Oregon Economic Update: No Recession in 2023
July 11, 2023Inflation is slowing, wages are rising, and job growth remains strong. For these reasons, the Oregon Office of Economic Analysis (OEA) believes we will avoid a recession in the near term. However, we’re not out of the woods yet. Inflation remains well above the Federal Reserve’s target rate, and inflationary economic booms historically end in recession. According to OEA’s latest forecast, a recession is not so much a question of ‘if’ but of ‘when’. The strength of the economy is pushing the recession date farther out into the future.
Forecasting the timing of recessions is difficult, and made more challenging today by the ongoing momentum in the economy. In addition to easing inflation, low unemployment, strong job growth, and improving household finances, the nation has also thus far survived the goods recession of 2022 and is working through the banking turmoil of early 2023. In light of this, OEA recognizes that it’s difficult to see where an imminent recession comes from. So for now, they are not incorporating one into their baseline scenario and instead allowing for the possibility of a soft landing and continued, albeit slowing, economic growth.
However, the risk of recession is uncomfortably high, and is played out in OEA’s alternative, or ‘boom/bust’ scenario. In this situation, interest rate hikes (past and potential future ones) result in a moderate recession beginning in early 2024. Oregon would see three quarters of job losses totaling 3%, or 60,000 jobs. No industry escapes unscathed, but the goods-producing sectors (construction, manufacturing) will see relatively larger losses. The unemployment rate rises to 7%.
The OEA's complete report is available at www.oregon.gov/das/OEA/Pages/forecastecorev.aspx.