OLMIS

by Guy Tauer
Published Nov-22-2011

Forest Cluster Employment Forest Cluster Broad Industry Sector Trends

Oregon is the nation's second-most forested state and continues to be a national and international leader in softwood lumber production, plywood production, forest productivity, timber harvest, logging, forestry research, forestry education, and wildland firefighting. However, the health of Oregon's forest industry cluster is influenced by factors outside of Oregon's control - global markets and competition, and national politics.

You rarely see the term "cluster" in Oregon Labor Trends articles. This is due to the nebulous definition of a cluster. Our late and much beloved former senior analyst Eric Moore once stated, "many people don't know an industry cluster from a Goo-Goo Cluster." Hopefully, after reading this article, you will easily discern the confection from the industry concoction.

The Oregon Department of Forestry (ODF) provide a group of industry sectors that they consider the "Forest Cluster." Their definition is: "Forest cluster" means firms and organizations that support production of forest products and benefit from primary and secondary wood products. This includes a broad spectrum of forest ecosystem services as well as geographically concentrated and interconnected economic activities and linkages to customers and suppliers. Organizations engaged in forest resource management, education, and research are also considered part of the forest cluster.

Using industry employment data, it is still not possible to count every job that is included in this definition. For example, there may be professors in Oregon's university system teaching forestry, so those jobs fit the ODF forest cluster definition. But we don't have industry information that would be able to discern those teaching jobs from the hundreds of others at Oregon's higher education institutions. Short of that, the ODF provides a manageable list of NAICS industries that are included in their forest cluster definition. Data presented here include the geographic area from Lane County south to the Oregon-California border: Coos, Curry, Jackson, Josephine, Douglas, and Lane counties, areas of the state that have historically been reliant on the forest cluster.

Payroll employment totals in the forest cluster declined fairly uniformly across regions 5, 6, 7, and 8 from 2001 to 2010. Overall, payroll employment in the cluster fell 32.6 percent across the combined portion of the state. Payroll jobs in the cluster totaled about 24,300 in 2001. By 2010, totals for the cluster were about 16,370. Curry County had the smallest change in forest cluster employment, down by 25.8 percent from 2001 to 2010, and by far the least number of forest cluster jobs in the combined regional area. Josephine County was on the other end of the spectrum, with forest cluster jobs down by 41.6 percent over that period.

The frenzied activity of the housing boom and soaring residential construction activity preceding the Great Recession merely slowed the longer-term decline in forest cluster employment in Southwestern Oregon. Technology advances, more automation, and less labor intensive manufacturing processes all conspired to reduced demand for employment, despite the ramp-up in lumber production. In Southwestern Oregon, after reaching a low in 2001 of 1.3 million board feet (MBF) harvested, volume rose to more than 1.6 MBF during the housing boom years of 2004 to 2006. Harvest volume then plunged to less than 1.1 MBF in 2009 before the region's harvest rebounded slightly in 2010. From 2002 to 2007, forest cluster employment declined between 0.3 percent and 3.5 percent.

While the forest cluster showed no employment gains during the housing boom years, the subsequent Great Recession did not spare this group of related industries, as payroll employment slipped by more than 18 percent between 2008 and 2009. From 2009 to 2010, the bleeding nearly stopped, with payroll employment down by just 1.5 percent.

Just as a Goo-Goo Cluster is a product of its various ingredients, the forest cluster has some key ingredients as well. The first component, and largest broad category, is manufacturing. Overall manufacturing payroll employment in the cluster fell by 35.7 percent from 2001 to 2010, on an annual average basis. Every county saw job declines. Jackson County forest cluster manufacturing declined the most, down by 48.1 percent. In fairness, some of the published changes in employment are due to "non-economic code changes," meaning employment was shifted administratively from forest cluster manufacturing, to other published sectors. The NAICS industry coding system counts employment in 'corporate headquarters' in the business and professional services category, even if it is a wood products corporate headquarters. These headquarter headaches make it difficult to complete valid time series analysis using the Quarterly Census of Employment and Wages (QCEW) - the only source of detailed industry information used for this analysis. Keep this in mind when viewing these data over time. Josephine County also saw a steep reduction in forest cluster manufacturing, down by 40.3 percent over the decade. Curry County saw the smallest percent change, off by 20.9 percent from 2001 to 2010. The other counties in the analysis area had declines ranging from 30 to 36 percent.

Another major ingredient in the forest cluster recipe is employment in timber tract operations; forest nurseries and the gathering of forest products; logging; and support activities for forestry. Employment in this group of industries fell from 5,432 in 2001 to 4,115 in 2010, a decline of 23.5 percent. Lane County had the steepest drop, down 44.8 percent. Coos, Curry, and Josephine counties saw declines between 30 and 35 percent. Jackson County was a true outlier, with employment increasing by 14.4 percent over the decade.

The increase in log exports, especially to China, has yet to translate into much employment gain in this forest cluster component - at least through 2010. Quarterly QCEW data does show a slight increase in logging employment statewide, from the second quarter 2010 to the second quarter 2011, but only about 150 jobs across all of Oregon.

The last major ingredient in the forest cluster mix is government: state and federal forestry and logging employment. Government employment posted the largest overall decline, down 35.5 percent from 2001 to 2010. Employment declined sharply in Josephine County, down by 70.6 percent. Coos and Curry counties were also hit hard in forest cluster government cuts, down by 59.5 and 43.4 percent, respectively.

Analyzing a group of interrelated industries can shed more light on how different parts of our economy can sometimes trend together - as is the case for most of the forest cluster in the Southern Willamette Valley and Southern Oregon. The global effects of the Great Recession, along with efficiency gains through technology and modernization, impacted the forest cluster over the past decade, resulting in less employment across most counties and individual cluster components. The ingredients for a Goo-Goo Cluster include marshmallows, chocolate chips, peanuts, condensed milk, and butter. After this article, you can consider yourselves in the category of people who clearly can differentiate between an industry cluster and a Goo-Goo Cluster.