How Long Can Portland’s Red Hot Economy Last?

October, rarely friendly to financial markets, has recently come and gone. But Portland keeps rolling along. In the last 12 months, Portland Metro has added 37,100 new jobs, a growth rate of 3.2%, while unemployment remains at 3.6% which is basically full employment for the able-bodied. In the last 10 years, median household income in the Portland area has grown by 25%. Portland is now the 10th wealthiest major city in the US compared to 17th in 2007. Over that 10-year period, only Seattle, San Francisco, and Miami among major cities have grown faster, and within Oregon only Bend has grown faster, at 27%. Portland now has the 21st-largest gross domestic product for a metropolitan region in the U.S. Thirty-three commercial real estate deals so far in 2018 have topped $7.5 million.

Dig a little deeper though, and not all the growth data is rosy. The gap between white and blue collar workers remains significant, with the average white collar worker earning $97,000 per year and the average blue collar worker $45,000. The poverty rate has fallen, but only slightly – from 14% to 11%. The number of families reporting food insecurity is unchanged. Also, the construction industry leads job growth with a 14.4% increase in the last year, with manufacturing and tourism third and fourth (healthcare is second). All three industries are boom-and-bust and will inevitably lose significant jobs in the next recession.

The state recently released a report predicting a $686 million kicker back to Oregon taxpayers. But the state sees gloomier days on the horizon, caused by scheduled reductions in federal spending, impacts from the 2017 federal tax overhaul, ongoing trade disputes, and rising interest rates. Demographics and increases to the minimum wage are expected to slow job growth. The projected growth rate for state revenues in the 2019-2021 biennium is 5%, which would be one of the lowest non-recession growth rates on record.

Real estate markets historically move in cycles of five to eight years. The current expansion has been going since 2009, so we are living on borrowed time. Combined with the downward trend in state economic forecasts, it would not be at all surprising to see Portland's job and real estate markets start to cool in 2019 and enter a significant down period in 2020-21.