|CONSULTANT: OREGON ECONOMY ON THE UPSWING|
|January 31, 2007 12:00 am|
By Tom Hubka
Pilot staff writer
The United States' economy is in a slow process of growth after a long period of recovery, and Oregon is following suit, according to an economist.
John Mitchell, consulting economist for US Bancorp and speaking at the ninth annual Business Outlook Conference in Brookings Tuesday, said Oregon's economy would have a slow year in 2007, but the days of playing financial catch-up were over.
"Oregon's job growth is above the national average," Mitchell told a full house at the Brookings Elks Lodge, "but not as much as we were."
In Nov. 2006, Oregon was ranked 15th in job growth among all U.S. states, and employment in December was up 1.9 percent, he said.
From 2001 to 2005, Curry County jobs grew by 10.2 percent resulting in about 600 jobs, mainly in construction and finance.
Oregon's economy will slow down in 2007 to about 2.5 percent, Mitchell said, as will inflation, also to 2.5 percent.
"I don't think we're talking about decline, it's just slow growth," he said. But the state is still at its "speed limit," growing as fast as it can based on its own figures.
"If the labor force is at 1 percent, and productivity is as 1.5 percent, then our speed limit is 2.5 (percent)," Mitchell said.
An industry that has contributed to Oregon's slowing pace has been real estate.
Statistics from the National Association of Realtors show housing resales down 18.2 percent in Oregon between 2005 and 2006, a difference Mitchell called a "dramatic fall." Resales across the country fell 12.7 percent.
Nationally, residential structures took away from the nation's gross domestic product. If housing were breaking even, the speed limit for Oregon could increase, Mitchell said.
"(Oregon) grew at 2 percent in the (2006) third quarter," he said. "If housing would have been flat, it would have been 3.2 percent."
But the coming year should be a good one for Oregon real estate. Housing price appreciation in Oregon has stayed strong, especially in growing metropolitan areas such as Bend. The percentage of house starts is expected to decline in 2007, but Mitchell believed it was not a permanent problem.
"I think the rate of decline is going to (improve), and you'll see some strength in real estate," he said. "I suspect it will gradually end over the year."
The U.S. economy has been expanding every year since 2001, Mitchell said. U.S. exports are also growing rapidly.
But a recent yield curve, which shows the relationship between interest rates and the length of a debt, may indicate a coming recession for the country.
Mitchell presented the yield curve from Jan. 25, 2007. The curve was inverted, meaning the long-term yields from interest were lower than the short-term.
"Inverted yield curves have historically shown the beginning of a recession," Mitchell said. "I hope it doesn't mean that."
Curry County in particular has been showing strong signs of strength, Mitchell said, noting the county added 30 jobs in 2006 and 55 percent of the county's 2004 personal income was from dividends, interest, rent and transfers.
"That gives you a degree of stability," he said. "Curry County hasn't had some of the wide swings of the rest of the state."
Falling prices of oil may also play a role for the country's finances. Oil prices have fallen from their recent highs during a year with no major natural disaster. Meanwhile, America has started to invest in alternative fuels such as biodiesel and ethanol.
But Mitchell warned of other financial effects, such as how fuels made from agricultural products such as corn may affect the price of corn and the livestock that currently eats it. Also, needed infrastructure to transport the secondary fuel separately from today's gasoline and diesel may result in some large additional costs.
"We're leaping on this bandwagon, and I'm not sure we have thought it out," he said.