OLMIS

by Nick Beleiciks
Published Jan-26-2012

Overview Private Sector Drove Job Growth in 2011 Unemployment Rate Finally Shows Real Improvement Average Pay Rising Faster Than Inflation Forecast Calls for Modest Job Gains in 2012

According to the Chinese zodiac, 2011 was the year of the rabbit. Oregon's economy was probably better represented by a tortoise, with a slow but steady improvement in the job market.

Growth in nonfarm payroll averaged nearly 1,600 new jobs a month over the year, but there were no significant gains after February. Oregon's unemployment rate improved by 1.5 percentage points over the year, falling to 9.1 percent by November as more people reported finding work. Consumer prices in the region continued their trend up in 2011, but average wage increases were able to keep slightly ahead of inflation.

Oregon's nonfarm payroll job growth in 2011 continued the trend that started last year and culminated by adding 9,700 jobs in February alone, perhaps the largest single month of job growth in the past 15 years. Since then however, each month's gains or losses haven't been large enough to show real direction (Graph 1).

That early growth meant that by November 2011, the state added about 19,000 jobs compared to November 2010. Oregon's job growth rate of 1.2 percent was slightly faster than the U.S. growth rate, and earned it the rank of 19th fastest job growth among the states (Graph 2).

There were 26,600 private-sector jobs added between November 2010 and November 2011, but the loss of 7,400 jobs in government means Oregon's net job growth was just 19,200. Manufacturing was the only major private sector to lose jobs over the year. Table 1 shows how each major industry sector performed in 2011 according to the number of jobs added between November 2010 and November 2011, their growth (or loss) rates, and the rank of each sector's growth rate among the 50 states and Washington, D.C.

Construction had a faster growth rate than any other sector in 2011. The 3,500 additional jobs over the year and growth rate of 5.1 percent were certainly welcome in the beleaguered industry, which suffered three years of job declines. The job growth in 2011 was enough to place Oregon fifth among the states with published employment for construction. To keep this growth in perspective of the losses seen during the housing downturn, it would take 10 more years of similar growth for Oregon's construction industry to employ as many people as it did in 2007.

Private educational and health services was the only sector that seemed to avoid job losses during the recession and it continued to do well for itself by adding 10,400 jobs in 2011. That's more jobs than any other sector in Oregon. Most of those new jobs were in the health services side of things, but private educational services added 1,900 of those jobs. The combined growth rate was 4.5 percent, earning Oregon a bronze for fastest job growth in educational and health services.

The information industry added 1,300 jobs, 4 percent more than the same time last year. That was the third fastest growth rate for information in the nation.

Oregonians were eating out again in 2011, evident by the 5,700 jobs added in the leisure and hospitality sector, many of which were in food services and drinking places. The sector's job growth rate of 3.6 percent was good for a rank of 11th fastest in the nation.

Professional and business services is a broad industry that includes legal, architectural, and computer services, management companies, and administrative and support services for business, among others. It added 2,800 jobs over the year for a growth rate of 1.5 percent. Employment services, the industry that includes temporary help agencies and is sometimes considered an indicator of future hiring, lost 600 jobs since November 2010.

Oregon's largest sector - trade, transportation, and utilities - added 3,500 jobs over the year for a growth rate of 1.6 percent. Nearly all of the growth in the sector was in the retail trade industry, which added 3,400 jobs as food and beverage stores and general merchandise stores continued to grow. The winter of 2011 brought wholesale trade, and transportation, warehousing, and utilities, to their months of lowest employment since before the recession. Small gains since then contributed a net of just 100 additional jobs to the overall sector's growth in 2011.

Other services, the catch-all service sector which includes repair and maintenance businesses, personal and laundry services, and membership associations and organizations, was essentially unchanged over the year, adding just 300 jobs for a growth rate of 0.5 percent. The little growth there was occurred among membership associations and organizations.

The collapse of the housing market and fallout from the 2008 financial crisis were still having an effect on Oregon's real estate and banking industry, as measured by employment in financial activities. The sector added just 300 jobs over the year for a growth rate of 0.3 percent. About 40 percent of the jobs in this sector are in the real estate and rental and leasing industry, which reached a recessionary low level of employment in April.

Mining and logging did not see any growth over the year and had the same number of jobs in November 2011 as it did last year.

Manufacturing went through another rough year in 2011 and was the only major private sector to lose jobs. The losses were relatively mild compared with the job cuts manufacturing had during the recession, with 1,200 fewer jobs during the year and a 0.7 percent decline. Not all types of manufacturers cut jobs in 2011. Computer and electronic products, machinery, metals, and transportation equipment manufacturers all had net job gains. Gains in those industries were overwhelmed by job losses in food manufacturing and wood product manufacturing.

It was a tough year for government jobs as the public sector lost 7,400 jobs for a 2.4 percent reduction. Local education bore the brunt of the job cuts, losing 5,000 jobs over the year. The non-educational areas of local government cut another 2,200 jobs, and the federal government cut 1,100 jobs in Oregon. A growing area within government was state education facilities, where employment grew by 1,800 jobs over the year.

Oregon's unemployment rate fell slowly in 2011. The number of unemployed Oregonians dropped at the beginning of the year, only to have the declines stall during the summer. The situation improved again in November, with an unemployment rate of 9.1 percent. That's still really high, but much better than the 10.6 percent unemployment rate in November 2011 (Graph 3).

The falling unemployment rate and unemployment levels mean that the job market was a little better in 2011 than during the preceding two years, but there were still about 168,000 unemployed Oregonians in November 2011.

Nearly every Oregon county saw improved unemployment rates over the year. The exceptions were Gilliam and Sherman counties, which each saw slight increases. Some areas are doing better than the state average, while other areas are still suffering extremely high levels of unemployment. Unemployment rates vary dramatically among the counties, ranging from a high of 15.5 percent in Crook County to a low of 6.1 percent in Benton County in November 2011.

Like most years, the average pay of workers in Oregon continued to rise through the first half of 2011 (Graph 4). The four-quarter moving average trend, which smoothes seasonal bounces in pay, shows that average pay increased more than 3 percent since the beginning of 2010.

Average pay grew faster than inflation, as measured by increases in the Consumer Price Index (CPI) for the Portland-Salem area, so the average Oregon worker saw real gains in her paycheck. The CPI rose 2.6 percent from the first half of 2010 to the first half of 2011. That period saw huge increases in prices for energy, mostly for gasoline.

Removing energy costs reveals that average prices for other things typically bought by consumers in Oregon increased by just 1.4 percent.

If consumer prices in Oregon mirror national trends during the second half of 2011, it's likely that inflation will run above 3 percent over the year.

The official state economic forecast produced by the Oregon Office of Economic Analysis indicates that annual job gains in 2011 could be 24,300, an increase of 1.5 percent. Preliminary employment estimates indicate that employment is on track to meet that forecast. The forecast expects roughly the same rate of growth in 2012, followed by faster growth in later years. Employment is not expected to reach pre-recession levels until late 2014.

Oregon's economy is expected to do slightly better than the U.S. in job growth over the next few years. The forecast expects job growth in most private sectors and anticipates strong job growth (more than 3%) in metals and machinery, food manufacturing, computer and electronic products, leisure and hospitality, health care and social assistance, and wholesale trade. The forecast expects wood product manufacturing to see another year of job losses in 2012. Government is expected to cut an additional 4,100 jobs.

Of course, projecting job growth into the future is very difficult. The forecast notes risks such as the continued credit crunch and financial market instability, housing market instability, commodity price inflation, and the loss of federal timber payments to Oregon counties. The volatility in overseas markets could impact Oregon's economy in a good or bad way, depending on how things shake out, as could local and federal policy changes.