CJ Jensen, co-owner at Big Peddler, discusses bicycle specifications with customer Sam Marr, of Salem, in downtown Salem on Thursday, April 2. (Amanda Loman/Salem Reporter)
Oregon faces a rosy economic future even with the pandemic showing little sign of waning.
That's according to the latest state quarterly economic forecast released Wednesday, which showed state tax collection and lottery revenue was strong in 2021. Oregon is now expected to return to pre-pandemic employment levels by the third quarter of 2022, one quarter earlier than the previous forecast.
The report cautions any new pandemic shutdowns could significantly change the picture, but says absent new closures, the state's economy should see little impact from people spending less on entertainment and other in-person events temporarily during the Delta variant surge.
People are still spending less on services than before the pandemic, a concern because spending on services translates more readily into jobs than when people buy material goods.
"In recent months, Americans are going out to eat nearly as much as pre-pandemic, but overall spending on services remains lower due to other sectors like health care where elective surgeries and routine dentist appointments continue to be delayed. The gap between service spending and the pre-pandemic trend remains noticeable at 5% as of June, but the gap is closing. On the other hand, sales of physical goods continue to be robust and are holding steady at double-digits above pre-pandemic trends," the forecast said.
But federal aid and higher incomes are driving recovery, the report said.
"Strong household incomes, boosted considerably by federal aid during the pandemic, are the underlying driver. Consumers have no shortage of firepower if they want to and feel safe enough to spend. The key to the outlook remains translating this firepower into actual consumer spending, particularly in the hard-hit service industries. Firms today are trying to staff up as quickly as possible to meet this increasing demand," the forecast said.
Businesses are still struggling to find enough workers to fill available jobs, the forecast notes. And while increase unemployment insurance payments are part of the reason, the report notes the labor supply challenge is more complicated because of increased household savings.
The end of enhanced unemployment payments on Sept. 4 won't suddenly increase the number of Oregonians looking for work, the report says.
"In fact, preliminary analysis of the limited data available in the states that ended UI early indicate that job growth did not suddenly accelerate relative to the non-cutoff states. As such, it is more likely that once some of that excess savings is drawn down and households need more money to pay the bills – hopefully in a safer health environment as well – then labor supply will likely pick up," the report says.
Oregonians are also on track to see a record $1.9 billion kicker under the state's unique law which returns personal income tax revenues collected in excess of the state's budget to Oregon taxpayers. That would mean a $420 credit for the median taxpayer on 2021 returns filed next spring.