Oregon’s economic forecast is brightening along with the weather as spring approaches, according to John Mitchell, US Bancorp economist for the western region. Mitchell presented his optimistic outlook Thursday morning at the monthly Business Briefing Breakfast Series presented by the School of Business Administration at Portland State University.
Speaking at the Multnomah Athletic Club to a group of about 200 business leaders, faculty and students, the former Boise State University economics professor delivered a detailed assessment of factors affecting the Northwest’s regional economy and the national economy. Rising business investment, surging commodity prices, the strengthening world economy and weakening U.S. dollar are among the factors he cited in coming up with the optimistic outlook.
“The economic picture across Oregon is slowly improving across a broad index,” according to Mitchell. Commodity price increases deliver more wealth across a broad array of industries in the Pacific Northwest, from silver mines in Idaho to cheese producers in Tillamook. The drop in value in the dollar makes U.S. goods cheaper across the world, helping U.S. exporters.
Among the reasons that Oregon stands to benefit from the current rebound in business spending is the high concentration of business equipment and tech companies located in the state. According to Mitchell, “Oregon is loaded with technology and transportation equipment companies,” which should position it well to profit from any recovery in business investment.
On the national scene, Mitchell attributed the jobless recovery to increases in business sector productivity. From 1994 to 2002, productivity growth rose from 1 percent to 4.5 percent per year. With technology allowing higher output per worker, the economy has made gains without adding more jobs.
Yet Mitchell cautioned that the current recovery must eventually be supported by increases in employment, and that tax cuts and consumer spending will not sustain the current economic expansion. Mitchell continued with a discussion of the relation between interest rates, job growth and inflation.
Mitchell said, “In a world with a lot of excess capacity (of labor and equipment), I don’t think we’re going to see a rise in inflation.” The Federal Reserve will likely not raise interest rates, its traditional method of curbing inflation, unless the recovery is reflected by an increase in hiring. “What’s critical to watch is the labor market. If we don’t see an increase in the 150,000 to 200,000 (jobs per month) the Fed won’t raise rates.”
The economist sounded a cautionary note in the midst of the good news, “On Wednesday, January 2, 2008, the first baby boomer is going to walk into a social security office to collect their benefits. There are huge financial implications to that. That’s 1,412 days from now.” He cited a statement from the Congressional Budget Office that unless taxes are raised to unprecedented levels, current spending by the government will be unsustainable over the next 50 years.
The next Business Briefing, “The Future of Oregon’s Economic Development” is scheduled for April 15, and will feature Marty Brantley of the Oregon Economic and Community Development Department and Don Mazziotti of the Portland Development Commission.