Economists have reason to believe Oregon’s slumping economy will show improvement in the second quarter of 2010.
In an economic forecast released early last month, the Oregon Office of Economic Analysis stated that while the job market is still hemorrhaging, job losses have slowed.
“Average monthly job losses for the last six months of 2009 were 2,300, compared to the first six months of 2009 with average monthly losses of 9,800,” the forecast said. “This does not necessarily mean Oregon’s job growth has returned, but at least the news is an encouraging sign for the end of the year.”
In the aftershock of the 2008 financial crisis, Oregon suffered significant job losses, with the state unemployment rate slightly higher than the national rate of 10 percent.
Some state economists say these statistics indicate the economy has emerged from the “free fall” period of late 2008 and early 2009. Because the downturn of Oregon’s job market has bottomed out, economists and legislators are now focused on economic recovery.
IHS Global Insight, a major economic and financial analysis organization, was quoted in the forecast as saying the market’s path to recovery will be subject to some troubling inconsistencies.
The group said the pattern of recovery will likely not be the standard in which markets trend sharply upward after recovery has begun, but rather a “jobless recovery” in which the labor market is slow to add jobs. According to the Oregon Employment Department, a jobless recovery occurs when economic activity resumes growth without a corresponding growth in employment.
The forecast mentions the possible risk of a downside extreme in which the economy will spend substantial time struggling before growth begins, with the state potentially “having a lost decade of no growth once we hit bottom.”
Josh Harwood, senior economist at OEA, said this recovery will not be easy.
In a standard recovery, the downturn is “followed by an equal and opposite reaction. You kind of just bounce back,” he said. “Instead, we are predicting our growth rates to slow back down again.”
He said this volatility can be attributed to the inherent qualities of a recession birthed out of a financial crisis — a recession that generally takes longer to recover from — and the influence of federal stimulus dollars.
“Our recovery is being buoyed by government spending,” Harwood said.
The OEA document states that “the bulk of Oregon’s share of the stimulus package is being implemented with about half yet to go.”
Harwood said the emergency session Oregon legislators held last month was planned before the 2008 financial collapse, and that the state already intended to address its economic woes before the national tailspin.
“The end of 2008 is when things really fell apart,” Harwood said, “but (the emergency session) was already there in case (Measures) 66 and 67 failed.”
He also said the OEA hasn’t been able to gauge the effect of those tax measures yet, but he doesn’t expect them to do much for growth in the state. Instead, Harwood said, they will be used to bridge pre-existing shortcomings in the state budget.
State Rep. Brent Barton (D-Clackamas) said in a press release reflecting on the special session that a number of bills were passed through the House and Senate that would address job creation.
His strategy for job growth has more to do with nurturing existing job markets than attracting new ones.
“Small businesses drive job creation in our communities,” Barton said. “Research and experience reveal that incubating existing businesses is a better method of job creation than bidding against other states to attract companies, which frequently leave for the next great offer elsewhere.”
The OEA forecast also mentioned other potential threats to Oregon’s recovery, including the contagion of credit instability, geopolitical factors, the extent of the global downturn, prolonged housing market instability, the H1N1 influenza virus and energy prices.
The OEA predicts that any disruption in the supply of oil could stall economic activity all over the world.
Despite the morbid tone of the OEA’s economic forecast, the document does cite “reasons to be cautiously optimistic.”
“Stabilization signs are more numerous with the hope that job growth, though mild, will commence with the second quarter of 2010.”
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