Oregon's Leading Indicators for the Economy Barely back in Black
The most recent data shows Oregon’s economy slightly back in positive territory in terms of leading indicators. This comes one month after the index flashed alarming signals for Oregon, falling into negative territory for the first time since the 2008 Great Recession with a -0.77 reading. The most recent print of 0.35 from the Federal Reserve of Philadelphia is still 50% worse than the previous lowest point in the recover cycle (0.71 back in June of 2011). 1
In February, the index hit its second highest point in the business cycle with a 3.48 reading. The index has fallen consistently from that point. The October reading (the index updates on a delay) often is a positive month for Oregon’s leading indicators. With that in mind, next month’s update from the Philadelphia Fed is greatly anticipated by regional investors and business analysts.
This all comes in the midst of an uptick in unemployment in Oregon’s cities this month. While the most recent unemployment update from the Bureau of Labor Statistics showed falling unemployment across the nation, Oregon’s cities saw a jump in unemployment: Portland increased to 4.3%, Eugene to 4.7%, and Salem 4.9%. That stated, Oregon’s cities had experienced record lows in unemployment earlier this year.
Leading Indicators Are Slightly Up From Cycle Lows
Indicators Remain Low After Last Month's Negative Read
Oregon Real Estate Markets Have Stayed Resilient
Oregon Unemployment Has Increased Recently
How Oregon Stacks Up
Oregon is not alone in slowing Leading Indicator Index readings. California, Washington, and Nevada have also grown between 0.2% and 1.5%. Idaho, Utah, Nevada, Wyoming, and Arizona have all had strong numbers, each clocking in above 1.5%. The Mid-South, by comparison, has lead the Nation, with Kentucky and Alabama among the highest reads in the U.S., and all of the Southern States in moderate to strong positions. Texas had particularly bad numbers, owing likely to damage from the recent Hurricane Season.
June was the last time the West Coast states uniformly stood in solid territory, with last month seeing multiple states in negative territory (including California).
About the Leading Indicators Index
The Index
Every month, the Bureau of Labor Statistics (BLS) publishes an index of Leading Economic Indicators for all 50 states. 2 This indicators index is produced at toward the beginning of each month, usually after the publishing of the Coincident Indicators Index. It is meant to predict the next six months of economic conditions in a given State.
This index is based on many factors: state-level housing permits, initial unemployment claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill (take a look at the methodology 3).
By the Numbers
Oregon’s Leading Indicator Index grew to 0.35 from -0.77 in September (the most recent report from the BLS). In recent years, October has been a positive month most years, yet more recent unemployment data has been negative in the most recent reports.
Oregon Leading Indicator Index
Conclusion
Considering that the Leading Indicator Index is meant to predict economic activity and business conditions for the next 6 months, recent data from Oregon is worrying. The precipitous fall from February’s very strong numbers is both surprising and troubling for economists and the business community of the Pacific Northwest. While this trend is present across the West Coast, it is encouraging that one component of this index- initial unemployment- has impressed commenters and analysts numerous times this year with strong reads. The National average unemployment has continued to fall. The next releases of housing price data and employment will be critical to establishing or reversing the current trend.
Thanks for joining us in our discussion of the Oregon economy. As an Portland, Oregon-based Investment Advisor and Financial Planning Firm, we often cover Oregon’s economic conditions. Please consider following our Newsletter to keep up to date with Oregon’s most important business and economic stories.
All information from this article from the Philadelphia Federal Reserve, St. Louis Federal Reserve, and Bureau of Labor Statistics.
Meet the Author & Portfolio Manager
Victor Schramm is a Certified Fund Specialist (CFS®), with expertise in Mutual Funds & Variable Annuity Separate Accounts. He focuses on long term investing geared toward our annuity clients as a Fee Only Investment Advisor. He lives in Portland, OR.
Victor Schramm, CFS®Analyst & Portfolio Manager
Disclaimer:
This information is solely a representation of publicly available facts intended for educational use only. This is not a solicitation to buy or sell any public or private Security, in any city named in the article or elsewhere. No information provided here about Oregon’s economic indicators is to be used as a market timing tool for buying or selling any security. Regional economics are very complex and require a high degree of research- this article is not investment diligence or investment advice in any form.