(Graphic | Courtesy of Oregon Employment Department)
“Epic” Expansion Tops Charts for Job Creation as Unemployment Hits Record Low
Economic experts have hailed Crook County’s “epic” expansion since the last major recession which has seen the area hit record lows in unemployment and strengthen its position through a more diverse slate of industries.
It has “fully recovered” from a labor market perspective and is also the number one county in the state for job creation since the start of the pandemic.
There was plenty of positive news during the Economic Development for Central Oregon (EDCO) — Prineville/Crook County Annual Membership breakfast, as well as cautionary messages regarding challenges presented by continued inflationary pressures and a historically tight labor market.
The event at Crook County Fairgrounds featured presentations on the economic and employment landscape, with speakers including state economists Josh Lehner and Damon Runberg, who labeled the area’s phenomenal growth “awesome” and, regarding the previous pivot to embracing data centers, “the juice was worth the squeeze.”
Kelsey Lucas, EDCO Prineville/Crook County Director, opened proceedings with an update on recent deals fostered by the organization, including a hi-tech company expansion which created 25 new jobs, with another 21 pending in a variety of industries including advanced technology and building products. The top employers for the region featured a workforce of 3,808, up 241 from the last year.
She also referenced a billboard jobs campaign in conjunction with Prineville Chamber of Commerce touting the benefits of staying and working local, especially in light of rising gas prices, as employers were doing everything possible to attract and retain workers, including offering increased wages and other benefits.
Median home prices had risen higher than pre-pandemic levels, and Prineville continued to be one of the fastest-growing “micropolitan” areas (as opposed to a metropolitan area, which has at least one city with a population of 50,000 or higher) often a factor that service businesses and retailers look for when choosing locations.
The nation’s “micropolitan statistical areas,” as defined by the Office of Management and Budget, include cities of 10,000 to 50,000 residents and surrounding communities. Prineville is on that list, and its estimated population grew to 25,739 in 2021, up 3.27 percent, or 816 people, according to the latest Census statistics.
A Prineville EDCO report indicated something of a shift in the housing market in the last two-to-three weeks, with some adjustment in prices, mirroring trends across the country considering mortgage applications dropping in the face of rising interest rates. But in the whole economic scheme of things, there was still a dramatic shortage of housing.
Opening speaker Josh Lehner, an economist with the Oregon Office of Economic Analysis — who along with his team provides forecasts on the economy, revenue and population to the governor, legislature and others making long-term policy decisions for the state — focused on the outlook for the state, and Central Oregon in particular.
He said, “Overall, it’s pretty good news. The economic expansion is moving to mid-cycle and the challenges associated with this phase of the business cycle are different from what we experienced coming out of the initial stages of the recovery and coming out of the shutdowns at the start of the pandemic.
“We’ve moved into this different phase of the cycle and the positive news is that jobs, income and production — all those things that we care about — continue to boom.
“The challenge is that it is an inflationary economic boom and inflation is running at 40-year highs and for the vast majority of us, our household income is not growing as fast as the cost of living is increasing, so that means our standard of living is eroding.”
Lehner said in the last year, the average wage in Oregon was down three percent after adjusting for inflation, which was the reason people were feeling pessimistic about the outlook.
But, overall, he expressed more optimism as data started to turn a little in terms of improvements in the last six to eight weeks, with the hope of seeing the contours of, in the words of Federal Reserve chairman Jerome Powell, where “there is a clear path here to land the plane.”
He observed, “There is an opportunity here where the combination of changes in the economy and Federal Reserve policy will slow inflation meaningfully without sending us into recession; without having a boom-bust cycle. I think we’re starting to see that, so I am more encouraged now than I have been in the last handful of months.
“I think there is an opportunity to continue this economic boom, we just need to get rid of the inflation part of it or at least slow inflation enough that it matters.
“The underlying boom in the economy really starts with the labor market and the number of employed Oregonians in the state has never been higher, even more so in Central Oregon.”
Oregon had “fully recovered” from a labor market perspective and Crook County was the number one county in the state for job creation since the start of the pandemic, with Deschutes County not too far behind (in the top five or six) so, overall, the economy was “doing quite well.”
Labor had rebounded and all the issues related to lack of in-person schooling and fear of a deadly contagious virus and maybe financial disincentives due to enhanced unemployment insurance benefits at the start of the pandemic had eased.
These were no doubt real issues but were now “in the rear-view mirror” and businesses reported record numbers of job openings and were scrambling to hire and expand their industries to keep up with the strong consumer demand.
Lehner added, “It is hard to find labor and is going to continue to be hard to find labor primarily due to demographics, where we have the Baby Boomers continuing to retire.
“We are maybe only halfway through the boomer retirement so it’s going to continue in the years ahead. The outflow to retirements in the labor market is going to continue to be really large for the next couple of years and we’re not losing just any workers — these are people with a lifetime of experience, a lot of knowledge and know-how and losing them to the economy means our productivity is going to suffer.
“It takes a while to find new workers, to train them up, to have them be just as productive as somebody you are losing to retirement. So, this dynamic is going to weigh on the economy for the years to come but the good news is that Oregon’s labor force, the number of people looking for a job will continue to increase in the years ahead.”
The Gen-Z and Millennials generations were slightly larger than the baby boomers and population growth would continue to see the number of people in the workforce grow, albeit at a slower pace than we have become accustomed to, as migration slows.
Every business was facing these demographic challenges both today and in the years ahead, and the major economic indicators were of a slower, tighter labor market in the years to come.
On the inflation front, he added, “The reason I’m a little more optimistic is there’s kind of two buckets or sources of inflation. On one hand, you have legitimate constraints on the economy — goods prices are through the roof — and supply chains are not broken but are overloaded because businesses are trying to spend so much money and buy so many products and so that has driven the prices up.
“But we are starting to see that slow. The price of used cars is finally starting to level out and decline a little, the price at the pump is not going to continue to double every single month, so as these goods prices rocket upward, then kind of peter out and kind of shift into neutral and are no longer contributing to ongoing inflation that means overall inflation is going to improve really over the near term in the next couple of months.
“Over the medium term, in the next six-18 months is that other challenge associated with inflation that comes from what economists call ‘excess demand’ — too many dollars chasing too few goods — and there we are going to see some improvement from the Federal Reserve policy.
“The higher interest rates mean some of that excess demand will cool; if it is more expensive to use your credit card or take out a business loan, to take out a mortgage, or some of these other things that rely on the cost of financing.
“Also, the Federal Reserve is not unhappy with the stock market being down this year as they want tighter financial conditions to sap some of this excess demand out of the economy, so I think we’re starting to see that.
“I think again the goods prices will slow in the near term, and the excess demand will cool in the medium term, so there’s this path to land the plane and I’m more optimistic today given that we’re starting to see this in the data just a little bit.
“So, overall, the inflationary economic boom is likely to transition into an ongoing economic expansion.”
Damon Runberg, Regional Economist for the State of Oregon, agreed that in general, the trends looked relatively optimistic.
He said, “Locally, it has been awesome in Crook County, with phenomenal growth and an epic expansion and the comeback has seen employment levels hit a major milestone.
“We had a similar pattern leading up to the Great Recession dip, but that growth was more artificial, including a lot of construction. Now we are back to pre-recession levels, matching a long-term trend in rural communities.
“Deschutes County recovered around 2015 and Crook County petered along then something changed in recent history.
“During the pandemic, Deschutes County lost one in five jobs but here the dip was half of that statewide — partly because of being less reliant on tourism and hospitality industries, and still growing data center activity.”
Prineville is home to Fortune 50 data centers, including Facebook and Apple, with Facebook’s data center campus being their largest in the world. These large industrial developments inspired the engineering of the award-winning Crooked River Wetlands projects and future Aquifer Storage and Recovery project to support large water and wastewater needs locally.
Runberg said highlights of the local economy included Crook County now being at record employment, above pre-pandemic levels, and lauded a “remarkable transformation” over the last couple of years. The bleeding had stopped in wood products and compared to before the Great Recession circa 2008 there had been a “dramatic structural shift in the economy.”
There had been a rapid shift in industry composition, as traditional industries such as manufacturing, transportation and warehousing were outpaced by the growth in professional and business services, particularly in information and construction categories, largely associated with the construction and operation of the data centers.
This trend had seen a dramatic jump in the average wage between 2007 and 2021, while Oregon’s average wage was up 23.8 percent to $64,027, Crook County’s soared by 39.4 percent in the same period, from $44,200 to $61,599.
Information sector growth was particularly marked, with data centers in that category, as direct jobs boomed, including for consulting and security services.
Runberg said, “Historically, there was a lot of debate about embracing data centers, but the perspective now is that it was an awesome move. The sector is a huge asset and was a great pivot for Crook County — the juice was worth the squeeze.
“There has been a transformation of the economy — with inflation-adjusted wage and household income growth, faster than the statewide increase. These incomes represent real spending of dollars, helping the local economy.”
In Central Oregon, the number of unemployed workers was 4,451 before the pandemic but skyrocketed during the “great lockdown” followed by a “V-shaped” recovery. By April this year, 4,800 people were unemployed, representing around 3.6 percent of the population but with a typical margin for error, the rate was near its lowest ever historical rate of 3.3 percent.
The supply of labor remained tight, accentuated by high quits, and demand for workers continued to be excessively high compared to pre-pandemic levels.
As of April 2022, there were 3,800 wanted ads in Central Oregon. The last April that saw relatively normal activity, in 2019, there were 2,200, with Deschutes County now reporting a number of vacancies 72 percent higher than pre-pandemic levels.
“We have a tremendous amount of openings for a variety of reasons,” Runberg elaborated. “Crook County is in an expansion as the total employment base has blown past the pre-pandemic levels. Much of this is centered around continued expansion at the data centers.
“The local labor force has not expanded at the same pace as these jobs being created leaving a shortage of workers to fill many of them. Second, demand for goods and services was elevated during much of 2021 due to excess savings.
“The local labor market is as tight as it has ever been, with two to three unemployed workers per job ad, which means relatively slim pickings, but we are likely near the bottom. There has been strong wage growth due to this tight labor market, but inflation has completely eroded those gains.”
In an attempt to increase productivity, industries were increasingly turning to automation, investment in new equipment and additional training to skill the current workforce up.
Considering the demand for labor, the response of businesses has been to differentiate through wages and early in 2021, there was a ten percent increase in wages, representing four percent real growth. But by the fourth quarter of last year, a six percent increase in wages was offset as inflation rose, and effectively equated to a one percent real drop in income.
Runberg said the goal of the Federal Reserve regarding annual inflation was two percent but the figure has recently been running over eight percent, partly due to the “wage-price spiral.”
Wages/income were on the increase due to a tight labor market. The demand for goods rises with more disposable income, and prices for goods rise with the demand. Rising prices increase demand for higher wages, higher wages lead to higher production costs, and so on.
The situation was also exacerbated by lingering supply constraints and bottlenecks. Housing was not the main culprit behind inflation, but affordability continued to be a major concern.
The cost of borrowing is rising rapidly, and higher interest rates and housing prices combined with flat wages resulted in much less affordable housing, leading to a somewhat bleak outlook for prospective buyers.
Regarding expectations for 2022, Runberg predicted a consistent rate of population growth though there was something of a “hard cap” regarding housing affordability. The labor crunch and inflation would remain, but both were expected to improve, and signs were that demand was already coming down as we collectively have less disposable income.
Inflation was set to slow due to the combination of higher interest rates, cooling of goods prices and moderating household financial conditions.
Spending less money would see more equilibrium and Federal Reserve policy affecting finances would also act to slow the economy and offer a “glide path” to avert recession.
One highlight was that youth labor force participation in the state had turned the corner after 25 years of attrition, with younger workers attracted by historically high wage offers.
Runberg concluded, “Crook County has seen a fantastic expansion and fully recovered from the Great Recession, with a more robust, diverse economy.”
Founded in 1981, EDCO is a non-profit corporation supported by private and public members and stakeholders. Its mission is to create a balanced and diverse local economy and strong base of middle-class jobs in Central Oregon. To do this EDCO helps companies MOVE, START and GROW here.