This morning I am part of the Springfield Chamber of Commerce’s State of Business Breakfast. Also presenting are Caroline Cummings of Oregon RAIN and Mark Gregory of Oregon SBDC. Should be a great event. My presentation focuses on the statewide economic outlook but I have incorporated some local material as well. What follows is some Lane County specific information.

Like Oregon overall, job growth in Lane County has slowed in recent years as the regional economy begins to approach full employment. However, as we have discussed before, Eugene-Springfield underwent major structural changes during the Great Recession. In particular the manufacturing losses of the RV industry and the chip plant still weigh on economic data today.

The university is a stabilizing force employment-wise and a source of growth overall with rising enrollments increasing consumer spending and spurring new construction.

All of that said, it’s really every other sector driving growth in recent years. These gains are broad based. The regional economy is at an historic high for jobs and the previous jobs gap — difference between the number of jobs and growth in the potential labor force — is effectively closed.

Importantly, economic growth in recent years has finally translated into real income gains. Local drivers of growth mirror statewide patterns. These gains are all about the labor market. More Lane County residents are working, for more hours, and for higher pay. Local inflation-adjusted incomes are back to where they were in the late 1990s and at the height of mid-2000s expansion. When the 2018 Census data is released this fall, I suspect Lane will have reached an all-time high on incomes as well.

Looking forward, the Lane County economy has never been more diversified. Keep in mind that this measure compares the local mix of industries to the nationwide patterns. As such, when a line moves sideways, it means the local economy is diversifying at the same pace as the nation.

Lane County is home to a very high concentration of timber-related firms, in addition to the university, plus a thriving beverage manufacturing sector (mostly breweries). These all stand out when looking at the local industrial structure.

On the flip side, Lane County has relatively low concentrations in finance (Oregon is not a financial hub), construction (slower population growth, but as we will see in a minute, still not enough construction), and professional and technical services (high-wage, white collar jobs).

For more on industrial diversification and the outlook, please see our previous work. But the main point being that a more diverse economy is better able to withstand different types of recessions. Having one key industry is great when that industry is booming (Timber in the 1950-70s, e.g.) but a region suffers considerably when that sector has fallen on hard times. If the proverbial eggs are spread across more baskets, it means when one basket goes down, the rest are better able to withstand the loss and recover.

Lastly, there are two ways to diversify. A region can add more jobs in industries that did not have a large local presence. Or a region can lose jobs in a sector they specialize in. Both types occur and Oregon’s more diversified economy today is not just due to new job growth. While Lane County still has 10x the concentration in timber-related jobs compared to the nation, it used to be 20x the concentration a generation or two ago. As such, the decline of the timber industry and job polarization overall have made Oregon and Lane County’s economy more like the U.S.

The keys to longer-run growth are demographics and housing. The Eugene-Springfield MSA is expected to continue to grow, but at a somewhat slower pace in the years ahead. The regional economy will face the same demographic headwind the rest of urban Oregon, and the Willamette Valley faces. Working-age population growth will be positive, but slower than total population growth as the Baby Boomer retirements weigh on the local workforce numbers. As discussed before, there are some discrepancies between local demographic forecasts, suggesting Lane may have more demographic upside risk than most.

All of that said, the region will still need to build significantly more housing in order to accommodate gains seen in recent years and their future neighbors in the years to come. Taking Portland State’s population forecast and turning it into household projections reveals Lane County needs to build around 1,400 units per year in the decade ahead, even with a moderate recession (solid lines). While this level of new construction, or more, was seen basically every year throughout the 1990s, the last time Lane permitted this many units was 2006. And the past decade hasn’t been close. More new construction is a must.

Today Lane County, like Oregon overall, is building 1 new housing unit for every 3 new residents. Historically we built 1 new unit for every 2 new residents in Oregon. At some point, something has to give here. So far the answer to that something is affordability. The concern is that affordability could put Oregon’s comparative advantage at risk, or our ability to attract and retain working-age households.

For more information on Lane County’s economy, see the great work that Employment’s regional economist Brian Rooney does.