Oregon State Economist Josh Lehner, one of the presenters of the September 2023 Oregon Economic and Revenue Forecast, writes, “Right now we know the economy remains strong and the labor market is tight. But trying to gauge whether things are strengthening or slowing is a bit harder to do. The Federal Reserve (and most forecasters) are expecting the economy to slow down and inflation to cool.”

However, Lehner points out that data for a soft landing is also consistent for a hard landing. Despite his 50/50 outlook and emerging signs that the economy is reaccelerating, which means inflation could re-heat at some point in the quarters ahead, legislators have ignored the risk level and are broadcasting only the positive side.

At the forecast hearing, economists testified, "The stability over the past three months is not a guarantee of what’s to come. The numbers haven’t changed much showing stability, yet there is a high degree of uncertainty. The economic outlook is adhering to the soft landing the federal government is trying to engineer. The Federal Reserve has taken inflation out of its baseline, but they will keep rates higher for a little longer, which is a concern."

On the positive side, Lehner says, “[A]s inflation slows, income gains are once again outpacing price increases, leading to rising living standards. With the economy nearly at full employment, future growth will come from labor force gains driven by a return of positive net migration in the years ahead, along with productivity gains driven by capital investment.”

A D V E R T I S E M E N T

A D V E R T I S E M E N T

Oregon’s growth rate was 1.22% compared to the national gross domestic product (GDP) at 2.1%. Inflation is at 3.2%, which still means if what we purchase doesn’t equal GDP, then the economy is still shrinking and inflation is still the driving force. Couple that with Forbes reporting that oil will go to $300 a barrel and gas prices will triple by the end of October.

The forecast report says the Oregon government will have plenty to spend on public services based on corporate tax collections projected from a negative $4 million this biennium to $321 million in the 2023-25 biennium. They credit it to increase in small businesses, more federal funding for construction of roads, broadband, and semiconductors that will boost productivity.

All expectations come from corporate taxes. Corporate taxes tracked with corporate profits until 2016 when taxes made a jump over profits and the gap has steadily increased until now when taxes are more than double the profits. Economists claim and blame this on federal tax policy making it more competitive to realize profits in the U.S., and Oregon uses the federal tax forms, which makes Oregon corporate taxes look extreme. The information on corporate profits comes from national data until they are actually filed and realized.

Lehner told Northwest Observer that the Corporate Activity Tax (CAT) interplay could have an impact on corporate taxes, but they are based on sales and companies are able to subtract a portion. The CAT tax is currently at $3 million expected to go to $24 million in the 2025-27 biennium, and gradually return to $3 million in 2030.

Oregon’s unemployment rate dropped from 4.7% in February to 3.40% July 31. Oregon is showing productivity growth, rather than population growth. Demographic data show deaths outnumber births and expect that to continue. Oregon ranks 44th highest (7th lowest) when it comes to the proportion of state population between the ages 0 and 17. This skews our state population older as a result. However, Oregon ranks higher in other generations and 8th largest in Millennial generation population. The population growth comes from migration, which remains consistent. Estimates on change of address shows people leaving Portland seems to have bottomed out, which supports stability.

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A D V E R T I S E M E N T

The seeding of projects takes time to hit the economy and we may not see results until 2026. Semiconductor manufacturing will create about 3,000 jobs and 1,000 temporary construction jobs. They project that Oregon has the available workforce as number 4 in the country. Oregon is overall 1.5% of the U.S., but possesses 17% of the tech jobs.

The total General Fund resources in 2023-25 reports an increase of $437 million that is slightly misleading since it includes a balance carryover of $148 million. Meanwhile, legislators are busy putting in their bid on what it should be spent on. And, after four kickers, there is still no talk of reducing taxes.


--Donna Bleiler

Post Date: 2023-09-06 18:09:57

Last Update: 2023-09-16 16:23:58