Oregon’s Rural Economic Output

by Damon Runberg

February 8, 2019

Gross domestic product (GDP) is a popular economic indicator that is used to measure the value of all goods and services rendered in a particular place for a given time period. Think of it as the total output of a particular economy. Traditionally, GDP has been more of a macroeconomic indicator that measured the output of nations or states. However, the Bureau of Economic Analysis began experimenting with a new methodology to develop a prototype statistic that measures the gross domestic product for counties. This new source of information for regional economic analysis was released in December 2018 with annual data from 2012 through 2015. Let’s take a look at this prototype statistic and see what it shows us about Oregon, particularly the state’s rural counties that were previously missing from gross domestic product statistics.

As of 2015, rural counties in Oregon accounted for $23.2 billion in annual gross output, which represented around 11.5 percent of statewide gross domestic product. The share of Oregon’s gross domestic product coming from rural counties is slightly lower than the share of the state’s nonfarm jobs in these rural communities (13.2%). The lower share of GDP from rural counties is largely a reflection of the recent recovery and industry composition. First, remember that these 2015 figures are dated, they represent a period when the recovery was just beginning to gain momentum in many rural communities. However, most metro counties were already in expansion mode by 2015. Total economic output was growing at a faster pace for metro communities during this period. Second, not all industries are created equal in the eyes of GDP. Some industries, such as health care, manufacturing, and financial activities, tend to produce a higher economic output per employee or higher rates of productivity. We tend to see a greater concentration of these high-productivity industries in metropolitan areas.
Since these new prototype statistics are so dated, looking at trends in the data requires us think back to 2015. Remember, the state recovered from the recession in late 2014, yet most rural communities remained deep in recovery mode. Between 2012 and 2015, real GDP (inflation adjusted) rose by 13.3 percent across Oregon’s rural counties, which was slower than the 16.8 percent growth in metropolitan counties. Once again, this is not surprising based on what we know about the employment recovery. Metropolitan areas were adding jobs at a faster pace than rural communities, so we would expect to see gross output also growing at a faster pace.

Perhaps more interesting is how much faster rural Oregon’s GDP grew between 2012 and 2015 compared with total nonfarm employment. The rural employment and GDP trend lines “decoupled” from one another between 2012 and 2015 with GDP up 13 percent, but employment up only 3 percent during the same period. The trend is a bit unusual as we didn’t see the GDP trend line decouple from the employment growth line either nationally or statewide during the 2012 to 2015 period. It would be possible to explain this decoupling of the two trend lines if the jobs being added in rural Oregon during the three-year period were highly productive. However, this is unlikely as we know that the vast majority of the jobs added in rural Oregon early in the recovery were concentrated in low-wage industries. Ultimately, this is a prototype statistic and likely not a perfect measure of gross output for these smaller geographies. The Bureau of Economic Analysis is currently receiving feedback and comment on the methodology and will likely make a few tweaks before publishing further iterations of the product.
Looking closer at individual counties we see that Oregon’s more populous metropolitan counties tend to have the highest economic output. One rural county broke into Oregon’s top 10 producing counties – Umatilla County, with its strong agricultural economy and excellent access to I-84 and the Columbia River for shipping and distribution.

As pointed out earlier, there is a strong correlation between gross domestic product and total nonfarm employment. The largest employment counties also posted the largest levels of gross output. Besides Umatilla County, other top rural counties with strong GDP output included Douglas, Klamath, Coos, Clatsop, and Lincoln counties. These are all big wood products and agriculture producing counties. Tourism is also a major component of the coastal counties.
The counties with the fastest growth in GDP between 2012 and 2015 were an interesting mix. The top four were all counties along the Columbia Gorge and Columbia Basin (Gilliam, Wheeler, Morrow, and Hood River). These are smaller counties that saw a shallow recession and a relatively quick recovery. The remainder of the counties that were ranked amongst the top 10 for fastest GDP growth included medium-sized metropolitan counties along the Willamette Valley, as well as Deschutes County in Central Oregon. These more populous counties were hit harder during the recession and posted rapid growth in economic output coming off the bottom of the recession.
This new hyper-local gross domestic product statistic is dated and shows a few questionable trends, but as the Bureau of Economic Analysis irons out their methodology I have no doubt that it will become an important tool for regional economic analysis. Localized GDP will allow researchers, policy makers, and businesses to better understand their communities and analyze broad trends in output.

 


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