Oregon U.S. Economic Outlook

Mark McMullen

Chief Economist

State of Oregon

January 15, 2013

Global Interdependence Center

(New Orders, % change year ago, 3-month moving avg.)

The Near Term Looks Soft…

2

-40%

-30%

-20%

-10%

0%

10%

20%

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

Recession

Computers & Electronics

Furniture & Appliances

-75%-60%-45%-30%-15%0%15%30%45%60%75%

-60%

-40%

-20%

0%

20%

40%

60%

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

RecessionMetalsMachineryTransportation Equipment (Right Axis)

…but Businesses Are

Profitable…

3

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

1959Q3 1964Q3 1969Q3 1974Q3 1979Q3 1984Q3 1989Q3 1994Q3 1999Q3 2004Q3 2009Q3

Corporate Profits, % share of GDP

…and Sitting on Cash

4

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

1960Q1 1970Q1 1980Q1 1990Q1 2000Q1 2010Q1

Tri

llio

ns

Nonfinancial Corporate Businesses, Real Liquid Assets

Household’s Gaining Wealth…

5

… And Lowering Liabilities

6

The 2013 Policy Drag

THE THREAT THE OUTCOME

All figures are calendar year $ billions % of GDP $ billions % of GDP

Bush tax cut expiry 197 1.2 35 0.2

Payroll tax cut expiry 113 0.7 113 0.7

Sequester spending cuts 72 0.4 postponed two months

Emergency UI benefits expiry 30 0.2 extended one year

Depreciation incentives expiry 66 0.4 extended one year

AMT Fix not extended 114 0.7 extended permanent

Doc Fix not extended 14 0.1 extended one year

Total Fiscal Cliff 606 3.7 148 0.9

Affordable Care Act taxes 24 0.1 24 0.1

Other spending cuts 34 0.2 34 0.2

Total Fiscal Tightening 664 4.1 206 1.3

7

Source: IHS calculations based on CBO and OMB data

Jobless Claims in Check

8

0

1

2

3

4

5

6

7

8

Jan-87 Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11

Initial Unemployment Claims per 1,000 Labor Force (SA) Recession Oregon Oregon, Current Level United States US, Current Level

The Handoff: Manufacturing to Housing

9

32

38

44

50

56

62

68

-30%

-20%

-10%

0%

10%

20%

30%

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

Economic Drivers

Recession Residential Investment (Y/Y, Left) ISM Manufacturing (Right)

Impressive New Construction

Growth Rates…

10

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Total Housing Permits (SA, Y/Y)

Recession Oregon Total U.S. Total

… But From a Low, Low Base

11

0

500

1,000

1,500

2,000

2,500

3,000

Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10

Oregon Housing Permits (Monthly, SA 3 MMA)

Total Permits

Single Family

Bottom Line: Eventually Some

Acceleration

12

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 Jan-20

Oregon Nonfarm Employment Growth (Y/Y) Recession Employment Expansion Average

Long Run Growth will be

Relatively Weak…

13

-0.5%

-0.3%

-0.1%

0.1%

0.3%

0.5%

45%

46%

47%

48%

49%

50%

51%

52%

53%

54%

55%

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Oregon Working Age Population (25-64) PPT Change (Right) Share of Population (Left)

…as Productive Older Workers

Retire…

15

…and Households Repair their

Balance Sheets

0

2

4

6

8

10

12

14

1960 1970 1980 1990 2000 2010 2020

Savings Rate (Percent of Disposable Income)

16

Consumer Spending Will No

Longer Drive Growth

25%

30%

35%

40%

45%

50%

1950's 1960's 1970's 1980's 1990's 2000's 2010 to 2020

Gross Domestic Product

Consumer Spending

Real spending and output, % change by decade

17

For More Information

Standard Contact:

155 Cottage Street NE

Salem, OR 97301

(503) 378-3405

oea.info@state.or.us

www.oregon.gov/das/oea

Social Media:

oregoneconomicanalysis.wordpress.com

@OR_EconAnalysis