Portland State Magazine Spring 2008

THERE'S A LOT riding on the forecasting abilities of Oregon state economist Tom Potiowsky. In May of odd years, Potiowsky and his staff in the Office of Economic Analysis compile a tax revenue forecast that state policymakers and department heads use to plan the state's biennial budget. If his predictions are too high, the legislature might have to meet in special session to cut programs . If they're too low, the state is ob liged to give money back to Oregon residents in the form of a kicker tax rebate check. Potiowsky, who is also a Portland State economics professor, must like the work-he's in his second appointment. Potiowsky first held the post from 1999 to 2005 and was reappointed by Gov. Ted Ku– longoski in January of this year. Currently on leave from Portland State, he returns for the occasional lecture and teaches classes through the Oregon Executive MBA, a joint program of PSU, Un iversity of Oregon, and Oregon State University. Affable and approachable, Potiowsky has an uncanny ability to explain complex economic concepts. He recently took time away from studying the state's economic indicators to ta lk with Portland State Magazine about recessions, the controversia l kicker process, and other matters economic. Q: What is the economic prognosis for Oregon? A: If the country goes into a deep recession, Oregon will be in recession too, but not as deep. In absolute terms, Oregon is already experiencing a slowdown in economic activity, but we should weather this downturn better than we did in 2001- 2003. Q: Why do you think Oregon will do better this time around? A: In the 2001 recession, Oregon entered early because the leading edge of the slowdown was rhe high-tech sector. That's not the case today. Although all sectors have slowed, we are seeing some resiliency in health services, metals and machin– ery, and information, which includes software publishers. Exports also are keeping our head above water. The fact is, no two recessions are alike. While the burst- ing of rhe high-tech bubble triggered the 2001 recession, chis time around, the bubble is housing. Industries with a strong tie to housing are feeling the pain, including wood products. The wood produces industry is really struggling right now, but because Oregon is more diversified than it was in, say the 1970s, we're less affected by the downturn in rhat sector. Three decades ago, chis kind of housing meltdown would have spelled disaster for Oregon. It isn't now. Q: Is it difficult to predict, or call, a recession? A: Ir's kind of foggy at rhe national level. The National Bureau of Economic Research sort of says what rheir definition is, bur they have to meet about it and come to a consensus. There's not some trigger chat says, "Ah, now you're in recession." I look for things such as a drop in personal income levels, or a loss of jobs across all sectors, not just concentrated in one. If rhe unemployment rate were rising, all chose things rogecher would make you want to say you're in recession. Bue because you're looking backward, you're probably well into a recession by the time you actually demarcate one. Q: Where is rhe state losing and gaining jobs? A: If we look over the longer term, outside the present business cycle downturn, jobs are increasing in all sectors of Oregon's economy. However, manufacwring has grown slower than either our service or public sectors, which is the case across the nation. The manufacturing sector in Oregon is seeing growrh in machinery and metals-the latter being an interesting bright spot. For example, Oregon companies are helping to satisfy an increased need for titanium for new aircraft and also for zirconium for chemical processing plants, especially in China. In addition, we have seen growth in local manufacturers such as Precision Castparts and railcar maker Greenbrier. We may see an increase in firms devoted to products associated wirh sustainability, such as SolarWorld and Soliacx. Within the service sector, healrh care has been one of rhe fasting growing areas, adding jobs even during recessionary rimes. In the public sector, local government has been the fastest growing. Q: The subprime lending mess and rhe resulting rise in home foreclosures has been blamed for many of the nation's econom– ic woes. How is Oregon's housing marker holding up? SPRI NG 2008 PORTLAN D STATE MAGAZINE 9