OLMIS

by Brooke Jackson-Winegardner
Published Feb-1-2010

Overview Employment Continued Declining in 2009 Oregon's Unemployment Rate Levels Off Average Pay Increased, Inflation Decreased Job Growth Forecast to Resume in Mid-2010

Oregon has been losing jobs since the national recession began in December 2007. Over the past year, Oregon ranked 47^th in rate of job growth (Graph 1). The state's employment declines have coincided with a rising unemployment rate over the last two years.

Educational and health services - where population growth and the aging population foster job growth despite recessionary pressures - was the only industry to show growth during 2009. Every other private-sector industry posted job losses. Construction and manufacturing were particularly afflicted.

The employment picture varied from place to place within Oregon. Four rural counties posted employment gains from November 2008 to November 2009. The remaining 32 counties saw losses ranging from 1.3 percent to 13.3 percent.

With only one exception, unemployment rates across Oregon were higher during 2009 than they were in 2008. Most counties saw an increase of nearly 3 percentage points.

Oregon's growth in average pay continued to be positive over the year, but at a slower rate than in previous periods. The change in average pay varied by county; some areas experienced a decrease over the year. Meanwhile, the year-over-year rate of inflation was negative for the first time in decades.

The forecast for 2010 shows employment declines early in the year, with slow job growth resuming mid-year. Weakness in construction and manufacturing is expected to continue. The length and depth of the current recession is difficult to predict, and various downside risks could cause the economy to fare even worse than this baseline scenario.

Employment in Oregon dropped throughout 2009, continuing the downward trend seen in 2008. As of November 2009, nonfarm payroll employment was at 1,611,700 - a drop of more than 88,000 (5.2%) jobs over the year. Oregon's employment level was last at this level in June 2004.

This loss of more than 5 percent meant Oregon's job growth ranked 47th among the 50 states and Washington, D.C. The decline in 2009 was more severe than the prior year, when employment was down about 2 percent over the year and Oregon ranked 38th.

Most of Oregon's major industries experienced employment declines over the past year. Some dropped more rapidly than others. Private education and health services was the only gainer, with growth of about 1 percent. Losses were most severe in manufacturing, construction, and natural resources and mining.

Education and health services added about 1 percent to its employment from late 2008 to late 2009. Private educational services continues to add jobs as Oregon's population grows and as rising incomes allow parents and students to afford a private education. Health care and social assistance also rise with population and income as well as with an aging population.

Government employment, which tends to lag total employment changes, began its descent in 2009 after growing more than 2 percent in 2008. As of November 2009, this sector was down nearly 4,000 jobs over the previous year. Most of the losses came from local government (-4,400) as local education and other sectors cut employment to balance budgets. Increased demand for state services - such as unemployment insurance and post-secondary education - caused a slight increase in state government employment over the year, but not enough to offset local government losses.

Information dropped 1,300 jobs over the last year. Although the industry saw strong growth from 2005 through 2007, employment declined since the beginning of the recession. Some of the loss is likely due to declining readership among printed publications. Employment in the telecommunications portion of this industry was unchanged during 2009.

The broad trade, transportation, and utilities sector lost 15,400 jobs or 4.6 percent over the last year. Retail trade was the source of nearly one-half of the losses, as consumers continued to restrain overall spending. Significant losses were also seen in wholesale trade and in truck transportation. The one bright spot was electronic markets, which grew more than 16 percent (2,100 jobs) over the year.

Both other services and professional and business services saw employment drop 5.3 percent over the last year. Combined, these sectors lost more than 13,000 jobs. In the bellwether employment services sector, employment dropped 6,000 since late 2009. The one sector posting gains over the year was legal services, up by 200 jobs.

Businesses engaged in financial activities provided 5,600 fewer jobs in late 2009 than in late 2008. The loss is due almost entirely to real estate and rental and leasing (‑5,400) as the collapse of the housing market continued to take its toll in 2009.

With the economic contraction affecting consumer spending, the leisure and hospitality sector dropped nearly 6 percent (-9,800 jobs) between November 2008 and November 2009. Food services and drinking places took the brunt of the loss as consumers tightened their belts and spent less eating out; that component was down 7,400 jobs over the year. While the effect of the broader downturn took time to develop, the industry has experienced gradual decline since late 2008.

Manufacturing - an important source of Oregon exports - last saw year-over-year employment gains in early 2007. The rate of decline accelerated in 2009 as the effects of the national downturn continued to reverberate in Oregon. As of November's preliminary numbers, the sector was off 14 percent from employment levels one year ago. Weakness was particularly evident in wood product, fabricated metal, and machinery manufacturing. Public announcements of job losses were prominent in all of these industries. The only portion of this industry still adding jobs over the year was food manufacturing.

According to November's preliminary estimates, construction lost 13,500 jobs or 15.2 percent over the year. Over-the-year construction employment growth slowed during the last half of 2006 from its blistering pace of the prior three years. The first downturns appeared in late 2007. Current employment levels are about the same as in 2003.

With just over 7,000 jobs, mining and logging is by far Oregon's smallest industry sector. Logging provides about four-fifths of the employment in this sector. The continued stagnation of the housing market lessened the demand for timber in 2009, causing many mills to cut employment as they curtailed production or closed entirely.

Oregon's unemployment rate began to rise rapidly in the latter part of 2008. Its ascent continued in early 2009 before finally peaking in May at 12.2 percent. For most of the year, the unemployment rate hovered around 12 percent, but in recent months the rate dropped somewhat. As of November, it was at 11.1 percent.

The national unemployment rate also rose in late 2008 and early 2009. Compared to Oregon, the national increase was less rapid but more prolonged, as it did not level off in the summer of 2009. The recent peak for the national unemployment rate was in October at 10.1 percent.

The last time Oregon and the nation experienced unemployment rates similar to their current levels was 1983.

Unemployment rates across Oregon rose during 2009. Nearly every county's unemployment rate was higher in November 2009 than November 2008. The only exception was Wheeler County, where the unemployment rate was down 0.4 percentage point from the prior year. Most counties saw an increase of nearly 3 percentage points. Harney County experienced an increase of 6.4 percentage points from late 2008 to late 2009.

As of November 2009, there were nearly 216,300 unemployed individuals in Oregon. This figure is down more than 27,000 from the peak in May, but up by 62,500 from November 2008. For January to November 2009, the preliminary average number of unemployed is 226,100 - an increase of 105,100 from the average for the same period in 2008.

Through the second quarter of 2009, average pay growth continued to be positive over the year, but it was growing at a slower rate than previous quarters. Meanwhile, the year-over-year rate of inflation for the Portland-Salem metro area turned negative. While the price of consumer goods such as utilities, housing, and medical care increased over the year, decreases in other goods - most notably gasoline - offset the increases.

By county, the change in average pay from the second quarter of 2008 to the second quarter of 2009 varied significantly; 22 counties saw a gain, 12 had a loss, and two were essentially unchanged. In Crook County, average pay fell more than 9 percent over the year - more than in any other county. On the other end of the spectrum, neighbor Gilliam County saw a gain of 7.3 percent.

The official state economic forecast indicates that Oregon will have lost about 88,000 jobs (-5.1%) by the end of 2009. Current employment estimates are inline with this projection. The forecast calls for an additional loss of 14,300 jobs in 2010, all in the first quarter, with employment growth resuming in the second quarter.

In all, the forecast shows an employment drop of 6.5 percent from the pre-recession employment peak in 2007 to the lowest point of employment in 2010. The state is not expected to again reach its pre-recession employment level until 2013.

The forecast shows both private education and health services continuing to grow from 2009 to 2010, adding a total of nearly 4,100 jobs. Professional and business services is also expected to grow slightly, adding about 1,800 jobs.

Continued weakness is expected in three sectors of the economy over the next year: construction, manufacturing, and financial activities. Together they are projected to lose nearly 15,600 jobs from 2009 to 2010. Construction's projected loss of 7,000 jobs would amount to about 9 percent of employment in that industry. Manufacturing is projected to lose slightly fewer jobs (6,300). Many of the expected losses in manufacturing are concentrated in the same industries that have recently been the weakest - wood products, metals, and machinery.

The forecast acknowledges that projecting the length and depth of the current recession is very difficult. It notes risks such as a continued freeze in credit markets, a prolonged downturn of the housing market, a decrease in consumer confidence and spending, and the effects of a contracting global economy. Thus, the economy may perform more poorly than expected. In the forecast's pessimistic scenario - which incorporates some of these risks - job losses continue throughout 2010 and employment growth is stagnant until mid-2011.