Josh Lehner, Senior Economist, Oregon Office of Economic Analysis
The
CSI Willamette Valley Chapter originally intended its January meeting to feature
a forecast of the Lane County economy and construction outlook for 2019. That
meeting will still occur, but the chapter leadership postponed it until
February 27, by which time this year’s economic trends may already be well-established.
In lieu of the customary January meeting, CSI-WVC organized a lunch
presentation this past week by Josh
Lehner, Senior Economist with the State of Oregon’s Office of Economic Analysis.
I
joined approximately fifteen others at Poppi’s Anatolia Restaurant in downtown
Eugene to hear from Josh. He is an excellent speaker, amply demonstrating his
comprehensive knowledge about factors in position to impact prospects for the
local construction industry. These range from the macro-level down to dynamics
very much specific to the Eugene-Springfield economy.
Josh
began by stating what has been clearly evident, which is that economic growth
has been robust across the country for the past decade (the 10-year expansion
of the national economy is a U.S. record). Increases in workers’ wages have
been especially strong in Oregon during that period, averaging between 3 and 4
percent per year. Lane County employment has rebounded since its pre-Great
Recession (before 2008) peak to the point where all industries are now at
historic highs (the outlier is manufacturing, which witnessed a 40% drop in its
numbers, from which it has yet to recover). The architecture and engineering
fields now number some 15,000 employees statewide, with an average annual
salary of $80,000.
Not
surprisingly, Oregon’s population expansion has matched that of its economy. Salem
leads the state’s metropolitan statistical areas in terms of population growth.
Here in Lane County, the majority of newcomers have settled in Eugene, with far
fewer choosing to locate in Springfield for some reason.
A direct
consequence of the strong local economy is a housing affordability crisis, with
the number of new housing units being built falling short of demand, driving up
prices. Exacerbating the problem is how tight bank lending has been since the
Great Recession. Additionally, the urban growth boundaries around the perimeters
of each of the state’s cities and metropolitan areas control urban expansion
onto farm and forest lands but also limit the supply available for new
homebuilding. The residential construction sector has thus struggled to keep pace
with the level of need.
Josh pointed
to several factors at the federal level that may influence how Lane County’s economy
plays out in 2019. There is a troubling level of bad debt on the corporate side.
Equally concerning may be the Federal Reserve’s shifts on monetary policy, and
the Administration’s views on trade and taxes. On the flip side, the exponential
growth of national debt and trade imbalances have yet to prove a barrier to
growth. The direct impact of the recently imposed tariffs on trade has likewise
been minimal, only amounting to 0.2% of Oregon’s GDP. The recent,
record-breaking government shutdown began to impact the national economy but is
now in abeyance.
Generally,
the economic outlook for 2019 remains rosy, though prospects for 2020 appear
less so as economists predict recession-related risks will be elevated by then.
So,
what do the latest local statistics say? Josh reported the rate of growth does
appear to be lessening, and with it the pace of Oregon’s population growth.
Domestic in-migration has been a prime driver of the state’s economy in recent
years, so a decline in new residents may augur a possible economic slowdown in Lane
County; however, this doesn’t mean a retraction is in order, simply that growth
is tempering. A reason why further expansion is unlikely is the tight labor market,
in which demand by employers exceeds the available supply of workers. This
problem is particularly pronounced in the construction industry as shortages of
laborers and skilled tradespeople are widespread. Current forecasts do predict levels
of employment in Oregon’s construction-related industries will remain on the
plus side for several years.
I’m no
economist but it seems to me a major consideration that isn’t being factored into
the analyses by Oregon’s Office of Economic Analysis and others is the
existential threat to all of humanity posed by anthropogenic global warming. Perhaps
this is attributable to how unprecedented the threat is. Without a doubt, the
worldwide impacts are becoming increasingly significant and hard to ignore.
These impacts will only intensify and have an effect on everyone, including all
of us here in Lane County. The pessimist in me says our planet has already
passed a tipping point toward an unavoidably apocalyptic fate. Our chickens are
coming home to roost, and with them will come massive economic upheavals. In my
mind, it’s not a matter of “if,” only a question about “when” everyone will
begin to see these effects.
* * * * * *
Is it
curious the chapter chose to conduct both a January lunch meeting and February’s
coming chapter meeting on the same topic? Yes, though I believe February’s
session may include a panel of economists offering a broad range of perspectives.
That said, February’s speakers will be hard-pressed to outdo Josh’s first-rate synopsis
of his office’s analyses and predictions for 2019. Big thanks to Josh for
sharing his time with us.
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