Office of Economic Analysis

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Agency Budget Kickoff Meeting
Oregons Economic and Revenue Outlook
Employment Department Auditorium March 14, 2006

• Office of Economic Analysis
• Tom Potiowsky, State Economist
• Dae Baek, Deputy State Economist
• Kanhaiya Vaidya, Senior Demographer
• Michael Kennedy, Senior Revenue Economist

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Quick Look at US Economy...
Office of Economic Analysis
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U.S. Real GDP, Percent Change Chain Weighted
1996 Dollars
Global Insight January 2006
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Mortgage Rates Stay Low But Are On The Rise
(a) Thirty-year mortgage, 80 loan.
Global Insight January 2006
Office of Economic Analysis
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Affordability Declines as Housing Price
Appreciations Outpaces Incomes
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Energy Spending Percent of Disposable Personal
Income
Global Insight January 2006
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Look at Oregon Economy...
Office of Economic Analysis
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Recent Oregon Economy Facts

• 5.7 unemployment rate for December 2005 7th
  highest for the states.
• 5th fastest job growth at 3.5 for all states for
  December 2005 over December 2004.
• 5.4 unemployment rate for January 2006, lowest
  rate in 5 years.
• Total nonfarm employment grew 3.2 year-over-year
  for the 4th quarter of 2005.
• 5.9 personal income growth for 3rd quarter of
  2005 over 3rd quarter of 2004. Annualized 3rd
  quarter 2005 growth at 4.0.

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Unemployment Rates for Selected States(lowest to
highest)
Higher than Oregon Michigan, South Carolina,
Alaska, Mississippi, Louisiana
Office of Economic Analysis
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Unemployment Rate by Region, January 2006(Not
seasonally adjusted Portland PMSA includes
Oregon counties only)
Oregon 6.0 (seasonally adjusted 5.3) U. S.
5.1 (seasonally adjusted 4.7)
5.2
6.9
6.2
9.2
6.9
7.1
Source Oregon Employment Department
Office of Economic Analysis
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Outlook for Oregon
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Most Oregon Employment Sectors are in Expansion
Phase for Fourth Quarter 2005
Expansion
Newly Expanding
Newly Slowing
Contracting
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Oregon Employment Department
Office of Economic Analysis
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Total Non-farm Employment(Annual Percentage
Change)
Office of Economic Analysis
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Housing Start Oregon U.S. (Annual Percentage
Change)
Office of Economic Analysis
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Annual Percentage Change in in OFHEO MSA House
Price Indexes through 2005 Q4
Bend
Medford
PDX-Vanc-Bevrtn
Salem
Office of Federal Housing Enterprise Oversight
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Oregon Outlook Summary

• 2004 job growth at 2.1, first positive year after
  three consecutive years of job losses.
• Job growth at 3.7 for January 2006 over January
  2005.
• Jobs gains continue to increase 3.1 growth in
  2005, 2.1 in 2006, 1.5 in 2007.
• Manufacturing will average a slight decline of
  0.2 thru 2008 while private nonmanufacturing
  averages 2.2 thru 2008.
• Personal income 5.8 in 2005, 5.9 in 2006, 5.8
  in 2007.

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Near Term Risk to the Forecast

• Downside
• Geopolitical risks
• Inflation and Federal Reserve Bank reactions
• A sharp and major stock market correction
• A possible collapse of the housing market
• Rising regional energy prices
• Initiatives, referendums, and referrals
• Others

• Upside
• Sharp reduction of oil prices
• Recovering business and consumer confidence
• Controlled growth of China and India

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Budget Driver Populations Past and Future Decades
Sources Census Bureau OR Office of Economic
Analysis
Office of Economic Analysis
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Inflation Measures
Inflation rate calculated on fiscal year average
value in deflators.
Office of Economic Analysis
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Per Capita Income -- Long Road Since 1980
Source Regional Economic Information
System Bureau of Economic Analysis
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General Fund Revenue Forecast . . .
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Composition of GF Revenues
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Current GF Forecast
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Progression of 2007-09 GF Forecasts
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Risks

• Corporate income tax system in a state of flux.
• Sources of recent capital gains growth not fully
  understood.
• Policy actions, both federal and state.

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Lottery Revenue Forecast . . .
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Recent Changes

• Slot-type games added to Video Lottery Terminals.
  Short-run impact 17-20 increase in sales.
• Powerball matrix changed in August 2005.
  Previous jackpot high exceeded twice since.
• Lucky Lines added to traditional game mix.
• Sports Action/Scoreboard NFL games end in fiscal
  year 2007.

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Current Lottery Forecast
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Lottery Funds and Programs
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For more information
Office of Economic Analysis 155 Cottage Street
NE, U20 Salem, OR 97301-3966 (503)
378-3405 email oea.info_at_das.state.or.us http//w
ww.oea.das.state.or.us
Office of Economic Analysis