Tuesday, December 9, 2008

Oregon recession intensifies in October

Professor Duy released the U of O Index of Economic Indicators for October last week.

The University of Oregon Index of Eco­nomic Indicators™ fell sharply in October to 90.2, a 0.7 percent decline from the previous month.
Compared to six months ago, the UO Index is down 8.0 percent (annualized).
Indicators pointed to widespread weakness; five of the sev­en variables declined from the previous month, while only one, the interest rate spread, improved. The remaining indica­tor, Oregon building permits, remained un­changed. The UO Index indicates that, like the nation as a whole, recessionary condi­tions in Oregon intensified in October.

As a general rule of thumb, a decline of 2.5 percent (annualized) over six months, coupled with a decline in more than half of its components, signals that a recession is likely imminent.

On the job market

Oregon labor markets deteriorated sig­nificantly. Initial unemployment claims jumped to a weekly average of 10,805, ex­ceeding the peak of 10,245 reached during the 2001 recession. Payrolls at employment services agencies declined again in October and stand 6.5 percent below October 2007 levels. This sector is dominated by tempo­rary help agencies, whose employees are often the first laid off by struggling firms. Nonfarm payrolls (not included in the UO Index) fell sharply during October as firms, on net, shed 14,100 workers. Declines were widespread; employment fell in virtually all major sectors of the economy.

On housing starts and capital spending

Residential building permits (smoothed) continue to hover near 1,000, having stabi­lized at low levels for the past four months.
Still, note that permits are below the lev­els of the 2001–3 period of weakness. New orders for nondefense, nonaircraft capital goods, adjusted for inflation, fell sharply in October as the intensifying credit crunch and signals of softer consumer demand prompted firms to delay capital spending. This sharp shift in firm behavior will deepen and lengthen the recession.