“To climb steep hills requires slow pace at first,” wrote William Shakespeare about success in “A Cotswold Village.”
That’s how Tom Potiowsky, the former Oregon state economist, described the slow recovery from the Great Recession when he spoke with Columbia Memorial Hospital Foundation members and others Thursday in Astoria.
“We really fell down in a deep pit,” he said about the most recent recession, which the National Bureau of Economic Research estimated started in December 2007.
“It’s a slow slog upwards.”
Potiowsky, who was appointed as state economist in 1999 through 2006 and again in 2008 through 2011, described an Oregon economy in the throes of what happens nationally, members of Congress being too political to get anything meaningful done. Oregon in general, he said, falls deeper into a recession because of the make-up of its economy, but also recovers faster, even though it still lags behind the national average economic performance.
Oregon has the 12th slowest growing economy in the nation, a ranking Potiowsky said could change in the wake of the U.S. Bureau of Labor Statistics reporting 7,900 jobs lost in Oregon in September – and later revising that figure to 800 losses. It was the largest single revision since the agency took over reporting labor statistics from Oregon.
In terms of employment loss, said Potiowsky, Oregon’s recession in the early 1980s was significantly worse than the one it’s in now – so bad that 1982 and 1983 were the only years Oregon lost population.
Potiowsky pointed to several important recent economic facts of Oregon during his presentation, including:
• Oregon’s unemployment rate for October was at 8.6 percent, above the U.S.’s 7.9 percent but much better than Oregon’s 9.3-percent rate the year prior.
• Oregon had a 3.6-percent higher personal income growth in the second quarter of 2012 than it did during the same period of 2011.
• Oregon exports through August 2012 are down 1.7 percent from a year ago. Computer and electronics, a large portion of Oregon’s exports, were down 4.8 percent; agricultural products were down 13.9 percent; and all other exports were up 4.8 percent from the year prior.
Construction is the biggest losing industry since the recession started in 2008, said Potiowsky, losing 30 percent of its workforce – mining and logging were the second-worst hit industries in the state. Education and health services – mostly health services – suffered the least, along with government services.
“State higher ed enrollment levels have ballooned like crazy,” he said about school being a growing sector during recessions. “If there’s no job out there, what’s the opportunity cost for going to school?”
When asked specifically about Clatsop County’s recovery, Potiowsky said it might be slower because of the area’s greater economic reliance on natural resources and tourism, which he said has received a boost from “staycations” and people’s pent-up demand to go on vacation after such a long recession. The Oregon State University Rural Studies Program estimated that forest and wood products are approximately 28 percent of Clatsop County’s economic output.
He said that transportation projects, including reconnecting Astoria by rail to Portland, could be some of the biggest economic boons to the region.
Potiowsky said rural areas in Oregon, in general, are doing worse than rural areas in Washington, owing to the former’s increased reliance on timber, natural resources and other volatile industries. He added that Oregon had more of a housing boom – and more to lose when it burst – than rural Washington. Meanwhile, Portland and Seattle metro areas are following a similar trajectory out of the recession.
Signs of life
Potiowsky said it could take until 2014 to get back to pre-recession employment levels. Although housing prices are starting to inch upward, he said, it could take until 2016 for Oregon housing starts to reach pre-recession levels.
He described a financial system in which the links of communication have been broken, resulting in banks not being as willing to lend money. The key to recovery of the system, he said, will be more regular financial markets in which money starts moving again.
He said there is hope, with consumer debt slowly going down, people paying off their mortgages quicker and housing prices and interest rates being low.
“Business and consumer confidence might grow now that the election is over,” said Potiowsky, adding that businesses and consumers do better without the uncertainty in leadership. “This is the type of environment that helps growth happen.”
Oregon will follow national trends of slower growth following the financial crisis, slower population growth and falling labor participation rate, largely related to an aging workforce, he said.
A lot will also depend on China.
“China is our biggest trading partner,” said Potiowsky, adding that there’s a risk – albeit unlikely – that China’s economy could go sour and hold the U.S. back. He said there are additional risks to economic recovery from a possibly stagnating housing market, oil concerns in the Middle East and the Eurozone financial crisis involving Greece.
When asked about what will happen in the next 60 days as Congress approaches what has been termed “the fiscal cliff,” Potiowsky said Oregon senators are telling him they’ll need to do the usual political dance to create a compromise. The U.S. is facing more than hundreds of billions in automatic spending cuts if Congress cannot create a plan on deficit and debt reduction in December and January, a sequestration requirement created by the Budget Control Act of 2011 and taking effect in January.
“It’s going to be a compromise to kick the can down the road,” said Potiowsky.
For more information on what he presented, Potiowsky directed people to the Oregon Office of Economic Analysis, oregoneconomicanalysis.wordpress.com and @OR_EconAnalysis on Twitter..