By Bill Watkins
CLU Center for Economic Research & Forecasting
Over the past several months, we’ve been heavily criticized for our forecasts, by the Bend Bulletin, The Cascade Business News, a few politicians, and who knows who else. That’s fine, but the irony of news media recommending censuring us seems lost on them. They also seem to not notice that our forecasts have been rather accurate and often slightly optimistic.
Consider, for example, our most recent jobs forecast. We estimated in January that Oregon job grew at a 0.3 percent annual seasonally adjusted rate in 2011 quarter four. The actual came in at a 0.1 percent seasonally adjusted growth rate.
February’s job report was really discouraging. On a seasonally adjusted basis, Oregon lost 6,600 jobs in February. That big of a loss this late in a recovery is sign that something is very wrong. Oregon’s Pollyannas will point out that on a non-seasonally adjusted basis, Oregon actually gained 1,900 jobs. Of course, that’s why jobs data are seasonally adjusted. The seasonally adjusted expectation is 8,500 new jobs for Oregon in February.
While the construction sector and the trade, transportation and utilities sector each showed big job losses, even when not seasonally adjusted, the poor performance was broad based. Only the information sector, which is showing a long-awaited recovery on the West Coast, and the generally-poor-paying leisure and hospitality sector showed seasonally adjusted job gains, gains of only 100 and 300 jobs, respectively.
Of course, February’s jobs report could be an anomaly. I hope it is, but I’m afraid it is not.
The February jobs report could be a reaction to very positive January. This almost surely explains part of February’s numbers. Weather caused changes in Oregon’s normal seasonal pattern. However, if you average across the two months, you still have a net loss. In fact, Oregon has lost jobs on a seasonally adjusted basis in seven of the past ten months.
The size of Oregon’s seasonally adjusted job losses in February is also worrisome. It was the largest rate of decline since the heart of the recession
Our forecast for Oregon is good, in the sense that we expect Oregon’s economy to grow, on net, in 2012. Most measures will show at least modest improvement. The forecast is bad, in the sense that we expect Oregon’s growth in 2012 to be less than we saw in 2011, and nobody is claiming that 2011 was a good year for Oregon’s economy.
Job growth, on the other hand, is likely to be virtually nonexistent. We don’t expect the state to have net positive year-to-date job growth until at least late in the third quarter.
This forecast is significantly less vigorous than the United States forecast. Part of the reason is that Oregon just doesn’t have any really robust economic regions. It doesn’t have a Texas or a North Dakota.
Part of the reason for Oregon’s weak forecast is that Oregon’s economy is tied to California’s economy, and California’s economic prospects are truly dismal.
Still, that doesn’t explain all of Oregon’s problems. Oregon has to accept some responsibility. As we say, not all of Oregon’s economic weakness is exogenous. Oregon made a mistake when it passed measures 66 and 67 in a recession. It is also true Oregon’s land use decisions are too centralized. That may not be a major problem in good times, but it is a real problem in bad times. In bad times, flexibility and a rapid response are key to competitiveness.
Oregon has also made some highly visible public relations mistakes. There was the tax fiasco over Facebook’s Prineville facility. Who knows how many companies won’t give Oregon a chance after reading those headlines? Then there were the hurdles that caused BMW to not film an advertisement in Oregon. These seemingly little mistakes can have serious results.
Then, there is a sense of complacency. A lot of Oregonians that I talk to seem to think that prosperity will return. All you have to do is wait for it. I’ve seen this in California too. The fact is, the world is changing, fast. What was successful just a few years ago, won’t be successful now. Oregon needs to have a serious conversation about how to recover the state’s economic vitality.
Oregon Real Estate
There is no joy in Oregon residential real estate markets. Foreclosures are at or near record highs and show no improving trend. Delinquencies, while declining, remain at very high levels.
Residential prices did see a small uptick, but even that was not sustained in the most recent data. Prices are low. They show no sign of increasing, and we can’t even be sure that they have bottomed out.
Residential home sales are low, and they show no sign of increasing. New construction remains near record lows, with no sign of an upward trend.
The only positive in Oregon’s residential real estate data is that affordability is high and rising. That’s nice, but Oregon’s lackluster economy is unlikely to benefit from the state’s new-found affordability.
Oregon’s commercial markets are no better. Vacancies remain high. Lease rates are weak. Values are low. Leasing and sales activity is low. New construction is minimal.
Unfortunately, Oregon’s real estate markets are unlikely to see any significant changes in 2012. Residential delinquencies will continue to trend down, but foreclosures may accelerate now that the robo-signing fiasco is behind us.
Oregon’s economy is likely to continue weak, with little job growth. Population is unlikely to grow significantly while the state’s economy is so weak. These two facts imply continued weak real estate markets and low activity levels.