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Deciphering Oregon’s Tight Labor Market

We know the economy is beginning to run into capacity constraints. The biggest issue today facing Oregon firms is the ability to attract and retain workers. The labor market is getting tighter for two primary reasons: a strong economy, and demographics as retirements increase. These factors are seen across the entire economy, not in an industry or two. Overall this results in slowing statewide job growth as the economy transitions down to more sustainable rates. 

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Oregon’s Food Economy

Oregon’s food economy overall employs nearly 290,000 workers, or 15% of the state workforce. It accounts for 4-5% of state GDP in recent years. One-third of these workers — nearly 100,000 — are in the production, processing, and distribution segments of the food economy.

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Oregon’s High-Tech Outlook

The biggest high-tech takeaway from an industrial structure point of view is that Oregon’s historical strengths are not expected to lead growth moving forward. Oregon’s high-tech legacy and our regional economy’s comparative advantage lies in hardware manufacturing, with semiconductors being the most prominent.

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Oregon Economic and Revenue Forecast, June 2018

Oregon’s industrial structure is very similar to the U.S. overall, even moreso than nearly all other states. That said, Oregon’s manufacturing industry is larger and weighted toward semiconductors and wood products, relative to the nation which is much more concentrated in transportation equipment (autos and aerospace). However, these industries which have been Oregon’s strength in both the recent past and historically, are now expected to grow the slowest moving forward. Productivity and output from the state’s technology producers is expected to continue growing quickly, however employment is not likely to follow suit.

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Oregon Beer Production, 2018 (Graph of the Week)

It turns out that not every week is craft beer week. Who knew? But this week, it actually is. So in honor of our value-added manufacturing, declining start-up trend bucking, homegrown Oregon breweries out there, I thought I should update our numbers of Oregon beer production. These figures come from the OLCC beer reports which only cover beer made in Oregon and sold in Oregon. So beer imported into the state from other breweries, and beer made here but exported to other states or countries are not included in these numbers. It also includes all Oregon breweries, regardless of ownership or brewing techniques. The goal here is not to get bogged down into defining what craft beer is. Rather it’s to look at Oregon beer production.

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Economic Headwinds and Tailwinds

This morning I have the privilege of being a part of Portland State’s Northwest Economic Research Center‘s forecast breakfast. NERC, of course, is headed by Tom Potiowsky who used to oversee our office as the state economist for much of the 2000s. In recent years, Tom and his team have created regional economic forecasts in addition to other research and consulting work.

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Downskilling in a Tight Labor Market

In a tight labor market, bargaining power shifts back toward workers to some degree. Businesses have a harder time attracting and retaining workers. Wages are bid up and firms need to dig deeper into the resume stack to hire candidates they previously passed over. Workers themselves feel more confident in their prospects and more likely to quit or switch jobs. All of the above is happening more today and one item I am trying to track is whether or not firms are downskilling their positions in order to fill them.

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Oregon Job Polarization, 2017 Update

As the economic expansion matures and the labor market tightens, it brings along with it the feel-good part of the business cycle. Wages and household incomes are rising while poverty rates are dropping. Employment has picked up in rural areas even as it slows in the large, urban centers that turned around first following the recession. Additionally, employment prospects are up for all levels of educational attainment. Now, in keeping with this pattern we’re finally seeing good growth again among middle-wage jobs here in Oregon the past few years. No longer is the economy only creating high- and low-wage jobs like it was early in the recovery. In fact, according to the latest occupational data released last week by BLS, Oregon’s middle-wage jobs in 2017 grew at a faster pace (2.8%) than both high-wage (1.4%) and low-wage (2.0%) jobs. This marked the largest middle-wage increase in the past 15 years, just edging out 2006’s gains.

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Oregon’s Unprecedented Growth?

A common refrain our office hears is that Oregon’s growth in recent years is unprecedented. Meaning that we’ve never seen population growth like this before. This is usually in the context of the housing market and explaining away our shortage more as a function of extremely high demand, and less about the supply issues. As such, I think it may be helpful to take a graphical trip down memory lane. The bottom line is that yes, in many places in Oregon, mostly urban, we’re seeing population gains that are better than in the 2000s but on par with the 1970s and the 1990s. Remember, people have been packing up and moving to this part of the world since before Lewis & Clark. Population growth and migration is nothing new. It is ingrained in our community and economy and remains our number one comparative advantage.

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Labor and the Trades

First, I want to define what I call classic blue collar occupations. We’re talking about occupational data here, based on what tasks and duties the workers actually perform, not industry data which mixes front line workers with back office staff. Classic blue collar occupations include four occupational groups: construction, installation, maintenance and repair, production, and transportation and material moving. Reminder that production jobs are, essentially, the manufacturing jobs that do the actual manufacturing. In the job polarization research all of these occupations are routine manual jobs, and are considered middle-wage jobs.

The most common issue our office hears is that it is hard to find workers. The labor market is getting tighter, due to both the strong economy and due to demographics as Baby Boomer retirements pick up. However, as I stress in these conversations and presentations, this demographic issue is widespread and impacting all industries and occupations. The trades, or the classic blue collar occupations are not facing worse demographics than other occupations. That does not mean, however, that it isn’t a problem and isn’t a challenge for businesses. The point is that the tight labor market impacts everyone. The good news, especially in places like Oregon with its migration trends, is that there are more warm bodies walking around today. The challenge is attracting them to come work for your firm.

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