Sponsored by George Fox University
Home Back Issues November 2008 Economist Joe Cortright: "Fasten your seatbelts"

Economist Joe Cortright: "Fasten your seatbelts"

| Print |  Email
Archives - November 2008
Saturday, November 01, 2008

 

YOU REMEMBER THE FEELING from when you were a kid: Just past the top of the highest point of the track, the roller-coaster car falls away, taking the pit of your stomach with it. Your brain frantically struggles to sense where the bottom might be. That’s what it’s like to have been an investment banker for the past few months.

The question for 2009 is not whether the U.S. economy is headed for a recession — it is — but whether, like mortgage-backed bonds, Lehman Brothers and AIG, it is headed for a massive pileup.

It’s clear the nation’s economy is caught in a downdraft as a result of the compounded effects of higher gas prices, the collapse of the housing market and the current financial crisis. How will this play out in Oregon?

t_JoeCortright
BY JOE CORTRIGHT

Memories of the 2001 recession are still vivid here: Oregon took one of the worst hits of any state in that downturn. Unemployment was the first- or second-highest in the nation, topping out at 8.5%, and the state had to repeatedly cut its budget to cope with falling tax revenues. There’s a reason for that queasy feeling in the pit of our collective stomach.

While it is impossible at this point to know how severe this recession will be, it appears that Oregon is far better positioned than it was seven years ago, and much better positioned relative to other states.

Each of the key drivers of this recession is likely to hit Oregon less hard than other states. Housing markets here haven’t overshot as much as in California and Florida, and housing prices are down about 6% over the past year, compared to a nationwide decline of more than 17%. Defaults and foreclosures are well below the national average. That said, Bend and Medford — both closely tied to the California market — are experiencing a much more severe correction.

The run-up in gas prices — still more than double the price of three years ago — is hurting consumer spending everywhere, but less so in Oregon, where gasoline consumption per capita is about 14% less than the U.S. average. Our more frugal driving habits saved Oregonians upward of $500 million annually that they would have paid in higher gas prices if they drove as much as the average American. Being green turns out to be an economic advantage.

The declining value of the U.S. dollar over the past two years has cut our buying power, but has the silver lining of making exports more competitive. Oregon is particularly poised to benefit because it ranks eighth in exports per capita among U.S. states. Oregon exports have nearly doubled since 2000 and are on track to reach $20 billion this year.

And since 2001 Oregon has worked hard to put its fiscal house in order. Unlike the last downturn, the state has salted away $600 million in rainy-day funds, which can help buffer any downturn. And despite what some critics of our fiscal system would say, Oregon has also been fortunate in this cycle not to have a sales tax: nationwide, state sales-tax receipts are flat over the past year while income taxes have continued to grow at a 4% rate. California and Washington, among others, both face serious budget shortfalls, largely because of stagnant sales-tax revenues.

Our best economic guess — the September 2008 Oregon Economic Forecast — predicted that this downturn would be far more mild than in 2001 and that Oregon would continue to perform better than the nation, growing employment at slightly less than 1% in both 2008 and 2009, before returning to a strong growth phase in 2010. In light of the recent turmoil in financial markets, that may turn out to be too optimistic a reading of our likely economic path. But even if the downturn is sharper and more prolonged, it seems likely that Oregon is much better positioned to weather this downturn than it was the last time.

Hold on tight, though. It’s going to be an exciting ride.


Joe Cortright is vice president and economist with Portland consulting firm Impresa.

 


Have an opinion? E-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

 

More Articles

13 West Coast seafood species now 'sustainable'

News
Tuesday, June 03, 2014

Fishing OrBiz Fishing 0357 ADOBErgbCiting the transition to catch shares management as a key to rebuilding stocks and reducing bycatch, 13 species caught by the West Coast trawl fishery today earned designation from the Marine Stewardship Council (MSC) as sustainable.


Read more...

Blips and trends in the housing market

News
Thursday, June 26, 2014
062614 thumb realestateBY ERIC FRUTS | OB BLOGGER

Last year, the housing market in Oregon—and the U.S. as a whole—was blasting off. The Case-Shiller index of home prices ended the year 13% higher than at the beginning of the year. But, was last year a blip, or a trend?


Read more...

Creating a culture of compliance

Business tips
Thursday, June 19, 2014
DataBY MONICA ENAND | GUEST CONTRIBUTOR

Nine tips for building habits among employees to respond when needed.


Read more...

Updated: Disrupting innovation

News
Tuesday, July 08, 2014
070814 thumb disputive-innovationBY LINDA BAKER  | OB EDITOR

The New Yorker recently published a sharply worded critique of “disruptive innovation,” one of the most widely cited theories in the business world today. The article raises questions about the descriptive value of disruption and innovation  — whether the terms are mere buzzwords or actually explain today's extraordinarily complex and fast changing business environment. 

Update: We caught up with Portland's Thomas Thurston, who shared his data driven take on the disruption controversy.


Read more...

Why I became an Oregon angel investor

Guest Blog
Monday, July 14, 2014
AngelInvestBY TERRY "STARBUCKER" ST. MARIE

I really didn’t know that much about angel investing, but I did know a lot about the entrepreneurial spirit.


Read more...

EPA Standards: A breath of fresh air for the region

News
Thursday, June 12, 2014
EPABY ANDREA DURBIN | OB GUEST BLOGGER

Last week, the Obama administration took an important and welcomed step in the effort to protect the health and well-being of all Oregonians by limiting carbon pollution from existing power plants.


Read more...

Understanding Oregon medical marijuana dispensary tenants

News
Friday, June 13, 2014
061314 thumb grassrentBY CLIFF HOCKLEY | OB GUEST BLOGGER

This article summarizes the key considerations a building owner must keep in mind when thinking about leasing to a medical marijuana dispensary.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS