Economists also say the state may be in for more revenue as lawmakers craft a budget next year.
Oregon’s sluggish economy could be picking up steam, state economists told lawmakers Wednesday, but headwinds like high fuel prices, elevated inflation and a slow job market aren’t making it easy.
In his latest quarterly forecast, the state’s chief economist, Carl Riccadonna, suggested an economic malaise in Oregon following the COVID-19 pandemic may be dissipating.
Yes, the state’s 5.2% unemployment rate is still running well ahead of national unemployment, which has been decreasing of late. But Riccadonna said the Beaver State’s economy is finally growing at nearly the pace of the nation as a whole. As of the first quarter of this year, Oregon’s economic output increased 2.4% over the past year, compared to 2.7% for the national economy.
“The point is that that gap has significantly closed,” he said, noting that Oregon had been trailing the national average by closer to 1%. The state often outpaced national economic growth from 2000 until the pandemic, but has fallen behind in the years since — one reason Gov. Tina Kotek announced a renewed focus on improving the state’s economy last year.
Riccadonna said his office has “been kind of scratching our head” at Oregon’s lagging economy, and hypothesized that impacts from President Trump’s tariffs, combined with job losses at two major state employers, Intel and Nike, were largely to blame.
While tariffs are once again in force, he said the two corporate juggernauts may have smoothed out their wrinkles. Economists will know more when updated numbers are released at the end of September.
Economic growth has been driven by job sectors like hospitality, real estate, entertainment and finance, Riccadonna told lawmakers in a hearing Wednesday morning. The state has made up ground despite contractions in the construction and manufacturing sectors.
Riccadonna and state economist Michael Kennedy also had good news for lawmakers bracing for major federal funding cuts to health care and food benefits.
The latest forecast predicts state tax revenue for the next budget — which stretches from July 2027 to June 2029 — will come in nearly $540 million higher than expected. Should that forecast hold up, it would provide a boost to lawmakers as they work to craft a spending plan in next year’s legislative session.
Kennedy told reporters in a press availability Tuesday evening that the bulk of the newly anticipated money, nearly $400 million, is due to bullish expectations about wage growth.
“Given the malaise in the job market, it really is more about who’s making the money and them making more money,” Kennedy said.
Oregon is also now expecting a bit more money in its current two-year budget, which is just over halfway through. The economists predicted an additional $55 million over the forecast they delivered three months ago.
That boost is tied entirely to personal income taxes. Corporate income taxes, which the state also collects, are now anticipated to come in somewhat lower, a trend Riccadonna attributed to one-time tax decisions rather than a new economic trend.
Wednesday’s forecast brought the usual divergent framing from lawmakers across the political aisle. Democrats applauded positive indicators, but warned of rocky budgetary straits ahead.
“There are promising indicators in today’s forecast, but too many Oregonians are struggling to make ends meet,” Kotek said in a statement. “Oregon families continue to face rising prices and that’s likely to continue as President Trump’s tariffs drive up costs for everyday goods and the war in Iran keeps gas prices high.”
Republicans suggested the state is being held back by taxes and regulations that hurt businesses.
“At some point, we will be forced to examine the policy decisions that got us to this point,” said House Minority Leader Lucetta Elmer, R-McMinnville, who highlighted the loss of manufacturing jobs in the state. “Will it be then that we actually listen to businesses and experts that have been warning of this very situation?”
This story comes to you from the Northwest News Network, a collaboration between public media organizations in Oregon and Washington.