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5th month of economic decline — Oregon index

October 4, 2011

University of Oregon Index of Economic Indicators
August 2011.
Sponsor KeyBank.

The University of Oregon Index of Economic Indicators™ fell 1.3 percent to 89.0 (1997=100) in August 2011, a fifth consecutive monthly decline. Compared to six months ago, the UO Index has fallen 4.4 percent (annualized) and less than half the components have improved or held steady over that period of time. In the past, sustained declines of this magnitude foreshadowed labor market recessions in Oregon.

Highlights of the report include:

• The two labor indicators included in the UO Index, initial unemployment claims and employment services payrolls (largely temporary employment) both improved. Still, initial claims remain at high levels consistent with a weak labor market.

• Overall nonfarm payrolls (not included in the index) continue to move sideways since the beginning of the year. The July gain was subsequently revised downward to a loss of 3,300 jobs, while only 800 jobs were added in August.

• Consumer confidence (smoothed with a five month moving average) dropped sharply in August as households turned cautious amid weaker job prospects and the protracted debt debate in Washington.

• The six-month decline in the UO Index, if sustained, is consistent with at least a labor-market recession in the Oregon economy. A similar pattern took hold after the 2001 recession, as the slow pace of the national recovery weighed more heavily on Oregon, dragging down nonfarm payrolls.

• The measure of Oregon recession probability computed by University of Oregon Economics Professor Jeremy Piger rose significantly in the past three months from essentially zero to 8.6%. Also note that the recent weakness in Oregon labor markets is also consistent with impending recession.

• It is possible, however, that the UO Index is overstating household weakness – consumer sentiment has been lower than expected given the growth in consumer spending. Moreover, the data is subject to revisions – a similar decline last fall proved to be short-loved and later revised away. That said, the economy is clearly very fragile and vulnerable to further negative shocks such financial market disruption as a consequence of the European debt crisis.

For an in-depth look at economic challenges as we navigate through what is once-again a challenging period, please join us at this year’s Oregon Economic Forum!

SAVE THE DATE!

The 8th Annual Oregon Economic Forum – Presented by KeyBank
The Governor Hotel
Portland, OR

October 20, 2011
0730am – 1130am

To register, please visit: econforum.uoregon.edu

The Oregon Economic Forum is in its eight year of bringing you timely, in-depth analysis of the national and local economies. As the upward momentum of late 2010 fades, new questions emerge. How sustainable is the recovery? Should the European debt crisis serve as a warning for policymakers? Should we heed this warning and start aggressively paring deficits now, or is it simply premature to turn to policy austerity? How does Oregon’s recovery compare to the nation and the region? What’s in store next for Oregon and the United States? Please join us as we explore the trends that will shape Oregon’s economy in 2012.

This year we are bringing two outside speakers. We are excited to have Brad DeLong, professor of economics at the University of California at Berkeley, to discuss the likelihood of a European-type debt crisis in the United States. We are equally excited to bring Glenn Rudebusch, Senior Vice President and Associate Director of the Economic Research Department at the Federal Reserve Bank of San Francisco. Glenn will bring his insightful analysis of the direction of the US economy. We will also continue our tradition of bringing economists from the University of Oregon, including Forum Director Tim Duy. In addition to an Oregon economy 2012 preview, Tim will present new research on state and regional economic indicators?

Special thanks to our presenting sponsor, KeyBank. Additional sponsors who help make this event possible include Providence, The Portland Business Journal, the Portland Business Alliance, the Port of Portland, Langley (formerly Ashforth Pacific) and Collier’s International. We also received support from the US Delegation of the European Commission

Timothy A. Duy
Director, Oregon Economic Forum
Department of Economics
University of Oregon – 1285
Eugene, OR 97403-1285

  
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