Deschutes County’s Economic Activity Among the Fastest Growing in the United StatesSeptember 22, 2016
The Federal Bureau of Economic Analysis (BEA) recently published the Gross Domestic Product (GDP) estimates for 2015. These preliminary estimates showed very large growth in economic output for the Bend-Redmond Metropolitan area (Deschutes County). Rates of growth were not too surprising considering the levels of job growth over the same period.
As a reminder, gross domestic product represents an estimate of the total dollar value of all goods and services produced in a given geography over a specific time. It is the economy's output. The majority of this output is market production, meaning those goods and services produced for sale in the market. However, a portion of GDP is non-market production, such as education services provided by local governments or management of our public lands. Gross domestic product is equal to the value of final goods. For instance, if a business produces cogs (intermediate product) for clocks (final product) then their production is not directly counted in GDP. Instead GDP measures the value of the clock (final product), which theoretically includes the production value of the individual cog.
Deschutes County's gross domestic product rose to $7.34 billion in 2015. Levels of production in our economy are relatively small compared with other metropolitan areas, ranking 238th out of 382 metro areas nationally. Deschutes County's GDP rose by $425 million from 2014 to 2015, an impressive increase for an economy of our size. In terms of raw GDP growth over the past year we ranked 104th out of 382. The rate of growth was even more impressive with the additional $425 million in economic output representing a growth rate of 6.9 percent from 2014, the eighth fastest increase in the United States.
Despite the rapid growth in GDP, levels of economic activity remain below pre-recession levels. GDP figures were 1.5 percent lower than the previous peak in 2006 or about $107 million dollars lower. Although total economic output remains below pre-recession levels, total nonfarm employment regained those pre-recession levels in early 2015 and we have been in an expansionary period ever since.
Why did employment recover before GDP? The tourism industry was the first sector to begin adding jobs early in the recovery. The economic output per employee in Deschutes County's leisure and hospitality industry was just over $33,000. To put that into perspective, labor productivity in the financial sector was 10 times higher per employee at more than $330,000. The value of the goods and services in the tourism industry are relatively cheap, but very labor intensive. Industries with high labor productivity didn't begin adding jobs until later in the recovery. As a result GDP has lagged behind job growth, but is making up ground as the recovery diversifies.
Ultimately the rapid growth in Deschutes County's GDP over the past year was due to rapid growth in the housing sector. Construction, primarily driven by residential building construction, was the largest contributor to local GDP growth over the past year. Construction accounted for around 19 percent of our GDP growth, but the industry only accounts for around 7 percent of the county's jobs. Based on continued strong job growth in 2016, particularly in the construction industry, expect to see gross domestic product continue to rise into the near future.