Release by Josh Lerner,
Office of Economic Analysis,
I don’t know if it’s paternal instincts or not, but I’ve been thinking a lot more about generations and demography lately. I just wanted to share some of graphs our office uses and talk briefly about why this is so important from an economic point of view.
First, a recent PEW report discussed how Millennials are now the largest generation in the U.S., overtaking their parents, the Baby Boomers. The same is generally true here in Oregon as well, although using our definition of generations, Millennials overtook Boomers back in 2008. This is in large part due to Oregon’s strong in-migration trends, which drive the vast majority of our above average population growth rates. In both good times and bad, people move to Oregon and younger adults have higher migration rates than older adults.
Here’s another way to look at the generations in Oregon over time. Two notes. First, the very small dark gray portion in the lower left hand corner of the graph refers to the Lost Generation, born in the late 1800s. Second, given the lack of definitions around Gen Z (iGen, post-Millennials or whichever name demographics settle on) I am simply cutting off their age cohort at 2020 and starting a new one.
More importantly, why does this really matter for Oregon and the economy? Well, it has been said that demography is destiny. Additionally, Mark talked at length in his Destination Oregon speech about how if an aging and retiring population is the issue, then young, working age households are the cure. We have highlighted previously the impact of individuals in their root setting years, generally 25-34 years old. During this time many begin their careers in earnest, get married, buy a house, start a family and the like. Oregon — and our metropolitan areas in particular — have a long history of attracting these types of individuals and households, which is a boon for longer run economic growth. However, even with these strong migration trends, Oregon, much like the nation, is now seeing its working age population decline as a share of the overall population. Now the absolute total number of working age adults continues to increase, but as a relative share of Oregon’s overall population, it has been falling the past few years and will continue to do so over the next decade. This directly feeds into the potential capacity of the economy. Such trends led Bill McBride over at Calculated Risk to say “2% is the new 4%” referring to real GDP growth.
Call it secular stagnation, or whichever term you prefer, but the combination of slower population growth and a relative decline in the working age population directly feeds into our office’s long-run economic and revenue forecasts. We are expecting growth to be slower this decade than in past expansions. However these bigger picture, longer-run trends do not rule out a year or three of relatively robust growth in the near term. 2014 was actually a pretty strong year, even relative to Oregon’s history. There is no reason 2015 and 2016 cannot be just as strong, before the demographics weigh more on the longer-run outlook.
Finally, it is important to note that even with slower job growth moving forward, it does not necessarily mean there will not be enough jobs available. About 60 percent of the job openings this decade, according to the Oregon Employment Department, will be generational or occupational churn. The other 40 percent will be new job openings. So there will/should be enough jobs, even if net growth rates are lower. The generational transition as the Boomers age into their retirement years will be at least a decade long process.