Tom Potiowsky

Office of Economic Analysis

Oregon’s Economic Outlook

Hotel Murano Tacoma, Washington

May 15, 2008

Pacific Northwest Regional Economic Conference...since 1967

Look at Oregon Economy...

Office of Economic Analysis

Recent Oregon Economy Facts … 5.7% unemployment rate for March 2008 – 10th

highest for the states. New release: March 2008 at 5.6% unemployment rate with April 2008 at 5.5%.

26th fastest job growth at 0.6% for all states for March 2008 over March 2007.

5.7% unemployment rate for March 2008 is up from the latest lowest rate of 5.0% in April 2007.

Total nonfarm employment grew 0.9% year-over-year for the 1st quarter of 2008 (preliminary data). Job losses (S.A.) for both April and March 2008.

5.8% personal income growth for 4th quarter of 2007 over 4th quarter of 2006. Annualized 4th quarter 2007 growth at 5.0%.

Last Two Recessions, Oregon faired better in 1990-91 and much worse during 2001 1990-91

National duration 8 months, about the same for Oregon

‘V’ shaped recession 1.6% decline in Oregon

jobs; 1.5% decline for US Oregon ranked 24th worst Inflation at 6.0% Oregon unemployment

rate peak 7.5% (about same as US), 22 months over 7%

2001 National duration 8

months, about 31 months for Oregon

‘W’ shaped recession 4.0% decline in Oregon

jobs; 2.0% decline for US Oregon ranked 12th worst Inflation at 3.4% Oregon unemployment

rate peak 8.5% (higher than US), 37 months over 7%

Oregon’s Position in the Latest Downturn Nationwide, foreclosure-related filings (e.g., default notices, auction

sale notices, etc.) increased 75% nationwide from 2006 to 2007. Oregon had a 12% increase over the same period, 43rd slowest rate in the U.S.

Oregon’s foreclosure rate at 0.533%, half the national average and well below 1.5% plus rate of NV, FL, CA, AZ, OH, MI.

Oregon still has positive single family house price appreciation as of 4th quarter 2007 (overall, but Medford and Bend are slightly negative, Portland most likely dipping into negative territory—S&P/Case-Shiller price index has Portland slightly negative).

Housing correction has less to adjust compared to other high population growth areas. But, residential building permits down -49.4% total and -51.0% single for March 08 year-to-date. (Deschutes: -68.4% total and -66.5% single)

Unemployment initial benefit claims up by 3,000, trend pointing to slower economic growth.

Oregon's Total Exports (1Q 1997 - 4Q 2007, current dollars)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Q1

19

97

Q2

19

97

Q3

19

97

Q4

19

97

Q1

19

98

Q2

19

98

Q3

19

98

Q4

19

98

Q1

19

99

Q2

19

99

Q3

19

99

Q4

19

99

Q1

20

00

Q2

20

00

Q3

20

00

Q4

20

00

Q1

20

01

Q2

20

01

Q3

20

01

Q4

20

01

Q1

20

02

Q2

20

02

Q3

20

02

Q4

20

02

Q1

20

03

Q2

20

03

Q3

20

03

Q4

20

03

Q1

20

04

Q2

20

04

Q3

20

04

Q4

20

04

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

05

Q1

20

06

Q2

20

06

Q3

20

06

Q4

20

06

Q1

20

07

Q2

20

07

Q3

20

07

($ m

illi

on

)

-30

-20

-10

0

10

20

30

40

(% c

ha

ng

e)

Year-over-year percent change(right scale)

Total Exports(left scale)

Oregon Exports by Industry($ millions, current prices)

2006 2007y/y %

changeTotal All Industries 15,288.3 16,515.4 8.0%

Computer And Electronic Products 6,549.7 6,303.5 -3.8%Agricultural Products 1,490.5 2,201.0 47.7%Transportation Equipment 1,883.6 1,749.0 -7.1%Machinery, Except Electrical 1,571.3 1,694.7 7.9%Chemicals 496.9 664.2 33.7%Primary Metal Manufacturing 495.0 601.6 21.5%Paper 373.6 427.2 14.4%Wood Products 372.4 419.4 12.6%Food And Kindred Products 321.3 409.2 27.4%Waste And Scrap 306.7 407.3 32.8%

Source: WISER, February 2008

Housing Related Sectors Feel the Effects (1st Quarter 2008)

Construction

Wood Products

Metals & Machinery

Food

Wholesale Trade

T/W/Util

Information

Finance

Prof. & Bus. Services

Educational Services

Health Services

Leisure & Hospitality

Govt excl EducationPublic Education

Electronics

Trans. Equipment

Retail Trade

-15%

-10%

-5%

0%

5%

10%

-10% -5% 0% 5% 10%Year-over-year %change

Qtr-

to-q

tr %

chan

ge

Contracting Newly Slowing

Newly Expanding Expanding

Unemployment Rate by Region, March 2008(Not seasonally adjusted; Portland MSA includes Oregon counties only)

Source: Oregon Employment Department Office of Economic Analysis

5.3%

6.2%6.9%

8.8%8.3% 7.9%

Oregon: 6.3% (seasonally adjusted: 5.7%)U. S.: 5.2% (seasonally adjusted: 5.1%)

Unemployment rate by MSA designations, March 2008Note: Portland-Vancouver-Beaverton includes Clark and Skamania counties in Washington State

6.3% 6.0%

9.9%

7.9%

4.5%

6.2%

7.9%

5.6%

6.4%

0%

2%

4%

6%

8%

10%

12%

OREGON MetropolitanArea

Non-metropolitan

Area

Bend Corvallis Eugene-Springfield

Medford Portland-Vancouver-Beaverton

Salem

Metropolitan Statistical Areas

Office of Economic AnalysisSource: Oregon Employment Department

Oregon Index of Leading Indicators(Six Month Annualized Percent Change, through March '08)

-30%

-20%

-10%

0%

10%

20%

30%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Leading Index (L) Diffusion Index <50 Nonfarm Employment(R)

Recession in Oregon

Oregon was Late to the Run Up in Prices (Jan. 05 to Mar. 08)

Housing Price Index(12-month percentage changes)

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Oregon

California

Washington

Idaho

Arizona

Nevada

CA

NV

ID

AZ

LoanPerformance

ORWA

(Repeat sales)

Total Non-farm Employment(Annual Percentage Change)

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Per

cen

t ch

ange

Oregon U.S.

Office of Economic Analysis

Population: Oregon & U.S. (Annual Percentage Change)

0.0

0.5

1.0

1.5

2.0

2.5

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Year

Per

cen

t ch

ange

Oregon

U. S.

Office of Economic Analysis

Personal Income: Oregon & U.S. (Annual Percentage Change)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Year

Per

cen

t ch

ange

Oregon

U. S.

Office of Economic Analysis

(Percent change)

Employment 2008 2009 2010

Baseline 0.6 0.7 1.7

Pessimistic -0.3 -0.3 1.4

Optimistic 1.2 1.8 1.8

Personal Income 2008 2009 2010

Baseline 5.3 4.4 5.6

Pessimistic 3.9 3.3 5.4

Optimistic 6.2 5.4 5.5

Oregon June 2008 Forecast Comparison: Alternative scenarios (draft)

Oregon Economic Assessment Going Forward … Wood Products is in terrible shape, slight help from exports, but

very depressed. Exports a sign of relief for agriculture, manufacturing, and service

sectors with overseas business. Housing starts will continue to drop this year, correction and mild

growth in 2009. House price appreciation may go negative (state-wide) but

adjustment should be quick. The drop in home prices will not be as dramatice as other “hot” markets. Expect bottom fishing of positive and negative price changes into 2009.

Job losses are possible in 2008, but may look more like 1990-91 rather than 2001.

Strong Federal Reserve cuts in rates and Fiscal Stimulus Package likely out in May will lessen the downturn.

Progression of 2007-09 Forecasts ($Bil.)

$12.0

$12.5

$13.0

$13.5

$14.0

$14.5

$15.0

Jun

2002

Dec 2

002

Jun

2003

Dec 2

003

Jun

2004

Dec 2

004

Jun

2005

Dec 2

005

Jun

2006

Dec 2

006

May

200

7

Dec 2

007

Actual Revenues Excluding Kicker

Office of Economic Analysis155 Cottage Street NE, U20Salem, OR 97301-3966

(503) 378-3405

email: oea.info@das.state.or.ushttp://www.oea.das.state.or.us

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