Oregon Economic Update: Full Speed AheadJuly 6, 2021 In the spring of 2020, Oregon was in the throes of the worst recession since the Great Depression. A little over a year later, we’re on the cusp of the strongest economic expansion in decades. According to the latest forecast from Oregon’s Office of Economic Analysis (OEA), job growth will surge this summer and fall as the pandemic recedes. By late 2022, employment in Oregon will be back to pre-pandemic levels with the unemployment rate approaching 4% soon after.
After more than a year living with restrictions, Oregonians have built up demand for vacations, restaurant meals, haircuts, and medical services postponed during the pandemic. And they have more money to spend. Currently incomes in Oregon are 20% higher than right before COVID. Even without the generous federal aid, incomes are back to pre-COVID levels and expected to increase further this year and next. In addition, many households have accrued additional savings having spent less during COVID.
The combination of pent-up demand and bigger bank accounts will drive rapid growth in the second half of this year, with 45,000 jobs recovered in the third quarter and 20,000 in the fourth.
All broad industries will contribute to growth with the exception of construction, which will be flat. Local government will add the largest number of jobs as schools resume in-person learning. Leisure and hospitality, hit hardest by the pandemic, will see employment surge by nearly 19,000 jobs as people head out to bars, restaurants, and gyms, and as tourism picks up. These two sectors will account for well over half of total gains in the second half of this year.
While OEA expects Oregon to return to pre-pandemic employment levels by late next year, the timeline varies significantly by industry. Several major sectors will recover sooner than the overall economy:
- Transportation, warehousing, and utilities has already recouped pandemic losses. It barely felt the recession as spending on goods remained strong and as consumers increasingly turned to e-commerce, which bolstered employment at warehouses and delivery companies.
- Professional and business services will be the next sector to recover, reaching this milestone by the third quarter of 2021. This industry includes a large proportion of office-based jobs, many of which can be worked from home.
- Manufacturing as a whole won’t return to pre-pandemic levels within the forecast period (2028) due to the long-term structural decline in durable goods manufacturing; however, the nondurable goods component (e.g. food, beer) will bounce back from recessionary losses by the end of the year.
- Leisure and hospitality employment plummeted during the pandemic (-43%), and while growth will surge this year and next, a full recovery is still several years away. OEA is factoring in the possibility that consumers will be slow to return to restaurants, and that a long-term shift to working from home (at least partially) will reduce demand for downtown restaurants and bars.
- Other services, which includes many consumer-facing businesses, slashed one-quarter of its workforce as hair, nail, skin care, and other personal service businesses closed – temporarily or permanently – due to public health measures. It regained half of lost jobs over the past year and will add several thousand more this year, but growth moderates in late 2022 and beyond.
- Several components of durable goods manufacturing are facing structural changes pre-dating the recession, including metals and transportation equipment manufacturing.
- Brick-and-mortar retail lost market share to e-commerce during the pandemic. While OEA expects it to recoup most of these losses, long-term trends point to flat growth as on-line sales become more entrenched in consumers’ shopping habits.
A Few Bumps
OEA acknowledges a few risks that could make for an uneven recovery. The first is that supply might not be able to keep up with demand in the short term. They’re seeing this currently in semiconductors and lumber, to name a few. The second constraint is the labor supply. Many employers are finding it difficult to attract and retain workers. Some of this tightness will recede in the coming months as schools resume in-person learning and daycare becomes more available, but demographics (e.g. Baby Boomer retirements) will impact supply over the long term.
The OEA's complete report is available at www.oregon.gov/das/OEA/Pages/forecastecorev.aspx.