A Look Back on 2016 and What To Watch in 2017

A Look Back on 2016 and What To Watch in 2017

by Damon Runberg

January 13, 2017

Cheers to the New Year, Central Oregon. It was a great year for our local economy with robust job growth, lowering levels of unemployment, and wage gains across the workforce. Although the region posted some of the fastest job growth in the country over the past year the expansion is not being felt equally by all. Let’s take a look at the highlights and challenges we faced over the past year. Then let’s take a quick look at what 2017 may have in store.

Near the end of 2016 employment levels in Central Oregon were up 4.2 percent from 2015. That represents over 3,600 more jobs than what we saw in 2015. The region recovered from the recession, which took hold in 2008 and was at its worst nationally in 2009, in mid-2015 thanks to rapid job growth in Deschutes County. The current expansion maintained its momentum in 2016 with employment levels now sitting more than 6 percent higher than the pre-recession peak. The expansion is largely being driven by growth in Deschutes County where employment levels are nearly 10 percent higher than in 2007.

The rapid jobs recovery isn’t being felt equally by all. Our rural communities have yet to recover from the recession. Employment levels are still around 20 percent lower than the pre-recession peak in Crook County. The situation isn’t nearly as grim for Jefferson County where employment levels are around 3 percent below peak levels. Large layoff events, such as the closure of the Woodgrain facility, have largely negated much of the hiring over the past several years in rural Central Oregon.

Fortunately Central Oregon is considered one “labor shed,” meaning those living in outlying rural communities can and do commute to our major employment centers like Bend or Redmond to find work. We know this is happening across the region as unemployment levels continue to fall in Crook and Jefferson counties despite lackluster hiring by rural businesses. The unemployment rate is calculated based on where individuals live. Someone living in Powell Butte who finds work in Bend will help drop the unemployment rate in Crook County. There was a 15 percent drop in the number of unemployed workers across Central Oregon over the past year, which is the equivalent of nearly 1,000 fewer unemployed.

During the depths of the recession, the region experienced a fairly steady decline in the labor force. Together, all employed and unemployed workers represent the total pool of available labor for businesses to hire from. The rapid recovery in the job market over the past several years helped to refill the labor force. In many instances, discouraged workers came back to the labor force as job opportunities expanded. However, we have also seen rapid population growth, which is helping to refill the labor supply. Over the past year, the labor force grew by nearly 5,000 individuals. Continued growth in our labor force is essential to feed a growing economy. When the supply of labor tightens it becomes increasingly difficult for businesses to find qualified workers to fill their vacancies.

Although a tightening labor supply can be challenging for businesses, it places an upward pressure on wages as businesses compete for the best and brightest from a dwindling pool of workers. A tight labor supply and increased hiring demand drove wages up across Central Oregon over the past two years. After adjusting for inflation, Deschutes County’s average annual wage rose by $3,400 between 2014 and 2016, an increase of 9 percent in just two years.

Contrary to popular belief, the jobs being added into the local market are not all low-paying tourism or hospitality jobs. All but one major industry sector expanded over the past year (financial activities) with the health care industry and professional sector adding the most jobs across the region. There was also notable job growth from construction due to a high demand for housing. Additionally, the retail sector posted strong job gains with increased consumer confidence and tourism visitation.

Where does that leave us for 2017? It is unlikely that we will see a complete reversal to the trends we saw in 2016. Expect slower job growth as we likely reached or exceeded full employment in Deschutes County. The labor supply will continue to be tight. As a result, expect continued wage gains. That being said, there are a few things worth watching in the coming year (besides whether or not the snow will ever melt):

  1. Will the economic activity and hiring spill over into our rural communities? Nearly all of our current expansion is centered in the metropolitan area. Will we begin to see more hiring from local employers in Prineville, Madras, La Pine, Culver, and Sisters?
  2. Will the tight labor supply slow business expansion and hiring? As the supply of labor drops we are approaching a situation where businesses may have a difficult time filling their vacancies. In 2017, businesses will need to come up with more creative solutions to expand their operations, such as skilling up less experienced workers through workplace training.
  3. How will communities address the housing crisis? Housing affordability and availability and the tight labor supply are closely related. Without available or affordable housing, workers are forced to find housing further away from employment centers. In some situations, good qualified workers have turned down high-paying jobs in Bend due to housing constraints.
  4. How will larger macroeconomic trends affect our local economy? A new President, a “new” Governor, statewide budget concerns, and many other unknown policy changes could occur in 2017. It is hard to determine how these changes will impact us here on the High Desert, but our economy often shadows national trends with more extreme highs and lows.