Trade with China key to Oregon economy
The global, national, state and regional economies are slowing. But there is no immediate danger of a recession unless President Donald Trump and Chinese President Xi Jinping fail to at least agree to keep talking about trade at the G20 summit of industrialized nations scheduled for the end of the month.
That was the consensus of economists who spoke at the 2019 Portland-Vancouver region economic forecast presented by Portland State University Northwest Economic Research Center on Thursday, May 30.
"The economic extension will soon reach the 10-year mark and be tied with the longest economic expansion in history. Expansions do not turn into recessions because of old age, but because of bad behavior in the economy," senior center adviser and former Oregon state economist Tom Potiowsky said at the annual forecast, which was held at the Multnomah Athletic Club.
Potiowsky presented charts and graphs that underscored how successfully the seven-county region that includes Portland has recovered from the depths of the Great Recession in 2007. Unemployment is now at record lows and household earnings are increasing faster than the national average, a complete reversal from when the recession hit the region harder than the rest of the country.
"The slowdown that is occurring is natural because we can't continue growing as fast as we have. Employers can't find enough workers," said Potiowsky, whose comments were supported by state economist Mark McMullen and John Tapogna, president of the Portland-based ECONorthwest consulting firm.
Raising the trade warning was Ellen Zentner, the chief U.S. economist for Morgan Stanley, who was the keynote speaker. She agreed economic growth is slow but is likely to continue for the foreseeable future, unless the current U.S. trade dispute with China drags on or escalates. Then, Zentner said, Wall Street investors could panic and trigger a stock market crash that would ripple around the world.
"If we go past the G20 with no progress for weeks or months, the stock market will flip out," said Zentner, talking about the summit scheduled for June 28-29 in Osaka, Japan.
According to Zentner, who worked in the controllers office when George W. Bush was governor of Texas and has held positions with the Bank of Tokyo, Trump is right to confront Xi about such Chinese policies as forced intellectual property transfers. Zentner says Europe supports Trump on that issue, which previous presidents have also tried to change.
But that policy has been central to China's economic growth, Zentner said, and they both will not and cannot change it easily. The risk is that Trump and Xi will continue increasing tariffs if they cannot at least agree to continue negotiating at the summit, slowing trade between both countries even more.
That would have hurt the Portland region more than many other metropolitan areas, Tapogna said.
"Trade is central to this region's DNA and its economy," said Tapogna, noting that many companies in the region trade with China — and so do many agricultural producers in the state who ship their products through the Port of Portland.
"Nike, Intel, Tillamook Cheese, regional wineries, food producers — in the long run, it would not be good news for Oregon if they could not sell their products to China's growing middle class."
McMullen agreed, saying the Oregon economy is two to three times more trade-dependent than the typical state.
Later Thursday, Trump also threatened tariffs on Mexico, prompting stocks to fall.
But if the trade disputes do not escalate or, better yet, are resolved, the regional economy could continue growing for years, although at a slower pace than recently, the economists agreed. Then, the biggest danger would be continued high housing prices that are contributing to the homeless crisis and putting low-income families at risk of homelessness.
"We have 6,000 to 7,000 people that are homeless on any given day, but 56,000 households with over 100,000 people that are spending more than 50 percent of their earnings on housing. They are constantly at the tipping point for episodic homelessness," said Tapogna, repeating one of the findings of an ECONorthwest report on homelessness in the region commissioned by the Oregon Community Foundation.
Visiting speaker Aruna Doddapaneni said public funds to help support public-private affordable housing projects are critical to creating homes that low-income families can afford.
"Without financial support from the jurisdictions, it's hard to make the market work to reach the homeless," said Doddapaneni, who works for BRIDGE, a nonprofit affordable housing developer and landlord in San Diego, overseeing its Southern California and Oregon development activities. She noted the affordable housing bonds approved by Portland and Metro voters.