1. Economic & Revenue Outlook
August 26, 2011
Office of Economic Analysis
Josh Lehner
Mark McMullen

2. Macroeconomic Outlook

3. Is Recession Imminent?

4. Pessimism Sets In Office of Economic Analysis Average LT Growth
Soft Patch
Better Growth Data
“Headwinds”
Revisions, Stock Market,
Debt Ceiling 4
Office of Economic Analysis 4

5. Where is the slowdown? Coincident Index Components
1) Nonfarm Employment
2) Average Hours Worked
Manufacturing
3) Unemployment Rate
4) Inflation Adjusted Wages
and Salaries
Long-term growth trended to state GDP. 5 5 5

6. Coincident Index Components
Where is the slowdown?
Coincident Index Components
1) Nonfarm Employment
2) Average Hours Worked Manufacturing
3) Unemployment Rate
4) Inflation Adjusted Wages and Salaries
Long-term growth trended to state GDP. 6 6 6

7. U.S. Economic Growth Continues at Subdued Pace
The economic expansion is sluggish by historical standards, with momentum being lost during the first half of 2011.
With home prices still falling, the housing recovery has yet to support growth.
Sustained job growth and an easing of commodity price pressures will enable consumers to spend more confidently.
Core inflation will rise only gradually.
The Fed is expected to begin raising interest rates in mid-2013.
Business equipment investment, exports, and consumer durables are driving growth; recoveries in housing and commercial construction markets will come later.

8. Regional Oregon Outlook

9. Recent Oregon Economy Facts
9.5% unemployment rate for Jul 2011 (Jul US rate is 9.1%) is down from the highest rate of 11.6% in May and June The 2010 average was 10.8%.
13th fastest job growth at 1.62% for all states for July 2011 over July 2010.
Total nonfarm employment increased 1.4% year-over-year for the 2nd quarter of S.A. job gains in nine of the last ten months since Oct (down in March). Total nonfarm up 30,000 since Sept 2010 with the private sector up 33,500.
4.4% personal income growth for 1st quarter of 2011 over 1st quarter of Annualized 1st quarter 2011 growth at 7.7%.
Oregon exports increased 18.6% in 2010 compared to June YTD in 2011 up 5.8% over June YTD 2010. 9 9 9

10. All Sectors Returned to Growth During 2011 Q1….

11. …but Have Lost Steam Since 2011 Q2

12. Unemployment Rate by Region, July 2011 (seasonally adjusted)
Oregon: 9.5% % % % %
Source: Oregon Employment Department
Office of Economic Analysis

13. Unemployment Rate Change, Dec ‘09 to Jul ‘11 (seasonally adjusted)
Oregon: -1.5%
Dec 09: 11.0%
July 11: 9.5%
-2.6% to -2.0%
-1.9% to -1.0%
-0.9% to 0.0%
0.0% to 0.6%
Employment Dept.’s grouping
Source: Oregon Employment Department
Office of Economic Analysis

14. Oregon Indexes Still Showing Growth (Data through June 2011)14 14 14

15. Hours Worked Holding Steady15 15 15

16. Exports
Non Computer and Electronic Product exports continue to do well
Agricultural Products benefit from higher commodity prices
Computer and Electronic Product exports coming down off of record levels
China, Malaysia, Costa Rica 16 16 16

17. Two Main Drags on Growth17 17 17

18. Drag #1: Housing Housing Price Declines Starts Return to Average
Baseline
-5.4%
2015 Q4
Optimistic
-2.9%
2015 Q1
Pessimistic
-11.3%
2016 Q2

19. Drag #2: Government 19 19 19

20. State Employment

21. Local Employment

22. Employment Outlook 22 22 22

23. Long Run Forecasting

24. Working Age Cohort Declining

25. Labor Force Participation Rates

26. Expansions’ Average Growth

27. Revenue Outlook

28. Revenue Growth Is a Mixed Bag April-June Quarter, % change vs. year ago28

29. CIT Collections Hit the Wall
Corporate Income Tax Collections
% change year ago, 3 month moving sum

30. PIT Collections Bounce Back
Personal Income Tax Collections
% change year ago, 3 month moving sum

31. Q4 Total General Fund Forecast Errors (Total General Fund Revenues, % error, April-June quarter)
+2 Standard Deviations (6.8%)
+1 Standard Deviation (3.4%)
-1 Standard Deviation (-3.4%)

32. Forecast Changes Difference from May forecast, millions32 32

33. 2011 Close of Session 33 33 33

34. September Forecast 34 34 34

35. Reserves 35 35 35

36. Accounting for the Decline36 36 36

37. Capital Gains Outlook Tax years, March 2011 revenue forecast
2011 Wilshire 5000:
14,000, 18% growth 7%
33%
63%

38. Personal Income Tax Forecast $ billions, 4 quarter moving sum2
-$167
(million)
-$220.5
-$299.1
-$324.1
-$368.2

39. Corporate Taxes and Profits Percent change year ago, tax years

40. Corporate Income Tax Forecast $ millions, 4 quarter moving sum
$12.2
(million)
-$14.1
-$22.2
-$3.9
-$14.4

41. Biennial Revenue Growth41 41

42. For More Information Standard Contact: 155 Cottage Street NE
Salem, OR 97301
(503)
Social Media:
oregoneconomicanalysis.wordpress.com
@OR_EconAnalysis 42