EXECUTIVE SUMMARY December 2012 Oregon Economic Forecast Current Conditions As 2012 winds down, Oregon’s economic expansion persists, but remains stuck in a low gear. Growth continues to come in fits and starts – a strong quarter or two followed by a weak quarter or two – with the underlying trend remaining slow and steady. Real GDP has averaged just over 2 percent growth since the expansion started, with the nation adding approximately 150,000 jobs per month so far in 2012. The slowdown seen in recent months can largely be attributed to the global manufacturing cycle beginning to wane. Future orders and current shipments have softened across a wide range of Oregon’s products. The good news is that the housing recovery is here to help drive economic growth. Even so, housing-related production is just now beginning to improve from its recessionary lows, and has a long way to go before the level of production approaches anything considered a normal year for housing. Although sales growth has slowed, profitability remains near record highs for many businesses. For households, signs are both encouraging and worrisome. Job growth has been weak, with the unemployment rate coming down very slowly. Wage growth has been even softer from a historical perspective. Average wages are growing at a 1.5 percent rate among production and non-supervisory employees and just under 2.0 percent for all employees overall. In good years, like the late 1990s or even mid-2000s, wage growth reached 4 percent per year. Given such weak growth, consumers – like the economy as a whole – remain vulnerable to shocks. Encouragingly, inflation remains in check for now, and households are becoming more confident about their future prospects. Consumer sentiment recently hit levels not seen since before the Great Recession suggesting that recent gains in spending may be sustainable going forward. Outlook Expectations call for growth in the coming few months to look like the growth we have been experiencing: slow. Although the fundamentals underlying economic growth remain strong, uncertainty continues to weigh on both businesses and households. Given weakness among our leading trading partners, and an uncertain federal policy environment, many firms are reluctant to take the risk of expanding their operations despite ample resources and profits. Similarly,
6