The risk for recession has increased, according to a new economic report released by Portland State University, but a sharp economic decline isn’t imminent.
“We don’t think there will be a recession in the next year, but risks are increasing,” said Peter Hulseman, senior economist with PSU’s Northwest Economic Research Center.
NERC found a few warning signs at the national level: trade wars and cutbacks in manufacturing, slowed consumer spending and costly housing. For example, the manufacturing industry is seeing reduced production and hours, but those indicators alone are not enough to point to a recession, Hulseman said.
“Some concerned people will look at that as a sign of a slowing economy and react,” he said, which in turn could cause further slowing.
He added that the Portland Metro Area is seeing some of the same slowing in manufacturing in Oregon with a decline in hours worked. But added the planned Intel expansion may serve as a local counter.
Consumer spending levels sometimes also indicate a looming recession, and in September, spending decreased significantly. Hulseman said the recently concluded strike at General Motors could be a factor, but at this stage, the Gross Domestic Product (GDP) is forecast to continue growing.
“You need two quarters of falling GDP to get a recession,” Hulseman said. “Nothing in the data says anything is imminent, we’re just extra cautious nowadays. We are seeing some flashing yellow lights, but they haven’t turned red, and we haven’t heard any sirens.”
The job market is also holding steady. In the Portland Metro Area, the job growth rate now matches the national growth rate and new jobs are being added at the expected rate for an economy that’s reached full employment.
The construction industry is seeing flattened growth, but Hulseman said the market, previously buoyed by private construction, should see a boost from many public projects in the planning and development pipeline.
The two fastest-growing industries in Portland remain professional business services and health services and education.
Housing affordability
The report also considered housing affordability and its impact on the overall health of the economy.
The Portland Metro Area lacks affordable homes, with NERC finding a shortage of about 41,400 units.
Oregon’s housing market is less affordable than the national market. The National Low Income Housing Report found just 28 affordable and available homes for every 100 low-income renters. The national figure is 37.
Housing is much less affordable than it was seven years ago, according to the report. Of 350,000 local rental units, only 8% are affordable to extremely low-income households.
Low-income renters — or those who earn 50 percent to 80 percent of adjusted median family income — account for 21.8% of the Oregon population. A household is considered cost-burdened if housing costs make up more than 30 percent of overall income, and in Oregon about 62 percent of renters are housing cost-burdened.
“There tends to be a discussion that either we need to publically create policies to build more affordable housing or build tons of new housing and that will fix the problem,” Hulseman said. “The report highlights that it’s not that simple.”
The rental price distribution of housing matters more than the total supply of housing, he added.
“The affordability gap is not a simple product of aggregate supply, but specifically the mismatch of supply relative to household income,” the report states.
Ultimately, Hulseman said the Portland Metro Area has a better chance of fixing housing supply than income issues.