Portland's economic Magic 8-Ball: Reply hazy, try again
Anyone looking for signs of how the Portland economy will fare in 2021 might be confused by the latest big report.
The Portland Business Alliance and the Value of Jobs coalition report, released Wednesday, Feb 17, looks back at 2020 to see what 2021 may hold for Portlanders' pocketbooks. The report — titled "2021 State of the Economy: Power of the Pandemic and Pathways to a More Inclusive Recovery" — makes clear that some sectors continued to expand, such as sportswear and tech, Nike and Intel. But two negative forces were a drag on the local economy last year.
"The decade's economic growth included two critical failings: an expanded racial/ethnic income gap and high housing costs driven by under-construction," according to the report.
The St Patrick's Day Massacre
After 126 consecutive months of economic expansion — following the Great Recession and stretching for a decade through the Obama and Trump administration — the COVID-19 pandemic shut down the Portland economy in March 2020 and a massive recession followed. Some Portlanders are emerging from the dip unscathed, while workers in education and hospitality are struggling to find work.
The report said the crystal ball appears to be cloudy:
"As 2020 came to a close, Portland was left with a confusing mix of indicators pointing in different directions," he reads.
For example, unemployment is a problem. But at just over 6%, employment has bounced back almost to pre-pandemic levels.
Strong and weak spots
Another strange indicator is consumer spending, which is strong again, despite income inequality. Shopping has changed. Spending on groceries is up 41% and shopping online (excepting groceries) is up 24% since January 2020. But spending on the economic categories of Hospitality and Recreation is down a whopping 40% and 48% respectively. If it wasn't already obvious, almost no one is dining out.
In terms of jobs lost, Accommodation and Food/Drink were whacked the hardest. Jobs in chip-making, professional services and construction were the safest, suffering the least losses.
The report had some good news. It praised the Portland region's response to the COVID-19 public health crisis as "among the best in the nation." It tried to quantify the good news about the local infection and death rates being well below the U.S. average by saying the measures have "saved 2,000 additional lives."
The Portland metro area has experienced 42 virus-related deaths per 100,000 people versus 124 per 1,000 nationally.
Boarded up windows are a sign of an unwelcoming downtown, the report reads, and can be interpreted as a response to riots and vandalism, or evidence that the pandemic itself already shut down many businesses. The report's only mention of Portland's famous civil unrest of 2020 were the lines: "The murder of George Floyd in May sparked racial justice protests in cities around the world. Perhaps none more persistent than those in Portland where peaceful protests and expressions of free speech were increasingly co-opted by political violence."
Construction jobs were protected from the get-go in the pandemic when Oregon Gov. Kate Brown deemed them essential services, unlike in Washington and California.
However, the air is running out of the building balloon.
According to the Portland Bureau of Development Services, which tracks these leading indicators, the total building permits applications received from May to October 2020 were down 27% and land use applications between August and October 2020 were down 35%.
Land use final plat applications received by the city, from August to October 2020, were down a scary 71%. Those applications show how much land is being subdivided.
Downtown has a problem with visitors being afraid to come: Fearing protests, riots, homeless camps or just because they perceive there's nothing to do downtown. and now that may be rubbing off on residents. If rent rates are anything to go by, downtown Portlanders are moving on.
Just a year ago, rent for a one-bedroom apartment was close to the same across the metro region. But by January 2021, the average rent had gone down 4.5% in Portland's city center, even while rents were still going up in the rest of the Portland region. This suggests that, with work-from-home becoming widespread, people are finding the suburbs more livable.
Even worse, the pipeline for building new apartments, which is indicative of new people moving to town with jobs "appear(s) to be in a freefall, down 37%," the report reads. That news won't help Portland's housing shortage.
The whole city of Portland's real estate ranking has plummeted from 2017, from 96% to 18% now. This is measured by looking at less-visible markers such as underlying capital and insurance markets. Between 2005 and 2020, the entire Portlandia feel-good bubble swelled. The report indicates that bubble has been popped.
At least we're not Seattle
For all its blue chip brands and big city swagger, Seattle is hurting more in some respects. While net migration to Portland — and also Bend — remains strong, the Emerald City is experiencing out-migration.
In terms of the post-pandemic economy, the PBA says economists are looking at Israel to see how the economy of a highly vaccinated country recovers. "By the first week of January 2021, Israel was vaccinating people at a rate of 16 per 100, where the U.S. average was closer to 2 per 100," the report notes.
It goes on, "The question remains, will our efforts to stop the spread of COVID-19 be fast enough to allow our economy to reopen and recover before more jobs are lost? How long will it take to bounce back?"
Three scenarios suggest, from soonest to latest, a bounce-back in 2023, 2025 or 2027, if one goes by jobs regained.
Finally, the report often makes comparisons with Great Recession of 2008-09 and the subsequent recovery.
"The 2009-20 economic expansion took too long to reach Black, Indigenous, Hispanic/Latinx and Asian households," it states. "Racial and ethnic income gaps grew."
Because the 2020 recession hit hardest at the leisure and hospitality sector, this has "exacerbated racial/ethnic inequities with 28% of Black households saying it's very difficult to pay usual monthly expenses. Latinx households are even worse off, with 30% it's very difficult to pay usual monthly expenses," according to the report.
The PBA and Value of Jobs takes especially close look at "tax incidence" — that is, the impact of taxes on the average household budget.
Since 2018, eight new tax measures have been imposed on Portland households and businesses.
The report lays the blame of the "astounding" rise in the cost of living in the Portland metro area on a combination of new taxes — which the PBA endorsed — and scarcity of housing.
"…there is a rising tax burden in Portland that has become regressive, due in large part to our inability to tax consumption, and reliance on property tax. In this report, we look closely at households filing taxes jointly with 2018 personal incomes of $50,000, $75,000, $150,000, and $300,000, acknowledging that the median household income for our region is $78,439."
The report shows that taxes have gone up more for Portlanders the less they earn, making them cumulatively regressive.
The figures show that even families making just $25,000 per year pay far more in income, property and auto taxes than peers in Indianapolis, Salt Lake City, Seattle, Houston and Nashville.
Find the report, "2021 State of the Economy: Power of the Pandemic and Pathways to a More Inclusive Recovery," at portlandalliance.com.
Reporter, The Business Tribune
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