Oregon Economic Update: Recovery, Risks, and ChallengesMarch 22, 2022 After plunging into a deep recession in 2020, Oregon added a record number of jobs in 2021 and is on track to make a full recovery by the end of 2022, according to the latest forecast from the Office of Economic Analysis (OEA).
All broad industries will add jobs this year due to a combination of pandemic rebound and underlying economic expansion. Growth rates will vary considerably depending, in part, on the status of each sector’s recovery.
- Leisure and hospitality (e.g. restaurants, bars, hotels) will grow by a booming 14%; nearly four times faster than the overall economy. This industry was hammered by the pandemic, losing nearly half of total jobs. As of January 2022 it was still 17,500 jobs (8%) shy of pre-pandemic highs, so much of the projected growth falls under the ‘rebound’ category. Although OEA forecasts historic highs in the years ahead, they point out that structural changes will keep growth below what we would typically expect given a growing population.
- Public and private education will be the second-fastest growing industry (5%) as schools continue to staff back up following a prolonged period of remote learning and limited school activities. However, this sector still has a ways to travel down the road to full recovery and despite strong forecasted growth, the year will end with employment still below pre-pandemic levels. Schools are struggling to find workers and college enrollments are down.
- Professional and business services, a large and sprawling industry that includes temporary help, legal and accounting firms, and other office-type jobs, will be the third-fastest growing industry in 2022. As this industry is nearly fully recovered from pandemic losses, which were relatively mild, OEA attributes much of the gain to economic expansion.
- Health care and social assistance is still in recovery mode and will see above-average growth this year. Employment returns to pre-pandemic levels in 2023, after which growth resumes tracking demographics.
- Transportation and warehousing suffered just a single month of pandemic job loss that was quickly erased as Oregonians turned to e-commerce, and to buying goods as opposed to services. This sector is clearly in the ‘economic expansion’ category, and growth will continue as more distribution centers are set to open or expand.
OEA believes the biggest challenge facing Oregon’s economy today is on the supply side. Not just overloaded supply chains but, more importantly, labor. Businesses are struggling to find workers and vacancies are at an all-time high. Employers have responded by raising wages, especially in lower-paying occupations.
Potential workers are sitting on the sidelines for a few main reasons:
- Strong household finances in the form of accumulated savings, growing assets, and lower debt provide a cushion if people cannot, or do not want to, return to work quite yet.
- Rising wages lessens the need for a second wage earner in the household.
- Rising wages also allow some people who worked a second job in order to make ends meet now to work just one.
- Lack of available and affordable childcare may keep some parents at home.
Note: OEA produced their forecast prior to Russia’s invasion of Ukraine and the ongoing economic fallout.
The biggest risk to the economic outlook is persistent inflation. Last year inflation was largely linked to semiconductor shortages and the reopening of the economy, and considered transitory. Since then its reach has broadened. The risk is that Federal Reserve policy will be unable to walk the fine line between tightening too much and not enough, resulting in a boom/bust cycle and possible recession. For now, OEA anticipates the Fed will be able to engineer a soft landing.
The OEA's complete report is available at www.oregon.gov/das/OEA/Pages/forecastecorev.aspx.