Recessionzilla: The Reptilian Wrath Rages On, and A Hopeful Prediction
In the last installment of Recessionzilla, you heard the thrilling tale of the rising unemployment rate and some predictions about when the turnaround may happen. Now let's break it down by geography and sector. (For those just tuning in, this is my take-away from a recent talk by Oregon's state economist Tom Potiowsky.)
The worst hit parts of Oregon: Medford and Bend are feeling the effects of the housing bubble worse than other geographies. With the biggest boom comes the biggest bust. Unemployment in the Bend area has already hit 11.3%.
In general, Oregon was not terribly affected by the housing crisis, largely due to the urban growth boundary, which prevented builders from oversupplying the market as badly as in states like Florida. Potiowsky predicts that we will not lose too much more value in our housing market due to the bubble. Lest that start feeling too good, "due to the bubble" is the operative phrase. Oregon's home prices will continue to decrease in value due to the recession in general.
Anything housing-related is already feeling the hit: construction, wood products, home improvements (e.g. Home Depot). Potiowsky predicts housing will stay negative in 2010, and may bounce back some in 2011. This prediction takes the federal stimulus into account. (At this point, Potiowsky's entire audience audibly and visibly winced.)
One final bit of real estate and construction-related bad news: non-residential real estate is starting to go south as well.
The export boom is ending due to the global financial crisis. This will primarily affect the Willamette Valley, the manufacturing core of Oregon. Forty percent of our exports are computer/electronic equipment. This sector is just beginning to tank. The good news: Oregon is well-positioned to rebound quickly in manufacturing once the economic crisis turns around.
Speaking of manufacturing, transportation equipment (think Country Coach, Freightliner) is already in the toilet. Who can forget those crazy high gas prices?
Rural Oregon, highly dependent on timber, has been hurting for the last few years. (Hark back to tales of libraries closed and citizens arming themselves due to lack of police protection.) Unemployment is in the double digits in many rural Oregon counties, including 15.9% in Grant and 12.2% in Klamath. These figures do come with a grain of salt: less people work in the winter than in the summer in rural counties. However, both of the aforementioned unemployment rates represent four- to five-point increases over 2007's fourth quarter.
So, what's next? Discretionary spending. The great service economy is going down: non-essential retail (toilet paper, you're good; Hermes Birkin, not so much), restaurants, and the hospitality industry are next on the list to fall to the great Recessionzilla.
The bright spot in all this: health care. Turns out, people are still getting sick. But this part of the economy is starting to soften also. (It is appalling to realize that healthcare is subject to the vagaries of the market, and that a lot of companies are probably run like AIG. Note to self: do not get sick until at least 2012.)
Having shared so much bad news, I'll pass on a more cheerful prediction for the future. I believe we may be witnessing the beginning of the 35-hour work week. Firstly, though there will certainly be many lay-offs, I am seeing hopeful evidence that workers and employers will "spread the pain" by reducing hours or enforcing unpaid furloughs, rather than eliminating whole positions. This will result in large amounts of the workforce experiencing additional free time. We may not be so willing to go back to forty-plus hours a week after a few years of reduced work weeks.
As well, though it's hard to believe now, Potiowsky pointed out that we will be facing a labor shortage around 2015, as the baby boomers age out of the workplace. This will result in two sources of demographic pressure on employers to offer meaningful part-time labor. Some baby boomers (particularly those whose portfolios are still recovering from the recession) will be willing to work part-time in a semi-retirement scenario, and Generations X and Y (who are famous for our love of work-life balance) will demand it.
We'll see -- social scientists in the 1940s fretted about the coming "leisure problem," when increased industrial productivity would allow Americans to work half-time. What would we do with our staggering amounts of free time? It is depressingly possible that we will emerge from the other side of this recession and bulldoze right back into our previous lifestyles, with no pause for self-reflection.
(For the unemployment stats I quoted and much more, check out OLMIS, the Oregon Labor Market Information System.)