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Predicting the future is no easy task.
When economist Bill Conerly of Conerly Consulting stood in front of a gathering of Associated General Contractors Oregon-Columbia chapter members one year ago, he predicted a gloomy 2002 that would turn around by the end of the year.
As Oregonians know, that gloom has yet to break in this state although the national economy has been expanding for the past four quarters.
Conerly once again looked into his crystal ball and made a prediction for the coming year at an AGC Issues Forum Thursday. This year, Conerly was joined by economists Ken Simonson of AGC of America and Art Ayre with the Oregon Employment Department.
So why is Oregon’s economy remaining sluggish even with the country showing signs of recovery?
While consumer spending is pushing the economy forward, capital goods remain weak because companies are still tightening their belts. That affects Oregon and the Pacific Northwest particularly because of the large amount of capital goods manufacturing done here, said Conerly.
Even the increase in government spending, specifically on defense, is not a huge plus for Oregon because of the lack of military bases in the state. And a possible war in Iraq could mean several things for the economy.
“War is not always good for the economy,” said Conerly.
Negative effects of war, such as failing consumer confidence, nervous investors and higher oil prices, are already apparent in anticipation of war, he said.
They could continue or even worsen if war does occur. Once the uncertainty of war goes away, some of those negative effects may dissipate also. The results depend on the length and depth of the conflict, he said.
Nationally, signs of improvement should continue.
“The national economy will be slowly edging forward next year,” Conerly predicted.
In Oregon, people are still moving into the state, he said, which is a good sign. He forecast gains in the state’s employment in 2003 and 2004.
Preliminary unemployment figures for October in Oregon show an unemployment rate of 7 percent, according to the Oregon Employment Department.
Oregon was the third worst state in the nation with an unemployment rate of 6.8 percent in September, just behind Washington and Alaska.
The Oregon workforce appears to be stabilizing for now, said Employment Department economist Ayre.
“Job growth has been slower this decade than the last,” he said. “This is especially true for construction.”
A 12 percent net growth in jobs in Oregon is expected between 2000 and 2010 equaling over 200,000 additional jobs. That’s not including about 380,000 expected job openings in that time frame from people leaving occupations, retirements and deaths.
“Portland and Southern Oregon will grow faster than the statewide average,” said Ayre.
Locally, construction employment was a tad higher in September than the low point in July, but nearly 15 percent below the peak reached in December 2000, according to AGC economist Simonson.
In September, the Portland, Salem and Eugene areas each had the lowest construction employment totals since 1995, he added.
The recent construction job loss in the state is mild compared to losses in the early 1980s, said Ayre. Most of the job openings in the construction field are due to people leaving the occupation, he added.
As far as construction activity nationally is concerned, activity in both residential and nonresidential sectors varies, said Simonson.
He said the picture with private nonresidential construction is mixed.
“Overall, the office market will be weak,” said Simonson.
Warehouse space will also not be seeing any growth, particularly with more companies using just-in-time inventory.
Construction of factories, lodging, shopping malls and shopping centers is also down.
However, because spending is up on homes, autos and health related items, construction on structures such as health care facilities, building supply stores and auto sales facilities have shown increases.
Low interest rates may help the residential market stay strong, particularly with single-family home construction, said Simonson.
Meanwhile, multi-family residential construction will likely slow as more people buy homes and vacancy rates rise.
Construction costs are expected to remain flat, including wages, said Simonson, except insurance. Premiums for all types of insurance have increased by an average of 30 percent coupled with reductions in coverage.
Overall, both nationally and locally, the economists said construction would remain uneven for several months. Business-related construction will pick up gradually in the second half of 2003 and public projects will likely diminish, predicted Simonson.