Almost four years into the recovery, several factors are weighing on growth. The global manufacturing cycle is waning and consequently shipments of Oregon products have slowed. Oregon exports, an early driver of our recovery, are down through the first nine months of 2012 relative to 2011. Business equipment spending, another key driver nationally and locally, has also softened. And uncertainty surrounding federal policy and the 'fiscal cliff' is weighing on businesses and consumers alike, with companies reluctant to hire and consumers delaying large purchases until a resolution is reached.
However, the stage is set for growth to accelerate this year and into next. Business balance sheets are strong; household net worth is increasing; the housing market is showing signs of life; and stock markets are nearing pre-recessionary levels. Barring a tumble off the fiscal cliff, a deep recession in Europe, or a dramatic slowdown in China, OEA expects Oregon jobs to expand by 1.6 percent (+25,700) in 2013 and pick up steam in 2014.
The Office of Economic Analysis forecasts growth in all of Oregon's major industries in 2013, with the exception of government (Graph 1). The public sector was hit hard by budget reductions and has only recently stabilized. Job cuts will end in 2013 but growth won't resume until 2014. Offsetting weakness in government, the private sector will add 27,100 jobs in 2012 (2.0%) and 26,300 jobs (1.9%) when the books close on 2013.
Solid gains in professional and business services over the past two years will continue in 2013. This sector was among the first to turn around following the recession, powered predominantly by a surge in employers' use of temporary help. Growth in most other components kicked in a bit later.
Construction typically drives economic growth but was absent in the first few years of this recovery. It staged a comeback in 2011, driven largely by multi-family construction. Growth should continue into 2013 (+2.8%) and accelerate in 2014 (+5.3%) as demand increases for both rental and owner-occupied housing.
Reduced domestic and international demand will slow manufacturing growth from 2.6 percent in 2011 and 2.3 percent in 2012 to 1.4 percent in 2013.
Although the risk of another recession is still on the radar, OEA isn't factoring one into its current forecast. The three biggest threats to the state and global recovery are the euro zone recession (and potential crisis); a slowing Chinese economy; and the U.S. federal budget situation and policy environment.
Oregon is expected to regain the nearly 150,000 jobs lost during the Great Recession in the first half of 2015 - five years after hitting bottom (Graph 2). Meanwhile the unemployment rate, which tends to be one of the last indicators to improve as the economy recovers, will slowly decline from its current 8.6 percent rate to 7.5 percent in 2014.
The OEA's complete report is available at: www.oea.das.state.or.us.