December 4, 2008
December 4, 2008
By University of Oregon
Index of Economic Indicators
Analysis The University of Oregon Index of Economic Indicators™ fell sharply in October to 90.2 (1997=100), a 0.7 percent decline from the previous month. Compared to six months ago, the UO Index is down 8.0 percent (annualized). Indicators pointed to widespread weakness; five of the seven variables declined from the previous month, while only one, the interest rate spread, improved. The remaining indicator, Oregon building permits, remained unchanged.
The UO Index indicates that, like the nation as a whole, recessionary conditions in Oregon intensified in October.
Oregon labor markets deteriorated significantly. Initial unemployment claims jumped to a weekly average of 10,805, exceeding the peak of 10,245 reached during the 2001 recession. Payrolls at employment services agencies declined again in October and stand 6.5 percent below October 2007 levels. This sector is dominated by temporary help agencies, whose employees are often the first laid off by struggling firms. Nonfarm payrolls (not included in the UO Index) fell sharply during October as firms, on net, shed 14,100 workers. Declines were widespread; employment fell in virtually all major sectors of the economy.
Residential building permits (smoothed) continue to hover near 1,000, having stabilized at low levels for the past four months. Still, note that permits are below the levels of the 2001–3 period of weakness. New orders for nondefense, nonaircraft capital goods, adjusted for inflation, fell sharply in October as the intensifying credit crunch and signals of softer consumer demand prompted firms to delay capital spending. This sharp shift in firm behavior will deepen and lengthen the recession. U.S. consumer confidence (smoothed) fell slightly, still indicating very weak consumer spending growth. While lower gasoline costs will support spending, the impact will be at least partially offset by rising joblessness. Oregon trucking activity, as measured by the weight-distance tax collected, fell in October, consistent with weakening demand. The yield spread—the difference between short- and long-term interest rates—rose as the Federal Reserve cut its target for rates on overnight loans. Typically, a rising yield spread signals improving economic conditions.
Impairment of the financial markets, however, is limiting the impact of monetary policy, suggesting that the yield spread has lost some effectiveness as an indicator during this recession.
The UO Index indicates that Oregon remains mired in recession with little chance of significant improvement in the near term (three to six months). Note that growing momentum for a federal stimulus package, if enacted quickly and of sufficient size, should offer support to economic activity by mid 2009.