[5]
By Oregon Business & Industry [6],
GDP growth ticks up: On Aug. 26, the Oregon Office of Economic Analysis (OEA) released the economic and revenue forecast for the third quarter of 2026. Much of the topline information has changed little since the release of the second-quarter forecast [7] in May.
Perhaps the most notable change involves the state GDP, which has begun to track closer to the national average. Prior to 2026, Oregon’s economy had grown more slowly than the national economy for five consecutive years. [8] That hasn’t changed. However, for the first quarter of 2026, year-over-year real GDP growth, at 2.4%, lagged the national average by only 0.3 percentage points. For most of the past five years, Oregon GDP has trailed the national average by roughly one percentage point.
Inflation also decreased from 4.4% last quarter to 3.6% this quarter, and the risk of an economywide recession has decreased to 18%, according to the OEA.
Continuing job losses: Employment in Oregon continues to struggle, especially in traded-sector industries, and the state’s unemployment remains steady at 5.2%.
The OEA’s presentation to the Legislature no longer features data on industry-specific job losses and gains. In its full report, the OEA now only references data published by the Oregon Employment Department, which shows the state has continued to experience year-over-year job losses in 2026. That trend is unusual, “as it has historically been the case to only see year-over-year payroll declines during recessionary periods.” Once again, the private education and health services sector continues to act as the state’s primary driver of job creation.
As a state that leans heavily on personal income taxes for government funding, Oregon’s declining employment jeopardizes its fiscal outlook. To reverse the trend, the Legislature in 2027 must enact policies that increase the state’s competitiveness and attract business investment.
Population growth slow: Meanwhile, Oregon’s population continues to grow slowly at 0.4%. Since Oregon relies on in-migration rather than natural increase for population growth, policymakers must enact policies that will attract working-age people. These must address the state’s high cost of living, its uncompetitive tax burden and its underperforming schools.
Revenue gains: Despite Oregon’s persistently sluggish economy, the OEA again increased the state’s revenue projections for the 2025-27 biennium. Oregon’s ending fund balance is now projected to be $400 million, and net general fund revenue is projected to be $35.75 billion, which is an increase of $55 million from the last forecast and $194 million from the close of the 2025 session. Those revenue projections reflect stronger-than-expected personal income tax withholdings, which compensate for softening corporate income tax collections.
The revenue forecast also estimates that Oregon will have $540 million more than previously expected during the 2027-29 biennium, contributing to a nearly $7 billion (or 18.6%) increase over the current biennium.
No need for tax hikes: Given this growth – and Oregon’s struggling economy – new and higher taxes should be off the table in 2027. In its full report, the OEA emphasizes the importance of pro-growth policy by noting, “[n]ational and state economic performance have withstood stiff headwinds from trade tariffs and elevated energy prices, in large part due to substantial fiscal support from the tax cuts embedded in H.R. 1.” Unfortunately, the Legislature in 2026 ensured that Oregon businesses will not benefit from several of these provisions, including bonus depreciation and the preference for qualified small business stocks. OBI will push the Legislature to revisit such tax treatment in 2027, ensuring that businesses have more capital to hire workers, increase wages and invest in efficiency.
You can read the full OEA report here [9].