Population stagnation will affect Oregon's future economy

“But for heaven’s sake, don’t move here to live!” he added. “Or if you do have to move in to live, don’t tell any of your neighbors where you are going.”

If McCall meant to discourage the state’s growth, he failed, at least during the 1970s. Oregon’s population barely broke 2 million in 1970, but by the next federal census in 1980, a surge of people pushed that total by more than 500,000 to 2,633,156.

Then came the economic downturn of the early 1980s, when Oregon recorded two of its three years of actual population losses in 1982 and 1983.

Many of those people left Oregon as timber production dropped and mills closed — although the output per worker increased by the close of the decade as automation led to gains in productivity.

The third year of population decline was in 2022.

Today, four years since the onset of the worldwide coronavirus pandemic, Oregon’s population is either growing more slowly or actually declining, depending on the source.

According to state estimates by Portland State University, Oregon grew from 4,269,529 in 2022 — after that total was revised downward — to 4,291,525 in 2023 for a modest gain of 21,996 people.

But according to the U.S. Census Bureau, its Oregon estimates for those years are lower by 23,000 — and the overall difference with PSU estimates between 2021 and 2023 is 57,000 less, about the size of Tigard’s population.

Mike Wilkerson, director of analytics at the Portland firm ECONorthwest, described the situation as the “new normal” at a presentation Feb. 15 to the Portland Metro Chamber. The firm bases its numbers on the Census estimates, which can be compared with similar cities.

According to the Census Bureau, Oregon and California were among 18 states with estimated population losses between mid-2021 and mid-2022 — and among just eight states with losses between mid-2022 and mid-2023. The only other Western state in both groups was Hawaii.

Economic implications

The Oregon Office of Economic Analysis bases its quarterly forecasts in part on the PSU estimates. But senior economist Josh Lehner said the office has taken note of the discrepancy between the state and federal estimates in preparing future forecasts.

In his most recent blog, posted after the federal estimates were released March 14, Lehner wrote:

“For now, slower population growth or declines means business and capital investment that lead to productivity gains are even more important than before in order to raise incomes and drive economic growth.”

Though Oregon has regained the total number of jobs lost during the pandemic, that growth stalled during 2023, when the statewide total actually dropped slightly.

Oregon has relied on in-migration — the flow of people into the state above the natural birth and death rates — as young workers boost the economy. But the economic growth that has occurred during the pandemic recovery has been tied more to gains in worker productivity instead of population.

Lehner wrote in a Jan. 10 blog:

“Population growth is the main reason Oregon’s economy outperforms the typical state over time. The influx of young, working-age residents allows local businesses to hire and expand at a faster rate.

“Our office’s baseline forecast calls for a modest rebound in migration and population growth in the years ahead. Oregon is still an attractive, scenic place to live and there are plentiful job opportunities.

“However, Oregon must be open to the possibility that even a modest rebound in migration may not materialize in the years ahead. The pandemic may be a structural break point from an historical perspective, even if it will take a few years to fully realize it.”

Gail Krumenauer is an economist for the Oregon Employment Department, which works with the Office of Economic Analysis.

“In-migration has been the primary way we have grown our population and labor force over the decades. In turn, that also has been the established way we have grown faster than the U.S. in terms of job gains,” she said.

“If we continue to find ourselves in a situation where the labor force is not growing because of slower population growth or outright declines, that can affect the ability for us to add jobs at the rate we have in the past.”

Filling future jobs

But Oregon is gearing up to add thousands of jobs as a result of President Joe Biden’s federal initiatives to rebuild public works, boost domestic manufacturing of semiconductors and other electronic components, and accelerate a transition to energy efficiency and carbon-free energy.

Among the recent announcements: $488 million for capping Interstate 5 at the Rose Quarter in Portland and reconnecting the Lower Albina neighborhood, $600 million for a replacement of the Interstate Bridge across the Columbia River — with up to $2 billion more being sought by Oregon and Washington — and $8.5 billion for Intel to expand production of computer chips in several states. Intel has four plants in Hillsboro and Aloha — it is Oregon’s largest private employer with 22,000 workers — and its advanced research and development facility is in Hillsboro.

One fact is clear: With the retirement of workers born during the post-World War II baby boom, Oregon’s total workforce will shrink, since succeeding generations are smaller.

Lehner said that part of a looming shortage of trained workers could be alleviated by more focused training of people who have been left out in the past: women, people of color, people with disabilities. (Oregon lawmakers approved a $200 million Future Ready Oregon program in 2022 to focus some training of previously excluded groups for construction, health care and manufacturing.)

“With increased participation rates among existing Oregonians, particularly those that help reduce historical disparities, the labor force could continue to increase even as the working-age population declines,” he said.

“Even so, the state’s economy will not crater. Rather, Oregon would be on a slower growth trajectory. In terms of personal income, consumer spending, and public revenues, those will not decline outright. This is due to ongoing wage and income gains for existing residents, in part due to inflation, and also due to rising asset values over time.

“That said, the cumulative difference between the baseline outlook and the zero migration scenario does add up.”

Effects on state services

Oregon’s two-year state budget, dependent as it is on personal and corporate income taxes, would get less money under a zero-migration scenario than if population growth continued. State economists have projected 4% less, or $8.6 billion. But they already have scaled back growth expectations for the rest of this decade.

In a supplemental report presented to lawmakers during the Nov. 15 economic and revenue forecast, Lehner and state economist Mark McMullen said the projected effects of zero migration may not be as severe as they might appear at first glance.

State support of public schools would lessen as the number of school-age children drops, a result of smaller generations born after the baby boom. Some districts already are feeling the pinch of reduced enrollments, which result in less state money.

Long-term care for people would increase with the growing number of people 85 and older.

Although fewer workers and businesses would pay income taxes, the lower amounts would not be as devastating to the state budget because most of those workers would not yet be at their peak earning years. (State economic forecasts cover only a 10-year period.)

The report says: “In the first decade, the largest changes would be among younger populations. Oregonians in the late 40s through early 60s have the highest incomes and tax bills, suggesting the zero-migration impacts would be larger in the second and third decades than in the first.”