000 jobs during the most recent 12-month period, led by declines in trade, transportation & utilities; professional & business services; leisure & hospitality; and financial activities.
Roughly 46 of the 50 states are now in recession. Those states with abundant oil and gas are, for now, avoiding the recession label.
Housing Excess
Oregon’s new home construction market has suffered the same realities of overbuilding as found in many markets across the nation. Oregon housing starts are not likely to grow significantly until excess inventories of unsold homes are cleared from the market.
Even so, wildly excessive overbuilding and home price appreciation in Arizona, California, and Nevada have led to much greater pain and downward price adjustments in those states than found across Oregon. A positive factor boosting the demand for Oregon housing in coming years will be one of the nation’s faster rates of population growth.
External Issues
One factor contributed greatly to the sharp contraction of the Oregon economy during 2008, as well as the nosedive in U.S. employment and economic output during the past eight months. It was the highly emotional appeal by Federal Reserve Chairman Bernanke and then-U.S. Treasury Secretary Paulson to the U.S. Congress for $700 billion in emergency funding during mid-September 2008 to stabilize U.S. financial markets and major financial institutions.
Domestic and global financial markets had already been under severe duress for a year. During mid-September, the American consumer was vividly told that “the sky was falling,” a factor which led to a sharp plunge in consumer confidence, consumer spending, and employment, and led directly to the sharp Oregon and U.S. economic contraction in subsequent months.
The Treasury Department and the Federal Reserve, among other governmental departments, are now “throwing mud at the wall” to see what might stick in regard to steps to boost the economy and shaken financial markets. The Federal Reserve’s announcement during March that it will buy more than $1 trillion of U.S. Treasury notes, government agency-issued mortgage-backed securities, and debt issued by Freddie Mac and Fannie Mae has, for the moment, led 30-year fixed-rate conventional mortgages to some of their lowest levels on record.
More attractive fixed-rate mortgages, combined with the lowest level of many short-term interest rates on record, could see U.S. housing markets move much closer to stabilization by the end of 2009, a critical factor in more broad-based U.S. economic stabilization.
The Oregon Outlook
A return to weak, but positive, U.S. economic growth later this year or early in 2010, combined with more fluid financial markets, would pay great dividends across Oregon and in many other states now dealing with recession. The Oregon economy is highly unlikely to emerge from recession without these two preconditions. The state’s recession could continue well into 2010. However, the state’s longer-term growth should outperform the nation as a whole.
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