Oregon Economic Update: Poised for RecoveryMarch 9, 2021 Oregon and the nation plunged into a deep recession virtually overnight in March 2020. A year later, we’re poised for potentially the strongest economic growth in decades thanks to increasing vaccinations, federal fiscal policy, and a resilient economy. According to the latest forecast from Oregon’s Office of Economic Analysis (OEA), the state will recover slightly more than half of pandemic job losses this year with the rest coming next year. Oregon should return to pre-COVID employment levels by early 2023.
Setting the Stage
The timing and strength of Oregon’s recovery is better than OEA originally anticipated. Several factors form the basis of their optimism:
- Public health improvements: After a dark winter which saw a resurgence in the virus, cases and deaths have fallen dramatically – although still high. Additionally, the pace of vaccinations is accelerating.
- Economic resiliency: We entered the recession on solid ground. Prior to the virus, there were no major weaknesses or imbalances in the economy. Moreover, OEA believes there has been less economic scarring than originally feared in terms of business closures and permanent layoffs. They are also relatively optimistic about prospects for the long-term unemployed.
- Strong and rapid federal policy: Stimulus payments, expanded unemployment insurance benefits, and aid for small businesses have kept many (but not nearly all) households and firms afloat.
- Wage and income growth: Oregonians who remained employed through the pandemic saw solid wage increases over the past year. In addition, asset markets (e.g. stocks, housing) increased in value. Include the strong federal policy response, and Oregon’s total personal income is now higher than just prior to the pandemic.
- Increased savings: Middle- and higher-income households have built up a considerable amount of savings despite strong spending.
Consumer spending continued throughout the pandemic, although patterns looked quite different. Instead of buying vacations, concert tickets, haircuts, and gym memberships, people purchased physical goods such as cars, Pelotons, home entertainment systems, and even new homes. Yet the amount spent on all these goods fell short of typical spending. Consequently savings rose – largely among the middle- and upper-income households.
As the economy reopens and people become more confident, OEA predicts spending will accelerate and consumers will shift away from buying physical goods back to the services that they had put on hold. The pent-up demand for vacations, massages, dental work, and other amenities, combined with the labor-intensive nature of these services, bodes well for job growth. OEA estimates that this shift will add 20,000 to 25,000 jobs.
The return to full, in-person schooling will also fuel growth in 2021. Schools will need to (re)hire teachers, bus drivers, and other staff. In addition, parents will be able to rejoin the labor force as their children return to the classroom and as businesses ramp up hiring.
OEA acknowledges there are risks to their forecast. A resurgence in the virus due to new variants or vaccination supply issues would hamper growth and push a complete recovery into 2025.
The OEA's complete report is available at www.oregon.gov/das/OEA/Pages/forecastecorev.aspx.