OREGON UPDATES
Oregon Economic and Revenue Forecast August 28, 2024 | Written By Josh Lehner T he economy has transitioned out of the inflationary economic boom and into what will hopefully become a sustained expansion. So far the Federal Reserve appears to be threading the needle. High interest
While the economy is slowing down from the inflationary boom, state revenues continue to outpace expectations in recent months. In particular, both personal and corporate income taxes have come in noticeably higher than the previous forecast. Consumption-based revenues like lottery, the corporate activity tax, and recreational marijuana have more closely matched expectations. Getting a handle of recent personal income tax collections is challenging. So far, the number of returns processed to date, and the amount of collections have outpaced previous expectations. Even so, compared to the past decade, collections are relatively low compared to the liability reported on returns. Ultimately how these data reconcile, with either less reported income or more payments than expected, will only be known after the extension filing season. Available resources for the General Fund in the current 2023-25 biennium are raised by $676 million (+2.0%) compared to the prior forecast. Two-thirds of this increase is due to tracking actual tax collections alone. One-
rates were needed when inflation was running near double-digit rates, but no longer. The key will be when, and how quickly the Fed adjusts course. Expectations are interest rate cuts will begin next month. This should stabilize and revive rate-sensitive parts of the economy in the year ahead. The labor market is expected to improve as well following the past year where slower hiring has led to a rising unemployment rate, despite layoffs remaining low. While imminent recession fears appear misplaced, the longer high interest rates remain, the probably of recession rises as economic growth slows. Getting a read on the current state of Oregon’s economy is challenging. Over the entire cycle to date, Oregon’s economic performance has been solid. Employment gains, income growth, and population change are all roughly in the middle of the pack across all states, but a bit below the typical state. Top 15 productivity gains have helped
overall growth. However, in recent months withholdings and job gains have picked up. The number of personal income tax returns filed and processed so far this year has increased. These data could be the first indication that Oregon’s patterns of growth have shifted out of the pandemic era lull, and back toward something more like the typical expansion. However, they could also be more noise than signal. Only time will tell. For now, the economic forecast remains essentially unchanged compared to recent outlooks. These green shoots of stronger gains indicate there is more potential upside than believed in some time.
24
The Business Review | June & July 2024
Made with FlippingBook - professional solution for displaying marketing and sales documents online