Economist: Impacts of COVID-19 create ‘Bizarro World’

The recession accompanying the current COVID-19 pandemic here in Central Oregon is unusual in a number of ways, according to Damon Runberg, regional economist for the Oregon Employment Department.

Runberg offered a presentation entitled “Into Bizarro World” at the December 9 City Council workshop.

Runberg’s comparison of the 2008-09 Great Recession and the 2020 recession, which he calls the Great Lockdown, highlighted two totally different patterns, with the Great Recession including the bursting of the housing bubble in Central Oregon. There were two years of job losses, staying at the bottom for months, with essentially two years of recovery.

According to Runberg, most recessions don’t look or feel like the last nine or 10 months as experienced here in Central Oregon. Instead of sitting at the bottom of a U-shaped curve for a long time, the economy this time has resembled a V-shape, with Deschutes County registering a 17.7 percent job loss in the one month of April 2020, rapidly recovering starting in June, and leveling off some in October.

“A COVID surge and public-health restrictions will likely lead to a moderate W-shaped recovery,” said Runberg. “We’re going to see losses again, but the backsliding won’t be down to what we saw before, not even close.”

He estimated roughly 50,000 jobs would be susceptible to temporary layoff due to another freeze and “extreme risk” public health designations.

In the Great Recession, the most impacted industry was construction, because of the deflated housing bubble. In 2020, construction is the least impacted industry. In 2008-09, the least impacted sector was leisure and hospitality and in 2020 it is the most impacted.

In most recessions, male employees are more impacted by unemployment, but in 2020 the heaviest impact has been on women. There is a high concentration of women in fields hard hit by shutdowns, including healthcare and food prep. School closures have necessitated more women stay home to care for and teach children. The burden has fallen on more women to care for those who are sick at home as well.

Runberg pointed out that preceding the Great Lockdown here in Central Oregon there was no structural weakness in our economy. People wanted to live here. Businesses were thriving.

“The rapid drop in the economy was simply a result of the pandemic shock, not a reflection of an underlying weakness in our local economy or even our national economy. That lack of prior weakness explains the robustness of the recovery,” he said.

Because of heavy reliance on tourism, Sunriver and Sisters were the hardest-hit towns in Deschutes County. Sunriver led the decline in jobs with a loss of 35.6 percent, followed by Sisters at 17.2 percent, Bend 13.0 percent, La Pine 8.7 percent, and Redmond with the least at 6.6 percent.

In Sisters that equates to 390 jobs lost in April 2020, or one-in-five jobs shed through June, compared to last year. After June and into the fall there has been good recovery, with jobs down by only 10 percent year over year. Sisters unemployment numbers are generally one percent higher than the county.

Of the 390 jobs lost in Sisters, the vast majority, or 175, were in the accommodations/food services sector, 59 in retail, and 57 in arts and entertainment. Those areas were specifically targeted in the stay-at-home orders. Non-essential healthcare and social assistance lost 38 jobs, but have mostly rebounded while other services lost 26 jobs. Several sectors actually showed growth including manufacturing, which is becoming increasingly important in Sisters. The number of construction jobs also grew. The technical/professional sector grew due to those who have the ability to work from home.

Businesses in Sisters were more impacted than the individual employees who live in Sisters and work here or elsewhere. In April, 223 residents of Sisters were unemployed, but 390 Sisters jobs disappeared. People commute into Sisters to work, so those 390 jobs lost reflect employees both from Sisters and outside of Sisters. Through October 2020, only 84 Sisters residents were unemployed.

People who can least afford to be laid off have been the hardest hit by the Great Lockdown. As of October 2020, layoffs due to the freeze have disproportionately impacted lower-wage workers.

“The trajectory of the recovery has been impressive,” Runberg opined, “but the rise in permanent layoffs is concerning.”

The more permanent job losses there are, the longer the recovery will take. If someone is only temporarily laid off, they can immediately return to work when called. If a person is permanently laid off, it takes time to apply and interview to find another job, do background checks, and actually begin receiving a paycheck.

The Deschutes County housing market in the third quarter of 2020 reflected the skyrocketing sales prices of the few homes on the market. According to Runberg, recently there were only 18 houses in Deschutes County listed for sale below a half-million dollars. Sales prices rose 9.9 percent in the third quarter over the second quarter. The home value index only rose 5.2 percent, which is a modest amount for Central Oregon.

The low supply/high demand for housing is due not only to the influx of people into Central Oregon, but also people are not leaving Central Oregon at the same rate as in the past. Normally, some older people retire to the desert southwest, and people leave Central Oregon for work in the big city in order to find better job opportunities.

“Because of the Zoom effect, we don’t have people leaving Central Oregon for job opportunities. People aren’t uprooting during the pandemic,” Runberg explained.

Runberg’s forecast is for housing to loosen up, with more homes on the market by summer 2021.

The economic recovery is closely tied to the course of the public health crisis and the rapid availability of the vaccines. Runberg thinks we are in the worst part of the pandemic right now.

“We are sitting on the precipice of turning the corner pretty aggressively,” he said.