John Mitchell received his B.A. degree from Williams College and his M.S. and Ph.D. degrees from the University of Oregon. He was a professor of economics at Boise State University for 13 years before joining U.S. Bancorp in July of 1983. He was also Chairman of the Oregon Council of Economic Advisors from 1992 to 1998 and a member from 1984 to 1998. John currently writes a column for Oregon Business Magazine and Sterling Bank’s Economic Newsletter, and has been making economic presentations on the nation and the region for more than 38 years. He is a member of the Western Blue Chip Forecast Panel, a Trustee of Aquila Tax Free Trust of Oregon and a board member of Oregon Mutual Insurance Company and Western Capital Corporation.
John began his presentation by describing the current macro-economic landscape and the confluence of circumstances that led to the recent and devastating recession:
- Rising vacancy rates
- Falling rents
- Plummeting values
- Rising delinquencies
- Falling construction employment (in all 50 states)
- Declines in the AIA Billings Index
- Revised expectations
Recent trends (including the recently released 4th quarter 2009 economic report, which indicated that the gross domestic product expanded at an annualized rate of 5.7% during that period) do suggest that the economy is improving. However, consumer spending, weakened by double-digit unemployment and negligible wage gains, remains weak. And the benefits of government stimulus packages and higher company output to feed depleted stockpiles will likely diminish. So, John believes that the GDP will expand at a rate closer to 2.5 to 3.5 percent through 2010 rather than the higher rate suggested by the 4th quarter data.(1)
John also stated that the Federal Reserve isn’t likely to raise interest rates, considering the current ultra-low rate levels as warranted for an extended period. There is simply a lot of uncertainty still at play. John enumerated the “headwinds” that could forestall the nascent recovery:
- Wealth declines
- “Underwater” homeowners (owing more than their property is worth)
- Uncertainty amidst major policy changes
- A new credit world
- State and local retrenchment
The uncertainty associated with these concerns is likely enough to hold back any reduction in the unemployment rate, currently at 11 percent statewide. In fact, some analysts expect the rate to even rise through year's end. Oregon ranks 44th for job growth among all of the states as far as year over year gains (-4.3%) are concerned. Where will new jobs be generated? North Dakota ranks highest but even it reported a net loss of jobs in 2009. There’s been no place to hide from the bleak employment picture. The education and health sectors of the Oregon economy were the only ones that created more jobs than they lost during 2009. The big losers were government services (other than education), leisure & hospitality, professional services, manufacturing, financial services, mining & logging, and construction.
How will the Oregon economy recover? The GDP will expand (slowly) but consumers are cautious. We now operate in a changed regulatory environment, a new credit world with reset expectations. There are limited resources and unlimited wants, including unfunded entitlements. Consequently, the projected recovery will be slow to happen. John predicts that the construction industry in particular is likely to arrive late to the party. For the majority of Oregon architects, the bottom line is that it will be 2011 before things improve appreciably. Eleven will be better than ten.
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Like last year, all of the credit for the success of the January program goes to the Willamette Valley Chapter, CSI. If you’re not familiar with the organization, the Construction Specifications Institute (CSI) is a national professional association that provides technical information and products, continuing education, professional conferences, and product shows to enhance communication among all the building design and construction industry's disciplines. Kudos to Willamette Valley Chapter president Matt Keenan and WVC program committee chairs Aaron Olson and Jon Texter for producing not only John Mitchell’s presentation, but also the excellent educational seminars and products show prior to the dinner meeting.
(1) John was quick to point out that when economists use decimal points in projections, it proves they have a sense of humor.