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Economy doctors prescribe patience

Despite tiny glimmers, analysts worry about health care, high-tech

Despite two new reports that show Oregon's economy remains in the doldrums, state budget watchers managed to find glimmers of hope that could indicate the start of a long, drawn-out recovery.

Last week's report from the Oregon Employment Department showed a disconcerting rise in the unemployment rate from a revised 7.3 percent in December to 7.5 percent in January.

And though the unemployment rate declined during 2002 Ñ going from a high of 8.4 percent last January to a low of 7.2 percent during the spring and summer Ñ the economy 'has been unable to sustain any kind of significant job growth during the past 10 months,' according to the report.

The faintly bright spot was an increase of 10,100 jobs in the year that ended in January, a modest gain of just under 1 percent.

Overall, 'the pace of recovery, especially in terms of new jobs being added, is painfully slow,' said Graham Slater, the employment department's administrator of work force and economic research.

The second report, an economic forecast released last Friday by the state's Office of Economic Analysis, acknowledged the weak job growth figures. Nevertheless, it predicted that Oregon's economy should gain strength during 2003, with employment growing

1 percent by year's end and improving by 2.4 percent in 2004.

'The outlook for the Oregon economy can be summarized as 'cautiously optimistic,' ' according to the forecast, released Friday by state economist Tom Potiowsky.

Other economists supported that view.

Jeff Thompson, an economist with the Oregon Center for Public Policy, is encouraged that the unemployment rate fell between January 2002 and January 2003, even if by a mere nine-tenths of

1 percent.

'We're not trying to say the economy is rosy,' he said. 'But there is job growth, even though it's disappointing.'

The center's research shows that Oregon's jobless rate is declining at a faster rate than in most other states, he said.

Randall Podenza of ECONorthwest, a Portland economic consulting firm, said, 'Technically, we are out of a recession and into a slow recovery, though slower than most people anticipated.'

As for the small number of jobs created last year, 'that's to be expected at the beginning of a recovery,' Podenza said. 'It takes awhile before you need more people.'

Still, the state's economy remains in trouble because of a $244 million decline in forecasted revenues for the fiscal year that will end in June.

The predicted shortfall, outlined in the revenue forecast, has state lawmakers scrambling to balance the budget by the end of June through maneuvers that include raiding the state's rainy-day school fund and borrowing against the state's tobacco settlement fund.

Spending cuts and layoffs resulting from the shortfall could threaten any recovery the state might experience, the report warned.

The report lists other threats to a potential recovery, including uncertainty about a war with Iraq and other global tensions; investors' distrust of the economy and the stock market; rising energy prices; and a slow recovery in Oregon's high-tech sector.

One example of how the state's fiscal crisis could undermine a potential recovery is revealed in the employment report in a section about Oregon's hospitals, which last year gained 2,600 jobs, an increase of 6 percent, according to state figures.

In the economic forecast, hospitals and health care were identified as 'a major component of growth' in Oregon's services sector.

But Ken Rutledge, director of the Oregon Association of Hospitals and Health Systems, said he worries that such potential growth could be threatened by a revenue reduction of at least $82 million in Medicaid funds because of cuts made by the state in the Oregon Health Plan and other medical programs for low-income Oregonians.

Rutledge said people whose benefits have been cut will turn to emergency rooms for care, quickly driving up health care costs that hospitals will have to absorb. Hospitals may have to eliminate some services, resulting in layoffs, and to shift costs to private insurers, Oregon businesses and individuals, Rutledge said.

'This could have a very, very (negative) impact across the state,' he said.

Oregon's high-tech sector Ñ which

fueled the state's economic growth during the 1990s Ñ has suffered during the last two years and will continue to slump in 2003, according to the state forecast.

State figures show that high-tech, which includes the manufacture of semiconductors and electronic components, lost 1,500 jobs last year.

One bright spot for high-tech is Intel Corp., the sector's primary driver, which remains in a strong competitive position to continue providing a base for a recovery, according to an ECONorthwest study.

Among the forecast's findings: Intel employed about 15,300 workers in Oregon during 2001, topping Fred Meyer Inc. (13,300 workers) and Providence Health System (12,800).

Andy Giegerich contributed to this report. Contact Mary Bellotti at This email address is being protected from spambots. You need JavaScript enabled to view it..