From staff reports
Oregon’s productivity gains have outpaced the nation, according to the March 2024 Oregon Economic and Revenue Forecast from the state’s Office of Economic Analysis.
The report states the 2023 population estimates show that Oregon’s population continued to stagnate during the COVID-19 pandemic, and the OEA has lowered the population outlook as a result.
The Beaver State’s population is expected to rebound in the decade ahead but grow at just 0.6 percent per year, according to the forecast. This will result in a relatively smaller labor force and a bit less personal income earned in the coming years.
The report notes that inflation has cooled and is near the Federal Reserve’s target, and the labor market rebalanced last year. However, recent data from consumer spending, job gains and real GDP growth indicate inflation may rebound in the quarters ahead. The Fed has indicated it will cut interest rates this year but appears to be in no hurry to do so given the strength of the economy.
“The good news is that between the start-up boom, increased federal investment and potential of generative AI, productivity is set to increase faster in the decade ahead,” the report stated. “These gains will boost the overall economy and make up for slower labor growth.
“Even so, one of the key dynamics for stronger business investment is a tight labor market. When workers are scarce and expensive, firms are more willing, if not forced, to invest in labor-saving technology and processes.”
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Oregon’s state revenue outlook remains stable, and the underlying economic outlook is relatively unchanged with collections tracking closely to expectations. Compared to the December 2023 forecast, general fund revenues are raised $76 million, according to the report. However, total available resources are increased $558 million in large part due to unspent appropriations from the last biennium. These revert to the general fund, boosting resources in 2023-25.
While overall revenue collections have been matching expectations, the report stated that there have been “some notable surprises.”
The most significant is the “persistence of the six-year boom in Oregon’s traditional corporate income and excise taxes. Tax collections have far outstripped growth in underlying corporate profits.
“The longer the surge in collections persists, the more likely it becomes that tax reforms enacted at the federal and state levels have permanently increased Oregon’s corporate tax base, and that the step up in collections will remain going forward.”
The report stated that the reduction in expected population and job gains points to a “somewhat weaker” long-term forecast for personal income taxes. However, the general nature of the revenue forecast hasn’t changed, with the largest reduction in expected general fund resources amounting to less than 1 percent of revenue in the 2029-31 budget period.
