Mode-Hot 2011

The Oregon unemployment rate fell to 9.6% in April, down from a revised March figure of 9.9%.  Note that this puts Oregon just a shade above the national rate of 9%.  In addition Oregon added 1,600 jobs in April after a loss of 2000 in March.

UPDATE: A commentator asks about the underemployment rate.  Here are all the various definitions and their Oregon estimates for April:





Underemployment as the term is generally used is the U6 measure and includes those that want to work full time and cannot, those that do not have regular employment, etc.  For Oregon is is estimated to be 18.4% in April as compared to the US which was at 15.9% for April.

About what I expected: slightly better but no tidal wave of new revenue to save the state.  The new forecast predicts an additional $128 million for the next biennium.  Always nice to have more, but realistically, this is hardly enough to make a real difference. It is clear that this is going to be a long and slow recovery and it will take time to recover the lost revenues.  In the meantime public school districts are resorting to draconian measures to further diminish what already is an embarrassment of a public education system.



Anyway here are a couple of pictures from the presentation to the legislature this morning.



The first is the graph of Personal Income Tax Collections presented as a % change from one year ago (3 month moving sum):

The second is revenue growth relative to the March forecast - corporate is doing better than forecast but personal is doing worse:





In the mean time lawmakers will haver another $40 million plus hole to fill before the end of the current fiscal year.

I have been very busy lately as you can see by the length of my posts.  But I have been quite remiss in not directing readers over to Josh Lehner's always excellent posts at the Oregon Office of Economic Analysis.



Here are three recent posts that are well worth a read:



First, it turns out he beat me to a post on the international GDP comparisons - his is much better. Not strictly an Oregon economic issue, but as Oregon is in the US it does correlate.

Second, there is this post and a follow-up on Oregon's relative performance on jobs.  In the graph below Oregon is red, Washington is blue and the US average is black.







Third, there is an update on the Oregon Index of Leading Indicators.







I'll be talking about some of this tonight on KGW's "Live @ 7" show.  

The February numbers are out and Oregon's jobs picture looks much better, though not enough to disabuse me of the belief that though we are indeed in recovery mode, it is still going to be a climb out.



The unemployment rate is still at a quite high 10.2%, but the number of new jobs created was a very robust 9,800 on a seasonally adjusted basis. This is the highest monthly jobs gain in Oregon since November 1996. The unemployment rate is of course a function of supply and demand and the supply of those looking for jobs in increasing with demand so it'll be hard to make a serious dent in it quickly, but the jobs numbers have been good for 5 months now, and it is this number that is the important one upon which to focus.  Finally some very good news about the Oregon economy.



Here is a picture of the jobs numbers:

One reason to temper enthusiasm is the terrible catastrophe in Japan, which will not help matters as it is one of the top destinations for our exports and the Port of Portland still handles a number of cars and other goods going to and coming from Japan.  Here is a picture of Oregon Exports by Country from 1997 to 2010 taken from a post at the Office of Economic Analysis Blog.





Turmoil in the middle east and the related surge in oil prices is not helping speed the recovery either.  So the moral of the story is that things are getting better, but still slowly and we still have a long climb ahead.

Some good news from Salem this morning, Oregon's unemployment rate fell to 10.4% in January.  Not really a significant change, but the better news is the robust job growth.  On a seasonally adjusted basis, 6,300 jobs were added in January, almost all of it private sector growth, after a revised 4,000 jobs added in December.  This is progress.  But before we get too giddy, here is a buzzkil:

We have only just begun to climb out of the hole the recession created. It is going to be a long slow climb...

The December Oregon unemployment figures were announced today and, as usual these days, they contain both good and bad news.  The bad news is that the unemployment rate is stuck at 10.6%, the good news is that for four months running now the state added private sector jobs.  Oregon added, on a seasonally adjusted basis, 400 private sector jobs in December, however government shed 2,200 jobs leaving the state with a net loss of 1,800 jobs.



The take away is the same as last month - the situation is improving but at a glacial pace.  The wave of budget crises in the states will continue to put the brakes on growth as spending cuts are made and jobs shed - which is severely hampering our ability to climb out of the hole we've created.

In the wake of my little post on Oregon's trade weighted dollar index, Josh Lehner at the Oregon Office of Economic Analysis' Blog discusses it in depth and points us to the index that his office keeps. Here is an excerpt:

Given Oregon’s industrial makeup (the state’s manufacturing location quotient for 2009 was 1.143, with durable goods registering a 1.309) and geographic location, the state has long been a major exporter and international trade is a pillar of the state’s economy. According to research, Oregon is the fifth most trade-dependent state in the U.S. and a recent Brookings Institute report (see page 15) shows that the Portland-Vancouver MSA is the second most trade-dependent metro in the country behind only Wichita, KS. (Wichita is the “Air Capital of the World” and has long been a major player in the aircraft industry with operations by Boeing, Airbus, Leerjet and Cessna, among others.) Seeing that exports play a major role in Oregon’s economy and international trade is influenced by exchange rates, tracking the international competitiveness of Oregon’s exports is important to determine the economic health of the state and also to help gauge future trends. It also stands to reason that for a trade-dependent state, such as Oregon, a dollar index is a leading indicator for local employment. As the dollar becomes more competitive, it will boost Oregon exports, which in turn will lead to increased employment as the exporting firms need to hire additional workers to fill orders and the ports will hire additional workers to load/unload the products onto ships, barges and airplanes.



Generally speaking, what the Dallas Fed is now undertaking follows the methodology of our office’s Oregon dollar index, however there are a few differences that lead to slightly different outcomes. First, the graph below illustrates our office’s Oregon dollar index and the Major Currency dollar index from the Federal Reserve over the past 15 years.



***



The fact that the Dallas Fed uses the Top 25 trading partner countries and our office uses just the Top 15 countries may seem like a potentially large difference, however, based on data over the past 15 years, it is not. On average, the Dallas Fed notes that their indexes cover 89 percent of all exports for each state. That means, the Top 25 trading partners account for 89 percent of each states’ exports. In Oregon, the Top 15 trading partners account for an average of 84 percent of all exports and depending upon the year, the exact percentage falls within the 82-88 percent range. With such a small difference between using the Top 15 compared to the Top 25, the overall dollar index for the state would not be changed significantly.



Overall, the continued depreciation of the U.S. dollar and also the Oregon Dollar Index, is good news for exports (and manufacturers of export goods), which should continue to increase as the global expansion continues.

Go read the rest of the post there.

The Federal Reserve Bank of Dallas has issued a report that creates a real trade weighted value of the dollar for each state.  This is weighted by the specific countries where the state exports to and imports from and by how much they do so.  The point is that national exchange rate indices do not always give an accurate impression of how exchange rates are affecting individual states.  Oregon, for instance, trades relatively heavily with East Asia and relatively little with South America.



First, how important is trade for Oregon?  Well, the statistic I always cite is old, but the most recent we have and shows that in 2006, Oregon was the 5th highest state in terms of the importance of exports to jobs.

As for the importance of trade with East Asia, here is a look at how the East Asian crisis of the late 90s really impacted trade with Western states.





Which is why, of course, when people ask me about Oregon's economic prospects I always point to what is going on in East Asia, which right now is great for us.  But, of course, the prospects of a major real estate bubble, social tension and a manipulated Yuan are all worrisome. 

You may remember that the national employment numbers for November were a huge disappointment - very few new jobs were added, when a big gain was expected.  Well in Oregon, largely because of the disappointing national numbers, I expected a very low job gain number and have been surprised again, this time pleasantly so.  6,300 jobs were added in Oregon in November, following 6,700 in October.  Two back to back healthy job gains is good news in this horrible economy.  The unemployment rate is essentially the same at 10.6%



Why the job gains and no budge in the unemployment rate?  Well, Oregon's workforce continues to grow, in fact for the first time ever, Oregon's civilian labor force has eclipsed two million people.  This is most likely due to population growth as Oregon is still a net in-migrtation state.



So it is good news but to give a healthy does of perspective here is a look at the employment numbers from the last decade:

Let's hope that this time we can keep the momentum going.



As for which sectors showed growth and which didn't the good folks at the Oregon Employment Department made this nice graphic:

According to a report released today by the Tax Foundation, Oregon's tax climate ranking among all 50 states remained unchanged from 2010 to 2011 at 14th. Oregon's ranking did fall from 2009 to 2010, from 8th to 14th, after the passage of Measures 66 & 67, but it remains in the top third of all states.

State Business Tax Climate Index Fiscal Year 2011
	2011 Rank	2010 Rank	Change from 2010 to 2011	2009 Rank	2008 Rank	2007 Rank	2006 Rank
Alabama	28	19	– 9	20	23	22	16
Alaska	2	3	+ 1	4	3	4	3
Arizona	34	28	– 6	24	25	29	29
Arkansas	39	40	+ 1	35	37	36	35
California	49	48	– 1	49	49	48	42
Colorado	15	13	– 2	13	10	11	13
Connecticut	47	38	– 9	37	38	39	41
Delaware	8	8	0	10	9	8	9
Florida	5	5	0	5	5	5	5
Georgia	25	29	+ 4	27	28	21	20
Hawaii	22	24	+ 2	22	18	16	24
Idaho	18	18	0	29	21	26	30
Illinois	23	30	+ 7	23	24	31	26
Indiana	10	12	+ 2	14	13	12	12
Iowa	45	46	+ 1	44	46	45	44
Kansas	35	32	– 3	31	31	35	33
Kentucky	19	20	+ 1	34	27	28	38
Louisiana	36	35	– 1	33	34	33	32
Maine	31	34	+ 3	40	35	37	43
Maryland	44	45	+ 1	45	47	24	25
Massachusetts	32	36	+ 4	32	33	34	36
Michigan	17	17	0	21	17	23	28
Minnesota	43	43	0	41	42	43	39
Mississippi	21	21	0	19	22	19	19
Missouri	16	16	0	16	16	15	14
Montana	6	6	0	6	6	6	8
Nebraska	29	33	+ 4	42	40	41	45
Nevada	4	4	0	3	4	3	4
New Hampshire	7	7	0	7	7	7	6
New Jersey	48	50	+ 2	50	50	50	48
New Mexico	33	23	– 10	26	29	25	23
New York	50	49	– 1	47	45	46	49
North Carolina	41	39	– 2	39	41	42	40
North Dakota	20	25	+ 5	30	32	32	31
Ohio	46	47	+ 1	48	48	47	47
Oklahoma	30	31	+ 1	18	19	20	21
Oregon	14	14	0	8	8	9	10
Pennsylvania	26	27	+ 1	28	30	30	22
Rhode Island	42	44	+ 2	46	44	49	50
South Carolina	24	26	+ 2	25	26	27	27
South Dakota	1	1	0	2	2	2	2
Tennessee	27	22	– 5	17	20	17	18
Texas	13	11	– 2	9	11	10	7
Utah	9	10	+ 1	11	12	18	15
Vermont	38	41	+ 3	43	43	44	46
Virginia	12	15	+ 3	15	15	14	17
Washington	11	9	– 2	12	14	13	11
West Virginia	37	37	0	36	36	38	34
Wisconsin	40	42	+ 2	38	39	40	37
Wyoming	3	2	– 1	1	1	1	1

Once again, Oregon's unemployment rate hasn't budged - for yet another month it was at 10.6% in September.  Worse, the state shed another 1,800 jobs - however the shedding of government jobs was responsible for the negative number.  The private sector added 1,600 jobs in September on a seasonally adjusted basis.  So that is something, but not enough.

Oregon's unemployment situation was little changed in August - the official unemployment rate remains at 10.6 percent for another month - leaving it essentially the same for almost a year.  But the depressing news was in the payroll report where the state lost another 1,500 jobs (700 of which were government jobs from the shedding of Census workers).



Given that the federal report showed 67,000 new private sector job, there was hope that we would see a positive number in Oregon, but alas, it was not to be.



This, along with slumping leading indicators, suggests it is still a long way out the woods for the state.  

The Oregon Employment Department has just released the July employment numbers.  This is a one-tenth of a percentage point gain from the revised June numbers, but is essentially stuck and has been for nine months.  The jobs number is bad: 3,000 jobs lost in July, but the revised June number is now 1,800 new jobs added, so the net effect is minimal.

Manufacturing and construction actually added 4,000 jobs while government shed 3,500 jobs including, but not limited to, census workers.



Once again, we appear to be stuck, stuck, stuck (as does the US economy) and there is no real reason to believe it will get better soon.  One hopes the federal government will come through with more aid to the states in the form of block grants, but there does not seem to be much momentum for this on Capital Hill.

The Oregon Office of Economic Analysis has a nice new post on Oregon's exports. Here is the key graph:

The blue line is the total exports and the red is the year-over-year percentage change.  As you can see, the recession had a huge impact but exports have recovered nicely and the trend is pretty strongly positive.



Read the rest of the interesting analysis at the OEA blog.

From the O:

At a minimum make this in real dollars, not nominal, but if you really want to inform, take out the federal dollars and put this in terms of percent of state GDP.



By the way, this is the construction site across the street from my office (which is located behind the photographer). Remember the wee little roller that was causing unsettlingly large tremors in my 100+ year-old brick building?  This is the reason.  When this cascade subduction quake-zilla thingy goes down I hope I am no where near my office...

In an otherwise very solid piece on the Oregon budget crisis by Harry Esteve in The Oregonian, there are a few high profile misfires.  I am most disappointed in this list which I think is misleading:

Eight reasons Oregon is in deep budget trouble

1. Recession: Unlike past economic troughs, this one was too deep, too vicious to muddle through with nips and tucks.

2. No sales tax: Our heavy dependence on income taxes to pay for schools and state programs leaves us vulnerable when jobs dry up.

3. Failure to apply spending brakes: Lawmakers went on a spree in 2007 that came back to bite them.

4. Dinky savings accounts: The state's first-ever rainy day fund, established in 2007, was all but depleted within two years.

5. Ballot measures approved by voters: Property tax limits, longer prison sentences, kicker rebates and mandatory parks spending leave little wiggle room when income stalls.

6. Public employee benefits: Most state employees get fully paid medical insurance. And the retirement system, despite rollbacks and changes for newer employees, still has old guaranteed returns and present retirement contributions that add up to soaring future costs.

7. Federal stimulus: It saved jobs for two years, but now it's going away and the economy did not recover fast enough to replace it.

8. The kicker: If the economy takes off faster than state officials anticipate, Oregon could be sending money back to individuals and corporations while cutting schools and services.

#1 is clearly correct, this is the worst recession since the great depression, there is no way to escape its downward pull.  But #2 is simply wrong.  As I have illustrated in this blog through a rather extensive bit of research, a sales tax would not solve anything as consumption and income are very highly correlated.  Sales taxes are almost as volatile as income taxes.  It is the shift away from property taxes that contributed most the the current volatility of state revenues - which is alluded to in #5.  [Though Ironically de-coupling property taxes from market values helped a tiny bit as the housing crisis hit] #6 is also misleading.  I don't know of a full accounting for all state employees, but the relatively generous benefits I get as a state employee are more than outweighed by the much lower salary I get relative to my peers.  I accepted a salary that was 25% below a competing offer when I moved back in 2006.  I had a very, very strong preference for living in Oregon, but we are at a competitive disadvantage amongst those without such preferences.



I do agree most strongly with #4 as you all well know.  In fact I think a good rainy-day fund built into the kicker would render the kicker question (#8) moot.   I think this is the #1 priority for the state legislature going into the next session.

Oregon's unemployment situation remained stuck in a rut last month with a dismal jobs performance of 3,600 jobs lost on a seasonally adjusted basis.  Not much time to expound on this today, but it kind of speaks for itself.  Depressing

The unemployment rate was flat and so were jobs.  The number of seasonally adjusted jobs added in May: 0.  Oy.



In a word: depressing.  This is beginning to look like what some call a U shaped recession which essentially means being stuck for an extended period in the trough.  And stuck we appear to be.

Went the Oregon general fund.  The Office of Economic Analysis blog has a nice picture that does a good job describing the torpedo they good ship Oregon took to her hull.

This is net receipts from February though April for the last 14 years.  Note how Oregon is $400,000 in the red in 2010, meaning we refunded $400,000 more than we took in during that period, and this is with 66 and 67.



What is going on?

...preliminary numbers show that the biggest culprit was capital gains. Following a 60 percent decline in capital gains income from the 2007 tax year to the 2008 tax year, we were expecting an additional 10 percent decline for the 2009 tax year. This was in line with what many other states were projecting (5 percent to -20 percent) based on an informal survey conducted early last winter. Unfortunately, preliminary estimates show that capital gains income likely dropped at least another 50 percent for the 2009 tax year. Going forward we believe that we will see an uptick in capital gains income, but carry forward losses and low levels of business transactions will limit growth.

Sigh.



Which brings me to another topic. Polictical football is being made of the decision not to call a special session and institute a 9% across-the-board cut. But, of course, as OPBs Chris Lehman reported lots of agencies only rely partly on general fund monies.  In fact K-12 education makes up more than 40% of general fund spending thanks to Measure 5.  Higher ed. another 10%. Mandated Medicaid about another 12%.  After that the only other significant portion is corrections and we see what a 9% cut will do there.   Given the dire state of K-12 in particular it seems difficult to understand why we wouldn't want to try and protect it.  But the reality of the numbers is stark: there just isn't a way to protect K-12 without totally gutting other state programs.  So while I like the idea of being more nuanced about cuts, there just aren't many degrees of freedom here.



Which of course brings me back to kicker reform and a rainy-day fund.  Yes, it does not fix long run trends that Tim Duy has very clearly explained, but a substantial rainy-day fund would allow us to avoid these types of draconian cuts to basic services in recessions.

Not long ago the Oregon Office of Economic Analysis started a blog.  It is infrequent but still a great addition to the discussion of the Oregon economy.  The also have some great graphs generated from Oregon data and today they have another of the graphs that look at Oregon's present labor market troubles compared with those of the recent past.  The picture is grim but probably quite accurate.  No one can say for sure how quickly we will climb out of the current recession-created hole we are in, but there is no great hope it will be a quick process.

Anyway, check out the blog for a more in-depth discussion.



Another blog that should be on your radar is the one from the Research Division of the Oregon Employment Department (and I will update my blogroll to include both of these).