Bend-Redmond Leads National Rankings But Forecast Hears Measure 97 Looms Large
“No recession in sight” was one reassuring message emanating from an expert forum at the Bend Chamber annual Economic Forecast Breakfast, which heard that the Bend-Redmond metropolitan area had “roared back” in leading the state in key metrics including job growth.
But while the regional economy soared, something of a civil war brewing between state government and businesses will be decided soon with ballot Measure 97 – the largest proposed tax increase in Oregon’s history – which had the potential to derail progress and “erode two decades of job growth.”
On the national level, Mark Kralj, portfolio manager with Ferguson Wellman Capital Management, said the economy was “muddling along” in typical recovery fashion, while economic growth was “anemic” across the globe
But on the local front, he said wage and job growth was continuing at a healthy pace, adding, “It’s pretty amazing the types of numbers we are seeing here in Deschutes County. It’s a very powerful force that looks like it’s going to continue for a while.”
Central Oregon’s impressive post-recessionary economic expansion had slowed some, but that didn’t mean another downturn was imminent; as Kralj observed, “A recovery doesn’t die of old age.
Fellow panelist Tim Duy, senior director of the Oregon Economic Forum, concurred, adding, “There’s no rule that says we have to have a recession. Usually, it’s going to end up being some kind of policy mistake or external shock.
“The recession chatter at the beginning of the year was clearly in excess.”
Duy said that the local region, and Oregon as a whole, was performing better than the national average, propelled in part by job growth in industry clusters focused on manufacturing and technology, and there was no reason to believe the trend would end “anytime soon.”
Roger Lee, executive director of Economic Development for Central Oregon (EDCO) – who completed the panel triumvirate of economics specialists addressing a packed house at the Riverhouse Convention Center event – cited a number of leading economic indicators, including the Bend-Redmond Metropolitan Statistical Area (MSA) having recently posted the highest Gross Domestic Product in Oregon, and the 7th fastest of all 381 MSA’s nationwide.
In a complementary flurry of data touting the area’s progress, the Milken Institute named Bend-Redmond the 8th Best Performing Small Metro in the U.S. for 2015, with ranking criteria including job growth, economic diversity and educational opportunities.
Meanwhile, Forbes magazine just rated the Bend metro area #1 in Best Small Places for Business and Careers following the area’s resurgence, including posting the top job growth rate in the country last year at 6.6 percent. It reported that the five-year annual rate of 3.8% also ranks among the highest in the U.S. and local companies enjoy business costs that are 22% below the national average, while its high share of educated millennials ranked among the top 10% of smaller metros.
Lee said another indicator EDCO uses for measuring economic growth was school enrollment, adding: “We are now the fifth largest school district in the state. People we work with are often amazed that on average at least one new school has been built in Central Oregon every year for the past 20 years, while other areas are somewhat stagnant in that respect, and the quality of our schools is certainly an attractive factor when businesses are looking at potential relocation.”
New Bend Chamber President Katy Brooks said it was an optimal time for sustained growth in Central Oregon and encouraged attendees to “make hay while the sun shines.”
Duy said leading indicators nationally were “flattening out”, which was to be expected during a mature phase of the business cycle, but the domestic economy was in good shape, with U.S. household net worth hitting an all-time peak of $88 trillion and the personal savings rate of 5.7% being the highest since 1982.
Unemployment rates had compressed to 5%, including milennials aging towards their prime earning years, and real wage growth at 2.4% was the highest in nine years. In light of progress, he expected the Federal Reserve to recommend an interest rate hike in December, with “maybe two next year” to follow.
Housing remained a bright spot, with sales of new homes accelerating and used home sales very strong in Oregon, and the construction industry was acting rationally, though more conservatively than previous periods, and ramping up in an effort to keep pace with demand.
Kralj said that slow economic growth had weighed on earnings but that effect may have bottomed out, as higher energy prices and a stabilizing dollar could provide catalysts for improved performance.
Duy said Oregon tends to follow national economy cycles but that would not necessarily be the case if there was a “disruptive shock” state-wide.
And Lee said such a potential disruption could come in the shape of Measure 97, the Oregon Business Tax Increase Initiative on the November 8 ballot in which a “yes” vote would increase the minimum corporate tax by establishing a 2.5 percent tax on corporate gross sales that exceed $25 million.
Sponsored by public employees unions, supporters of the measure say it would be a needed boost to State coffers in critical areas such as education, while opponents see it as a veiled attempt to impose a tacit sales tax which would be passed on to consumers at every step of the supply chain while no limitations on how the additional revenue may be spent could see funds effectively channeled to propping up spiraling Public Employees Retirement System (PERS) obligations.
Lee called the move potentially passing “bad policy” through the ballot initiative process rather than crafting a well-rounded solution to revenue challenges via elected representatives in the state legislature, and could result in an anticipated 37,000 job losses if the measure succeeds.
He said, “This has the potential to change the economy in Oregon and Central Oregon.
“The economic reality, the real concern for us, is the impact it would have on the job picture in Oregon. It could erase a couple decades worth of job growth.”
Regardless of the outcome, Lee said the conversation surrounding Measure 97 has elevated the pressing need to talk about the state’s tax structure, especially as it is currently so dependent on personal income taxes.
“It certainly has unified the business community in a greater way to get engaged in the conversation,” he said.
Kralj added, “It is clear that additional revenue sources are needed but you don’t need a sledgehammer as opposed to a well-thought out policy. Bad policy would cost the state regarding jobs.”
Duy commented, “We need elected representatives on both the state and national levels that can reach across aisles. “An inability to compromise leads to, for example, relying on ballot measures regarding policy rather than a crafted solution.
“We certainly have budget issues coming up and if they are not addressed we will have to come to the table to come up with additional revenue options, including regarding funding PERS obligations.”
