Economic Recovery in Oregon

There was an article in last week’s Oregonian citing a report by IHS Global Insight which warned that Oregon must wait until 2013 before returning to pre-recession peak employment. Unfortunately that prediction is just whistling in the dark

First, it appears that the IHS Global Insight report looks at total jobs rather than only private sector jobs. The reason that is important is that private sector jobs represent increases in real economic growth while growth in government sector jobs represents increases in economic burdens on the economy.

For instance, total private sector employment peaked in December of 2007 at 1,445,100. At that point total (private plus public) employment stood at 1,739,000. At its nadir in December of 2009, private sector employment declined to 1,293,100 – a loss of 152,00 private sector jobs. During that same period of time total employment only dropped by 147,900. In other words while productive private sector jobs were declining, non-productive jobs (government) were increasing.

Despite the fervent belief of Oregon’s Democrats, economic recovery will not occur through a growth in government. But that lesson has yet to settle in with Oregon’s Democrat ruling class. For instance, the modest growth of 1,300 jobs in May was represented by 600 government jobs and only 700 private sector jobs. Even at that, Oregon’s critical growth sector – Construction and Manufacturing – lost 600 and 1000 jobs respectively.

Second, the IHS Global Insight report ignores recent history. During the last recession, Oregon’s private sector lost 64,100 jobs between peak employment in November of 2000 and April of 2003. From that point it took twenty-five months to recover those lost private sector jobs. That represents a recovery run rate of about 2,564 jobs per month. At that rate, recovery of the 152,000 private sector jobs will require fifty-nine months or until near the end of 2014. However, given that the last three months have only produced a growth of 2,700 private sector jobs (900 per month), it is more likely that the recovery period will be much longer – maybe as long as twelve years.

And third, the IHS Global Insight report ignores the fact that Oregon’s population continues to grow. More importantly, the available work force continues to grow. According to the United States Bureau of Labor Statistics, 32,000 new workers entered the job market in Oregon from October of 2009 to October of 2010 – an average of about 2,700 workers per month. That means, in addition to the 2,564 private sector jobs that must be produced to keep pace with the previous recovery period, another 2,700 jobs must be produced each month just to keep pace with the workforce availability increases.

The Portland business community at its annual business summit urged newly elected governor John Kitzhaber to adopt their “aggressive plan” to add 25,000 jobs per year for the next ten years or slightly over 2000 jobs per month. That self-described aggressive plan falls short of absorbing the new job entrants let alone recovering any of the jobs lost during the Kulongoski administration.

And finally, the government class continues to be fixated on Oregon’s jobless claims numbers; viewing any decline in those numbers as a sign of eminent economic recovery. Unfortunately, unemployment numbers simply reflect those receiving benefits, not those actually unemployed (or underemployed). There are a whole variety of reasons that a person who is unemployed may not be receiving benefits. He may have exhausted his benefits; he may have been self-employed and his business went under, or he has simply given up looking. To prove the point, let’s look at May’s unemployment report and the corresponding jobs report. In May, Oregon’s unemployment declined from 9.5% to 9.3% (far in excess of the level promised by President Obama and his Democrat colleagues). In terms of actual claims, that means the numbers dropped from 190,557 receiving benefits in April to 185,540 receiving benefits in May – a decline of 5,017. Yet, there were only 1,300 jobs created during that same period. Thirty-seven hundred claimants disappeared – not because they found employment but for any variety of other reasons they no longer receive benefits.

Democrats like unemployment numbers because they reflect how many people are dependent on government. They eschew private sector employment numbers because they represent real growth and independence.

The legislature is close to ending its session. The best that can be said is that they did not make Oregon materially worse for those who would start, grow or retain a business here. But the legislature did not address the primary barriers to long term economic growth. Just as a reminder, the legislature should reduce the capital gains tax, eliminate the inheritance tax on family owned businesses, roll back the taxes on individuals and businesses found in Measures 66 and 67, and reduce the growing burden of public employee union pension and healthcare benefits so as to redirect those funds to education and improved transportation (not light rail – real improved transportation).

Dealing with those issues would send a strong signal to the national business community that Oregon is serious about economic recovery. Continuing to ignore them while handwringing over where there is enough money to fund a bloated government sends a strong signal that Oregon is intent on business as usual.

Which way do you think Oregon will go?