Thursday, August 26, 2010
Does this mean we’re in for a double-dip recession? Moody’s Economy.com doesn’t believe so. The national ratings agency characterizes Oregon’s economy as “recovering” and estimates the chances of a double-dip recession here at 28%.
Whether you use the word “recession,” “depression” or “slow recovery,” the forecast calls for pain. The collapse of the national RV market has sent Oregon's transportation equipment sector jobs down by a predicted 45% from 2007 to 2012. The moribund housing market has devastated the state's already weakened timber industry, and Oregon construction jobs are expected to drop by 12.5% this year and another 2% next year.
The bottom line is that the state is expected to bring in $12.3 billon in revenue during the 2011-2013 biennium due to the ongoing drop-off in personal income taxes. That is $377.5 million lower than the forecast from June 2010 and a whopping $1.27 billion from the end of session forecast in 2009.
Thus continues a long string of overly optimistic and downright inaccurate forecasts from the state’s economic analysis team. The release of each new forecast brings new rounds of excuses about how no one could have seen such trouble coming.
No doubt the recession has turned out much worse than many had predicted. But wishful thinking also has played a role.
When the recession first hit in 2008, many top officials insisted that Oregon was somehow immune or at least sheltered because of the state’s relative lack of reliance on the financial sector, the comparative strength of the Oregon housing market and the spectacular growth of the state's urban creative class. Wrong, wrong, wrong and wrong.
When I was researching a cover story that we ultimately decided to title "The Party’s Over," I heard a lot of wishful thinking, from people in power as well as people in the real estate business. One maverick who wasn’t buying the suggestion that Oregon was somehow protected from the approaching storm was Tim Duy, director of the Oregon Economic Forum. “There is this surface veneer that we as Oregonians want to believe that the meltdown isn’t happening here,” he told me. “I keep telling people, the market in Oregon started to rise later than in the rest of the country. We’re just lagging the cycle by 12 to 18 months here. It’s a story that people don’t want to hear for a whole host of reasons. But that is what’s happening.”
Unfortunately, Duy was right, and a whole lot of other people were wrong. We’re paying for that now. The battle over what to cut is going to get even uglier than it already is. The inevitable cuts to the public sector and resulting job losses are going to put even more pressure on the job market and make people even less willing to spend spend as personal income stagnates, a trend which will take its toll on the private sector as well.
All I can say is that I hope Moody’s prediction that a double-dip recession is unlikely in Oregon doesn’t turn out to be the latest exercise in wishful thinking.
Ben Jacklet is managing editor of Oregon Business.