Oregon Economic Update: Softening but Stable

October 2, 2024

The national economy appears to be transitioning from a post-pandemic inflationary boom to what could be the beginning of sustained growth. Inflation is nearing the Fed’s target and the overheated labor market of the past few years has cooled. Recent interest rate cuts are expected to revitalize rate-sensitive sectors of the economy (e.g. housing, manufacturing). A recession isn’t entirely outside the realm of possibility, but the risk of one in the near-term is waning.

Oregon’s trajectory is difficult to predict, according to the latest forecast from Oregon’s Office of Economic Analysis (OEA). The state will follow the nation down whatever path it takes but our starting point, or the current state of Oregon’s economy, is a bit unclear. While our economic performance has been solid, this recent cycle has been different. Instead of outperforming most states in employment and population growth as in the past, we’ve dropped to roughly the middle-to-bottom of the pack. OEA attributes slow job growth to our lackluster population growth.  

Additionally, the labor market is softer than it appears. On the surface, job totals, labor force participation rates, and the share of adults with a job all remain relatively high. Below the surface, labor market dynamics have shifted. Job openings have declined and the hiring rate has decelerated. And while many employers are choosing attrition and/or a reduction in hiring as opposed to layoffs to address a slowdown in consumer spending, Oregon has seen a few major layoff announcements this year, specifically in high tech, footwear and apparel, and wood products. Whether this is the start of a trend or a temporary adjustment to softening demand remains to be seen.

On a more positive note, tax withholdings have picked up in recent months. Excluding the Powerball jackpot won by an Oregonian, withholdings are up about 6% over the year. This is in line with past expansions. Job growth has also perked up. Employers added over 20,000 jobs between February and August: nearly twice as many compared with the same time a year ago. Finally, the number of personal income tax returns filed this year has also ticked up. Some or all of these data points could be signs that we’re breaking out of the post-pandemic lull, or perhaps they’re just noise. Only time will tell.

For now, OEA’s outlook remains basically unchanged from recent forecasts. The baseline, or the most likely path for the economy, assumes a soft landing: inflation is tamed without tipping the nation into a recession. Employment in Oregon will increase by about 0.3% this year, held down by very slow population growth, then accelerating to 1.0% in 2025. The unemployment rate will hold steady at 4.2%. And, importantly, Oregonians will see personal income increase by 4.5% this year and 6.2% in 2025.

The OEA's complete report is available at www.oregon.gov/das/OEA/Pages/forecastecorev.aspx.