What the Data Show
This is the fifth Economic Check-Up. It focuses on three measurements of the Portland-Metropolitan Service Area (MSA) economy:
- Gross Metropolitan Product (GMP)
Portland-metro’s economic performance from August 2007 to August 2013 will be compared to the following geographic areas:
- The average of all U.S. metropolitan areas
- Peer group regions, defined as Sacramento, St. Louis, Cincinnati and Salt Lake City
- spirational group regions, Seattle, Denver, and Minneapolis
These groupings of peer and aspirational regions, with the exception of Salt Lake City, have been used in past Economic Check-Up reports to give better context to how Portland-metro’s economy compares at the national level. This year, Salt Lake City was added to align with analysis being done by Greater Portland Inc.
Job growth: In the big picture, a positive story
For the fourth consecutive year, Portland-metro’s economy measured positive growth in the first eight months of 2014, adding a total of 22,175 jobs. Over the four years, a total of 84,875 jobs were added, overcoming the 64,500 loss recorded during the recession, for a net positive change of 20,375 jobs, as shown in Figure 1. For the first time since the recession, Portland-metro’s job growth outpaced the national average for metro areas, see Figure 2.
During the last year, many of the job gains have been in the local-service sectors, with education, health care, and leisure showing the greatest gains, along with professional services, which includes both local- and traded-sector jobs. In fact, looking at job recovery since 2008, those sectors have shown net positive gains, while other sectors, such as manufacturing, construction, financial services and government, have shown a net negative, see Figure 3.
In assessing the strength of the recovery, it’s important to distinguish between job growth in the traded and local sectors. The traded sector includes industries and employers that produce goods and services that are consumed outside the region (e.g., semiconductors). The local sector consists of industries and firms that produce goods and services that are consumed locally (e.g., K-12 education).
Both sectors—traded and local—are essential to economic health. Traded-sector employers export products or services and bring new money into a region. In part, this money is spent in the local economy, supporting jobs and income in the local sector. The typically higher wages from traded-sector jobs have an important benefit: in our income-tax-dependent state; traded-sector jobs generate more revenue for critical services like schools, health care and social services. Local-sector employers provide necessary goods and services that both improve quality of life and contribute to the productivity of the traded sector.
During the recession, the loss of traded-sector jobs was greater than the local sector loss, and recovery in trade-based jobs has been slower, as shown in Figure 4. In the period between August 2013 and August 2014, the pace of recovery in tradedsector employment picked up, however, and the region is just 4,100 jobs away from the pre-recession 2007 level. In fact, just like local-sector job recovery, Portland-metro is outpacing the U.S. metro area average for job recovery in the traded sector.
Job recovery: Portland-metro vs. other regions
Since the first Economic Check-Up report in 2010, the Value of Jobs coalition has looked at how Portland-metro’s economic performance compares to other metro regions. We have divided those comparator regions into two groups: 1) “peer” regions: St. Louis, Cincinnati and Sacramento, which four years ago had economic and population characteristics similar to Portland-metro, and 2) “aspirational” regions: Seattle, Denver and Minneapolis, metro areas Portland-metro frequently looks at for best practices. This year the coalition has added Salt Lake City to the peer review to align with analysis underway by Greater Portland Inc.
Since 2011, Portland has outpaced three of its peer regions in job recovery. St. Louis, Cincinnati and Sacramento are all still short of their 2007 job peak, while Portland-metro and Salt Lake City have totally recovered in terms of job numbers, see Figure 5.
All of Portland’s aspirational regions, Seattle, Denver, and Minneapolis, have more than gained back their lost jobs since the pre-recession peak. This year, Portland-metro joined the ranks of regions that have achieved full job-count recovery. In fact, with a 2 percent gain since 2013, Portland-metro has surpassed Minneapolis in job additions, but still lags behind the other two aspirational regions. Job growth since 2007 in Denver-metro has exceeded 6 percent, in Seattle-metro it is close to 4 percent, and in Salt Lake City it is almost 5.5 percent, as shown in Figure 5 and 6.
Job growth vs. population:
Are we keeping up?
For this Economic Check-Up, the Value of Jobs coalition looked at another indicator of regional economic health: job growth relative to the regional population growth. An important trend appeared.
For more than a decade, Portland-metro’s employment per capita has been in decline. In 2000, employment per capita was 53 percent; by 2013, it had declined to about 47 percent, see Figure 7. Portland-metro’s longstanding reputation as an attractive place to live has caused many to move to the region, and, unless job growth keeps pace, that could exacerbate employment and income concerns in the decades ahead.
Incomes: Growth but slowly
While regional job growth has remained steady during the last four years, the same has not been true for incomes. Following the trend in most U.S. metro regions, Portland-metro has seen only modest growth in both median household income and per capita income, two important measurements of regional economic prosperity.
Median household income (MHI) declined by 11 percent from 2008 to 2010 (in 2013 dollars), as the recession pinched wages. In 2012, Portland-metro saw the first significant increase in MHI since 2008, and in 2013, modest increases continued. Between 2012 and 2013, MHI grew $1,355, from $57,813 to $59,168 (in 2013 dollars). That is still $4,408 (or 6.9 percent) short of the pre-recession 2008 level of $63,576.
Looking at other regions, Portland-metro’s growth in MHI surpassed three of the peer regions, Cincinnati, Sacramento and St. Louis, but lags behind Salt Lake City, see Figure 8. On the other hand, Portland continues to significantly lag the aspirational regions, Seattle, Denver, and Minneapolis, in MHI. Although none of the regions have completely regained the household income lost since 2008, Portland (95.1 percent of 2008 MHI) has regained more than all of the peer and aspiration markets, except for Salt Lake City (95.6 percent), see Figure 9.
Another important measure is per capita income. The first Economic Check-Up in 2010 uncovered the disturbing reality that Portland-metro’s per capita income had declined over a 13-year period from 1997 to 2010, falling below the national average for metro areas. In response, regional leaders put a major focus on improving incomes, adopting a goal of exceeding the national average for metro areas by 2020.
The region still falls short of that goal. In 2012, Portlandmetro’s per capita income was $43,734, about 4.6 percent below the national average for metro areas. And Portland-metro’s per capita income lagged all of our aspirational comparator regions, Seattle, Denver, and Minneapolis. Comparing per capita income to some of our peer regions, Cincinnati, Sacramento and St. Louis, reveals a deviation from all of the other measures—these three peer regions have higher per capita incomes. Portland, however, was $2,718 higher than Salt Lake City in terms of per capita income, which is a reversal from MHI, where that city leads Portland.
Affordability: Another look
Comparing regional incomes raises the obvious question of cost of living. Are wage and income disparities offset by differences in the cost of housing and other factors? Previous Economic Check-Ups have looked at that question, ranking Portland’s affordability against peer and aspirational regions.
For this report, a new measurement tool is used: Regional Price Parity (RPP) which adjusts the buying power of personal incomes to account for regional price differences. For regions with higher costs of living, the RPP would adjust household incomes downward, while regions with lower costs of living would see an upward adjustment.
Portland-metro has an RPP factor that essentially is zero: the RPP-adjusted median household income is almost the same as the unadjusted income. All three of the aspirational regions, Seattle, Denver, and Minneapolis, have RPP-adjusted incomes that exceed Portland-metro’s, as do three peer regions, Salt Lake City, Cincinnati and St. Louis. Only Sacramento lags Portland in this measurement. Bottom line, among the seven comparator regions, only Sacramento lags Portland-metro in the buying power of median household income, see Figure 10.
Income distribution: Lagging professional wages
One last look at regional incomes reveals income distribution is a matter of growing concern. Regions across the country, including Portland-metro, are experiencing a loss of middleincome jobs. In 2015, the Value of Jobs coalition will take a look at trends related to middle-income employment in the region.
What is Regional Price Parity?
Regional Price Parity (RPP) is a new form of measurement developed by the U.S. Department of Commerce this year. Much like currency exchange, it compares real buying power in different regions at a given point in time.
For example, the New York metropolitan area has an RPP of about 122, meaning prices are about 22% higher than the national average. When factored against median household incomes, this provides a measure to account for cost of living differences for a given region. See Figure 10 for Portland-metro’s RPP-adjusted income ranking.
For this Economic Check-Up, the coalition looked at how the spectrum of Portland-metro wages compares to the national average for metro areas and comparator regions. The results were interesting, but not unexpected. Portland-metro’s lowestincome earners, the bottom 20 percent, make 10 to 30 percent more than the national average, likely driven by a minimum wage that exceeds the federal minimum by $1.85 (25.5 percent). At the higher end, Portland’s top 30 percent make as much as 14 percent less than the national average, again illustrating a finding of a 2013 Value of Jobs report showing Portland-metro’s college-educated workers, on average, make less than their counterparts nationally.
Looking at the peer regions, Sacramento, Cincinnati and St. Louis also have upper incomes that fall short of the national average for metro areas, while aspirational regions, Denver, Minneapolis, and Seattle, are above the national average at almost all income levels, as shown in Figures 11 and 12. Salt Lake City follows a pattern very similar to Portland-metro; incomes are higher than the metro national average through the 65th percentile for both regions, before dropping below the national average. At the 97th percentile, Salt Lake City slightly exceeds the metro national average percentage while Portlandmetro falls just short at 99.2 percent. Both regions are more than 10 percent lower than the national average at the 99th percentile.
Gross Metropolitan Product: The bright spot
Finally, a very bright spot for Portland-metro’s regional economy: Gross Metropolitan Product (GMP), which is the market value of all goods and services produced in a Metropolitan Statistical Area. Since 2008, Portland-metro not only has outpaced the nation in GMP growth, but the region also has been a national leader.
Through the second quarter of 2014, Portland-metro ranked third in the nation for GMP growth from the trough of the recession (calculated for each market), behind Austin and Houston. Portland-metro’s GMP grew 23.6 percent, compared to a national average for metro areas of 10.8 percent, see Figure 13.
GMP is an important indicator of efficiency in a local economy, and strong GMP growth is a tremendous attribute in economic development efforts. Much of Portland-metro’s strong performance in this area is due to the electronics and semiconductor industry, most notably Intel.