Local Economy Holds Steady but Global Headwinds Swirl

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(L-R Damon Runberg and Lindsey Piegza)

The Bend Chamber’s latest annual Economic Impact Breakfast featured keynote speakers highlighting somewhat contrasting perspectives — from painting a resilient local picture, to a rather less rosy outlook nationally in the face of slowing job growth and data pointing to potential recessionary pressures.

A healthy crowd of attendees for the event, held at the Riverhouse Convention Center, with presentations sponsored by PacificSource and Brooks Resources, heard how after years of rapid economic expansion in Central Oregon, the slowing of the regional economy became widely evident in 2019.

Although the economy continues to grow, the relative deceleration represented something of a radical shift from our previous trajectory.

Damon Runberg, Regional Economist with the Oregon Employment Department, tackled the factors leading to this recent adjustment and the ramifications of slowing growth on job seekers in the context of our relatively thin labor market.

On the local horizon, he said Central Oregon remains in the “Goldilocks zone” of economic stability, with neither too much acceleration nor too little growth, hovering at over two percent, with a more insulated economy bolstered by increased diversification since the last market crash.

He saw no reason to panic just yet, adding, “We are not sure how long we may stay in this equilibrium, but the decline in job growth has actually eased up pressure on businesses locally looking to find qualified employees.

“We are in that ‘money’ zone where there is enough activity for workers to be mobile — and those who are able to can move up to jobs of their choosing — while the demand for labor is not so high that it cannot be filled.

“Some element of recession is inevitable in the foreseeable future, but when such a downturn happens, Central Oregon will not be hit as hard. We are better equipped to respond and not as vulnerable to the shocks that may happen.

“The next shock is not going to be a housing bubble bursting, as was the case previously, but we will be better able to withstand the effects as there has been a lot of effort put in to diversification, which is great for building resilience into the local economy.

“Some communities are going to get disproportionately affected, while others will come out with little impact.

“Our current expansion is not based on one single industry — Central Oregon has a stronger foundation economically than ever before.”

He added that the area’s enviable quality of life continues to attract new businesses and entrepreneurs to locate in the area, and that even after a sustained period of growth between 2014 and 2018, many smaller professional companies were still “going gangbusters.”

Meanwhile, keynote speaker Lindsey Piegza, a renowned news media contributor and chief economist for Stifel Financial Corp., pointed to the stalling pace of our economy nationally.

As of 2019, the U.S. was in the longest period of economic expansion in its history. But, in the same year, the yield curve, a reliable indicator of an upcoming recession, inverted and sent a warning sign through world markets, at least for a moment.

She said, “The Federal Reserve remains optimistic and is contemplating potentially one more rate cut by year end, and maintains the outlook is favorable. But the data coming in is not supportive of such a point of view.

“This remains the longest recovery in U.S., history but two percent growth is the minimum one should expect from an economic recovery.

“We see a rising risk of recession, with a lot of companies relying on low wage, low-cost, temp and part-time positions to get by.

“There has also been a decline in the employment participation rate. Ageing population is an issue; but we still see deep intrinsic decline, including a rising rate of disability, and rising childcare costs all being factors.

“A cash economy is picking up among the younger population, and this kind of underground economy is a growing phenomenon, while the opioid epidemic of painkiller addiction is also tied to a decline in male participation in the workforce.”

Piegza observed that job openings pointed to a continuing skills mismatch and consumer confidence was variable by region. Consumer spending was propping up the economy, but retail sales showed uneven momentum, with a cyclical pattern of lower/moderate spending going forward as people saddled by debt drew down savings while ramping up credit.

She added: “We have anemic economic conditions around the corner and wage gains are not even across the economy and struggling to keep pace with inflation.

“The prospect of owning a home also is seemingly more distant for many, with the challenge of coming up with a down payment potentially taking many years of saving.

“There is also an increase in adult millennials living in the parental home and a preference for renting — after they saw what happened to the older generation during the last crash — as they like mobility and flexibility.”

Mounting levels of student loan debt were also a drag on the economy, while the Fed chose not to acknowledge a persistent trend of low inflation raising the specter of disinflation.

Overall, she observed:

  • Moderate domestic conditions remaining positive but waning in momentum;
  • Hiring remains positive but less robust; tied to industry specific demands;
  • Business investment uneven at best with corporations hesitant to invest given an uncertain economic outlook;
  • Tariffs will serve to disrupt flow of goods, raising costs and reducing access to global goods;
  • International uncertainty weighing on the market as yields retreat;
  • Policymakers will act to cushion the economy from slow growth or recession with stimulus and lower rates among their arsenal, but tools were limited.

International concerns included Germany contracting, Italy zero-ing out and the prospects of a “disorderly” Brexit dragging the UK economy down.

While U.S. manufacturing was contracting there was widespread hope that a “Phase one” trade deal with China may be in place as soon as sometime this month.

bendchamber.org

 

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Simon Mather CBN Feature Writer

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