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No April surprise in economic forecast

State revenue and job growth projections this month yielded “no April surprise,” with robust employment growth still outpacing the national average and corresponding revenue in step, according to a report on the state economic forecast released Friday. That growth is now expected to continue through 2017.

“Job gains are outpacing the typical state as are wages for Oregon workers,” the report stated. “The state’s economy is quickly approaching full employment, or a healthy labor market. Such a milestone has not been seen since 2000.”

One recent policy change, however, is expected to slow job growth in the next decade by 15 percent or about 40,000 positions: the phased-in implementation of higher minimum wages, said senior state economist Josh Lehner. The first increase takes effect in July. Initially, it is set to generate additional state revenue from more income taxes. Over time, that elevated yield will level off as employers look for ways to cut costs from the higher wages.

“Over time, employers are going to want to increase worker productivity one of the ways they can do that is work existing workers harder or by doing capital for labor substitutions,” Lehner said.

Over the past two years the state has added 5,000 jobs each month, producing about 3.5 percent growth annually, compared with 1.5 to 2 percent in 2013. In the past year, Oregon employers added 59,500 jobs. That is well above what was needed to recover jobs lost during the recession and to provide jobs for the state’s newcomers, Lehner said. Wages also have been increasing by double digits, which also spiked the state personal income tax collections, he said.

Oregon ranks second in the nation for job growth in March, according to the most recent rankings by Arizona State University’s W.P. Carey School of Business.

State revenue is $50 million greater than project in the March forecast, largely due to a spike in video poker profits.

State general fund revenue is greater than projected in the March economic forecast. Standing at about $18 billion, an increase of $17 million from March and of $1.9 billion since 2013. The general fund makes up about 85 percent of the state’s revenue.

The lottery generated $37.2 million more than anticipated in March.

State economists said the main threat to the state’s robust growth is lack of affordability.

Portland had been considered one of the most affordable cities on the West Coast, but it is losing that reputation due to the housing crisis. A shortage of housing has resulted in higher prices, and wages have not kept pace, Lehner said.

The city’s reputation as affordable has been a big draw for both companies looking to locate in Portland and new residents. If the city loses that distinction, it could slow economic growth, Lehner said.

Another detractor from revenue growth will be the debut of the Cowlitz Tribe’s new casino in spring 2017 in La Center, Washington. State economists project the new casino will siphon about $55 million in revenue from the state lottery fund in the next biennium, said state economist Mark McMullen.

State economists give a forecast four times a year to help planners and policy makers in their decision-making. The next forecast is scheduled to be released in September.

By Paris Achen
Portland Tribune Capital Bureau Reporter
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