[5]
By Oregon Business & Industry [6],
May 21, 2026
On May 20, the Oregon Office of Economic Analysis (OEA) presented Economic and Revenue Forecast for the second quarter of the year. This forecast, technically the June forecast, provides an update for the Legislature following the short session, which concluded in early March. Historically, this forecast has provided an early indication of the likelihood that Oregonians would receive kicker payments or that the Legislature would need to plug budget holes caused by economic weakness. According to the May 20 forecast, neither of these scenarios is likely.
In presenting the forecast to legislators, Oregon Chief Economist Carl Riccadonna characterized it as a “slower growth” forecast rather than a recession forecast. Nationally, the economy is softening, with anticipated national GDP growth shrinking from 2.2% to 1.6% in 2026. Notably, Oregon’s economy continues to grow more slowly than the national average. In 2025, state GDP grew by 1%, which is roughly half the rate of the national economy.
Meanwhile, Oregon’s unemployment rate continues to outpace the U.S. by nearly a full percentage point and currently sits at 5.2%. Current year-over-year job growth sits at -1.1%.
Despite the state’s continued economic malaise, the OEA increased its revenue projections for the 2025-27 biennium. Net general fund revenue is now expected to reach $35.69 billion, an increase of $345 million since the first-quarter forecast and $139 million since the close of the 2025 legislative session. These projections fully account for the revenue impacts caused by HR 1’s changes to federal law.
Economic Outlook
It is worth noting that the OEA no longer provides industry-specific job data in its presentations to legislators. Its full report observes that year-over-year job losses continue into 2026 and points to the private education and health services sector as the state’s primary driver of job creation.
The full report also contains a brief focus on manufacturing employment, noting that this sector, historically a strength for Oregon, has seen steady job declines in recent years. That trend has not improved. In 2025, “Oregon manufacturing saw continuous job losses which have persisted into this year. While there were increases in hours worked in 2025, these were short-lived. The current direction of manufacturing hours worked per week in Oregon, coupled with ongoing job losses, raises concerns for labor demand in this sector.”
Overall, the OEA is less than giddy in its assessment of the state’s employment picture: “With lackluster growth expected for the economy, coupled with persistent job losses and a high concentration of job gains in a small number of industries, the overall employment situation for the state has softened.”
As a state that relies on personal income taxes for government funding, the decline in employment, especially private sector employment, has jeopardized Oregon’s long-term economic and fiscal outlook. To change the state’s employment trajectory and better weather the slowing national economy, legislators must enact pro-growth and pro-business policies.
The sluggishness reported by the OEA extends beyond economic and employment growth. The OEA has adjusted population-growth estimates downward as well, projecting a growth rate of only 0.4% through 2035 – the lowest rate since the mid-1980s. Given the state’s low rate of natural increase, Oregon relies upon in-migration for population growth. To counter this trend, policymakers must enact policies that attract working-age people, beginning with policies tied to affordability. These include tax policies, regulatory policies that increase costs for individuals and businesses, and an ossified land-use system that increases costs by constraining supply.
Revenue Forecast
The June forecast predicts that 2025-27 general fund revenue will exceed those anticipated by the first-quarter forecast by $345 million despite Oregon’s struggling economy and softening personal income tax collections. The OEA attributes the projected increase largely to strong capital gains and corporate tax collections. The 2025-27 general fund is now projected to enjoy an ending fund balance of $344.6 million.
Given that healthy ending fund balance, the state’s struggling economy and its tepid population growth, policymakers should resist calls to increase taxes on individuals and businesses. Policy changes already have increased the state’s effective business tax burden by 33% from 2019 to 2023, severely eroding Oregon’s competitiveness. According to the nonpartisan Tax Foundation, Oregon has dropped a nation-leading 27 places [7] in its annual state tax competitiveness ranking, plummeting from 8th in 2020 to 35th in 2026.
Speaking of specific policies, Oregon’s former connection to the tax provisions of H.R. 1, especially its business expensing provisions and qualified small business stock treatment, would have provided tax relief during a particularly difficult period. The savings could have been used to hire people, increase pay and benefits or otherwise invest in employees and communities. Unfortunately, the Legislature in 2026 partially disconnected Oregon from the federal tax code, denying businesses and their employees the full benefits of H.R. 1 and further eroding Oregon’s competitiveness.
Legislators must change course during the 2027 session by reconnecting to these key tax provisions.
You can read the full OEA report here [8].