(Photo | PhHere)
Perhaps I’m alone, but from my personal perspective, 2020 suddenly feels like “the future,” whereas during the teens, even Y2K was somehow less of leap. I’m not sure what the next landmark is for me, but 2035 seems impossibly far away while still being just a decade and a half off. Not to worry, there will be no prognosticating about the economy in that far-off date; the next year or two will be challenging enough.
In recent years I’ve provided a black-and-white number forecast on things like local and national GDP growth, interest rates, population, and employment growth. Generally, those forecasts, which drew on EDCO’s own experience and the research of others, held up well against reality. However, perhaps not surprisingly, these fascinating indicators to economists solicited little feedback from local business owners and others genuinely interested in what’s happening economically. Perhaps they are just too ethereal and far removed from day-to-day decision-making. So, I’m pivoting this year in favor of predictions that are closer to home. Here are four things to consider:
- It will be a bit easier to hire in 2020 than 2019, despite persistent, record-low unemployment rates.
- Finding space to lease for your business will be easier this year than in the past four years.
- There’s a good chance that you’ll be paying more for most inputs into your business in 2020.
- Our regional economy will continue to outpace all other regions in Oregon, and all but a few nationally.
Hiring (and keeping) Employees
In any given 12-month period, EDCO meets one-on-one with 350-400 local traded-sector business owners or managers to identify challenges and opportunities. Workforce skill alignment, recruitment of key employees and turnover continue to be at the top of the list of things that keep employers up at night. They are all signs of a hot job market, but there are other factors also at play. Housing, child care availability and health care costs are also contributing to persistent hiring headwinds for employers across a variety of industries and positions of all pay ranges.
What will be changing in 2020 is that the region will find more of an equilibrium between job seekers and employers. It’s been an employee-driven market in recent years, which is contributing to steady wage increases. In fact, The Milken Institute ranked the Bend-Redmond MSA as #1 in the U.S. for five-year wage growth (+19.9 percent) in its most recent index of U.S. metros. Don’t expect the pendulum to swing to an employer-driven market this year, but we believe you’ll see more and better aligned applicants for open positions.
EDCO is also excited about a truly regional effort to, in more meaningful ways, connect our emerging workforce with area employers. Unemployment rates among our young adults (16-24) has been unacceptably high, but there have been persistent behind-the-scenes efforts by a partnership of business, industry, education, nonprofit and government leadership under the umbrellas of Better Together and East Cascades Works to turn the tide through high school, college and university internships. In 2020, EDCO will be playing an expanded role in making the one-on-one connections to find matches that help students more smoothly enter the workforce and employers tap into the next generation of talent.
Our communities are also making some remarkable headway on the issue of housing availability, which impacts the workforce. Bend’s bold move to set a goal for 3,000 new housing units is aligning permit and land use processes in city hall, effectively doubling the rate of development in recent years. There are also a record number of low- and middle-income units being built, not just less affordable single-family homes as has been our tradition in Central Oregon. Additionally, the communities of Sisters, Redmond, La Pine and Prineville have made residential construction of all types a priority, and are tracking progress. It remains to be seen if average sales or rental prices will level to a more sustainable pace (i.e. more in line with wage growth), but the added inventory (supply) can only help. Fear not about oversupply — we have years of underbuilding from the past decade to make up for.
We’re also optimistic about efforts that the Bend Chamber is leading with the help of COCC and OSU-Cascades to expand child care options in our region. It’s a little-known fact that our region, which comprises only about five percent of the state’s population, is driving nearly 20 percent of Oregon’s overall K-12 student population growth. That’s a sign that young parents are choosing this place over others to raise their families, and it’s as positive a future indicator of success that there is — for any economy.
Finding Space for Your Business
Underbuilding in the office, industrial and retail markets in Central Oregon was even more pronounced than the residential sector. Industrial and business parks built before the Great Recession sat vacant, or with little construction activity, as that inventory was absorbed. That has changed markedly in the past 18 months. EDCO worked with developers, land owners, commercial realtors and businesses to identify opportunities (tenants) for new buildings. At the same time, record low vacancy rates drove up rents enough to cover a new paradigm of construction costs. Today, nearly a half-million square feet of spec and owner-occupied light industrial and mixed-use space has been constructed, is under construction or is in the permitting or planning phase. Despite persistently higher building costs than many of our peers across the Northwest, we are seeing rents stabilize at a rate that businesses can afford. Expect vacancy rates to rise slightly in 2020 as new inventory comes online.
Businesses (and consumers) Will Pay More
In past forecasts, I’ve warned of headwinds to business that have been building for years. They are here. 2019 was perhaps the worst in recent memory for state legislation with the passage of a new, ill-conceived and poorly architected tax on business and individual revenues called the Corporate Activity Tax (CAT), which is truly unique to Oregon. But it’s law now and 30,000-40,000 individuals and businesses are trying to figure out if and how much they owe for the “privilege of doing business in the state” fee, which is expected to generate $1.4-$2.0 billion in new revenues.
More quietly but equally impactful, the Oregon legislature has created stacks of new employment law over the past five years that are affecting employer’s operations and bottom line. EDCO recently brought in experts to talk to our Board of Directors (four-dozen local private and public leaders throughout the region) about upcoming tax and workplace law changes. The tax portion took 15 minutes. Nearly an hour, and 48 PowerPoint slides later, new workplace mandates — everything from equal pay to paid family leave to new lactation accommodations — were finally covered. While no doubt well-intentioned, these new rules and regulations will drive up costs of compliance and litigation as they are implemented and tested in the courts. We expect over time these changes will have a dampening effect on job creation in Oregon, even as our own region continues robust job and GDP growth.
Central Oregon Will Outpace All Other Regions of the State
What’s new you say? For the past five years the tri-county area has left the rest of the state “in the dust” for population, job and GDP growth. But its not just Oregon. The region and its communities have been listed in more “top ten” national rankings than ever over the past year for economic measures. Consider this:
- Top 10 rankings for entrepreneurship: The Center for American Entrepreneurship (#4), Wallet Hub #4, #9), Advisor Smith (#7) and CloudKitchens (#2),
- Top 10 rankings for dynamic, diverse and resilient economy: Forbes (#8), Milken Institute (#1), Walton Family Foundation (#5) and
- Top 20 rankings for overall growth: Milken Institute (#1), US Census Bureau (#15) and WalletHub (#3)
More and more we see our peers not as neighboring communities in Oregon, but those across the country that are attracting the best and brightest human capital. And together, Central Oregon is winning the ultra-competitive national race for jobs, capital investment and a tax base that is positioning us well for the future.