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Study shows economy's strengths and fault lines

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The Portland Business Alliance published its fifth annual Economic Check-Up last week.

The good news: jobs are coming back.

The bad news: wages are not.

“We can expect full employment by 2017,” the economist John Tapogna, President of ECONorthwest, told the Portland Tribune. “Portland usually takes a deeper dive into recession and a steeper path out of it.”

However, Portland’s median household income is still $4,400 below its pre-recession peak in 2008. (Today it hovers just under $60,000.) Tapogna added, “Employers haven’t been forced to give raises yet.”

During the worst part of the Great Recession (January 2008 to December 2010) the Portland-metropolitan area lost 64,500 jobs.

Then between January 2011 and August 2014, the region added back 84,875 jobs, for a gain of 20,375 since the 2007 peak.

The jobs Portland has been adding since 2008 have mostly been local jobs in education and health, professional and business services, and leisure and hospitality. But traded sector jobs have been sluggish. Groups like the Portland Business Alliance constantly promote the need for traded sector jobs, those which trade goods and services beyond the Portland region and bring outside money into the economy. For example, semiconductors. The area economy depends heavily on Intel.

The low wages mean that although Portland appears to be a cheap place to live, it is actually less affordable than places like Seattle.

In the Check-Up, Portland is compared to the average of all U.S. metropolitan areas, but also to two other groups: Peer group regions, defined as Sacramento, St. Louis, Cincinnati‚ and Salt Lake City; and Aspirational group regions, Seattle, Denver, and Minneapolis.

Portland’s median household income is second-lowest in our peer group, but we are below Denver and Minneapolis in our aspirational group, with Seattle on top.

When you take into account Regional Price Parity, which compares real buying power in different regions at a given point in time, Portland fares badly. It is second — only to Sacramento in terms of the buying power of its median household income. Tapogna said the low price of oil has been “like a shot of adrenaline” for the economy, putting gas money back in the pockets of middle class and lower income Americans.

The study also looked at how much it takes to be in “The 1 percent” in a region. You can be a one percenter in Portland if you make about in the high $300,000s a year. In New York City you need to make around $700,000 a year.

Portland’s lower wage earners, the bottom 20 percent, make 10 to 30 percent more than the national average, thanks mainly to our relatively high state minimum wage. However, above the 65th percentile our households underperform. Tapogna said this is because our college graduates heading those households tend to have the lower earning majors, and also have less full time hours of work available to them.

The Check-Up studies three measurements of the Portland-Metropolitan Service Area (MSA) economy: Employment, Income and Gross Metropolitan Product. Portland looks good in terms of GMP, the market value of all goods and services produced in an MSA. Our GMP is growing quickly, behind only Austin and Houston.

Portland-metro’s GMP grew 23.6 percent, compared to a national average for metro areas of 10.8 percent. Much of Portland-metro’s strong performance in this area is due to the electronics and semiconductor industry, most notably Intel.

The report concludes that sluggish income gains are not just a Portland problem, they are a US problem, and that the way out is to focus on two trends: the technology revolution and a growing global middle class (as in Chinese and Indian people with money to buy chips and sportswear.)

The report says “Technology is eliminating routine, middle-skill work. Simultaneously, technology demands higher-skilled labor—to design, operate, and otherwise harness its potential. Our students, workers and schools must be better informed about the direction of technology and organize their training and studies around it. We must connect education to the economy.”

Oregon and Portland need “a coherent, focused export strategy, and this increases the urgency to attract and retain diverse students and investors to the region, who understand foreign markets and have deep networks overseas.”