
The pandemic has led to more people spending their money in suburbs than in the downtown area.
Elaine Thompson / OPB
The pandemic has changed the way we think of work and school drastically, but it has also changed the way we spend our time and money. In a blog post, Josh Lehner with the Oregon Office of Economic Analysis found that Portland’s economy is trailing behind the rest of the state. He notes more people are choosing to spend their money and dine in the suburbs, not downtown. We’ll hear from Lehner on how the pandemic has changed the way we spend our money and the future of Portland’s downtown.
The following transcript was computer generated and edited by a volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. After the great recession, the Portland metro area led the state in the recovery. In fact it led most of the country in terms of job growth, household income gains and increases in educational attainment. But now, almost two years into the pandemic, Portland’s recovery is actually behind the rest of the state. So what happened and what does it mean? Josh Lehner wrote about this a few days ago. He is an economist with the state of Oregon and he joins us to talk about it. Josh, welcome back.
Josh Lehner: Thanks Dave. Great to be here.
Miller: Let’s start with the title of your blog post: “What is Wrong With Portland?” So, what is wrong with Portland?
Lehner: I think we need to separate a couple of things here. I think there’s no question – there’s been polling, there’s been surveys done – that the public perception of the region is down noticeably at best. There’s a difference though between the public perception and the underlying economic performance; there we’re doing okay. We’re in the middle of the pack for big cities, but big cities are trailing this recovery because the pandemic’s different. The impacts of the pandemic are different depending upon where you live.
Miller: So are we solely talking about leisure and hospitality in Portland versus the Portland suburbs and the rest of the state? Are we simply talking about the fact that fewer people in Portland, on average, are going out to restaurants and bars?
Lehner: That’s certainly the biggest piece of it. Typically cities thrive on in-person interactions. You’ve got a lot of commuters coming into the urban core, to downtown. They’re working, they’re going to coffee shops, they’re doing that last-minute window shopping on their way home because they forgot their anniversary gift – all that sort of stuff. When you’re working from home to a greater degree means you’re downtown less and spending less. That’s certainly part of it. And business travel is just now starting to pick back up, so that means there’s fewer people flying in from elsewhere around the country or the globe to do business in the local economy. So that has a direct impact on employment at bars, restaurants, hotels, convention centers and that sort of thing. So I think, absolutely, that lack of in-person activity is by far the biggest component here.
Miller: As an economist, your stock-in-trade is finding data that can tell you a meaningful story. I was struck that one of the graphs you chose to look into as a kind of proxy for something is proceeds from video lottery terminals. What do those tell you?
Lehner: Well, frankly, video lottery spending – this is a measure of how much money we’re plugging into those machines in the 2,000 bars and restaurants scattered across the state. It’s really the best real-time data we have on consumer spending. Now, it’s not necessarily indicative of all types of spending. It is gaming at a bar or a restaurant or a deli, for the most part. So it’s not necessarily totally generalizable to the entire economy, but we get it every single week, by establishment, across the state. So it’s something we can dig into, and there we’ve seen good numbers coming out of downtown Portland. Not as strong as the suburbs or not as strong as the rest of the state, but the amount of money being spent in video lottery in the urban core of Portland is 100% recovered today.
Miller: It’s just that in suburban Portland and the rest of the state, it’s more than recovered.
Lehner: Exactly. It’s up 20-30 percent in most places around the state. Therefore, a full recovery in downtown from a dollar amount still trails what we see in the suburban markets.
Miller: Is it possible to look at that video lottery terminal data as a way to see that, in general, people in Oregon… I mean, as proof of what you’ve been telling us before and that we’ve heard, that because – especially because – of federal boosts, people actually, on average, have more money to spend?
Lehner: Absolutely. I think that for the specific numbers on video lottery or any spending, it’s about that income. We just got 2020 census data, 2020 American community survey data. And what it showed was incomes were up last year and poverty was down, despite the pandemic, despite the severe recession because that federal aid more than offset those economic-related income losses.
Miller: I want to dig deeper and something you mentioned at the beginning. And you provide this context in your blog post, that what we’re seeing with Portland not doing as well so far in the recovery as outlying areas… that it’s not an Oregon-specific thing. This is basically the case in all the major cities around the country, that they’re trailing their smaller urban and rural counterparts. But the fact is that, while Portland used to be doing better than most large cities economically – and it did so over the last 10 years or so – now we’re right in the middle of the pack. You say this is a sign of good news and bad news. Give us the positive case first.
Lehner: The positive case is what we talked about at the beginning. Despite the public perception, despite leading the national news for a place where protests turned violent and we have white supremacists marching in our streets and the president said we’ve been burning for decades, despite all of those issues, we’re average. That seems to be a pretty good starting economic vantage point. And the other part would be [that] typically Oregon and Portland’s economy were more volatile than much of the rest of the country. So we fall further in recession, we grow faster in an expansion. So, when you put the entire business cycle together, we come out ahead. Well right now we’re just in that initial stage of recovery. So we’ve seen the recession. We were a little bit worse than the rest of the country. Now, we’re starting to grow a little bit faster as we’re coming out. So we’re still kind of in that middle of the pack. I think five years from now will be the real telling point of exactly how fast we grow. That’s the positive spin.
Miller: Okay, what about the glass-is-half-empty version?
Lehner: The glass-is-half-empty is the fact that we have what have been identified as some peer comparison metro’s around the country: places like Austin and Salt Lake City and Seattle, Indianapolis and Nashville. These are research-based peer comparisons, research done by ECONorthwest and for the Portland Business Alliance. If we look at Portland compared to these comparison areas, we trail every single one of them. We’re average; we’re in the middle of the pack for the entire country. But compared to some of these highest flyers that we typically would include ourselves in, we’re behind all of them at least today.
Miller: If I understood a pretty complicated graph correctly, it’s that in 2020 people in Multnomah County had a bigger drop in wages – money they got for doing jobs – than their counterparts in other urban counties. But, this is in 2020, but had a bigger overall increase in income. First of all, did I understand that correctly?
Lehner: You did. Yes. We saw larger local losses in the economy, but then the total incomes were up a little bit stronger.
Miller: So, is that another way to say that people in Multnomah County got more federal stimulus money or more unemployment benefits, more money from the government than people in other urban counties?
Lehner: At least certainly more than most other urban counties, not every single one. But yes, absolutely. That’s the biggest difference; there would be the recovery rebates, the enhanced unemployment insurance benefits, then there’s smaller stuff like rental assistance and student loan deferrals and all this sort of other stuff that works to boost household financial situations.
Miller: How do you explain that?
Lehner: Well, I think it’s relatively easy, is that we had a 10% hole in the economy at the national level; the pandemic blew a massive 10% hole in the economy. And then federal policy has filled it with 25% of GDP worth of federal aid. Right? So we had a big hole, but then the federal policy more than filled it. Then, specifically to Multnomah County, you see that same sort of pattern, where the job losses were larger but then the unemployment insurance benefits, which on average paid 100% wage replacement, filled the gap. And then everybody got the recovery rebates on top of it.
Miller: What does the longer-term economic outlook look like to you for the Portland metro region right now? Everything we’re talking about is based on 2020 data, but what does it look like for the coming years?
Lehner: I think, in the short term, the economic recovery is going to continue to be about us spending money, and in particular spending money going out to eat and on vacations and getting our routine dentist appointments done again. We can see it in the data; we’re not all doing that. So just getting back to some of those things that we used to do, that’s going to drive the short term growth. Longer term growth is all about how many workers you have in your economy and then how productive each worker is. We expect Oregon and Portland to see above average growth – at worst – and potentially the exceptional growth again that we saw last decades economic expansion.
Miller: Finally, the last time you were on was when inflation was just starting to become a major national story. And at that point you had told us that it didn’t really seem that the Portland or Oregon picture was particularly special, that this was really a national story and a national issue. Is that still the case?
Lehner: It is. These pressures on used car prices and hotels and gas prices and all that sort of stuff, these are national and international phenomena. They’re not Oregon specific. We just got the latest numbers this morning for November; inflation is up 6.8%, which, on the national level on a year over year basis, that’s the highest we’ve seen since the early 1980s.
Miller: And what’s your best understanding, based on the data you’re looking at, for when it might start to ease?
Lehner: Chairman Powell, the chairman of the Federal Reserve, when he was in front of Congress a few weeks back, he said we’re expecting to see this certainly persist into the middle of next year. And for that reason, the Federal Reserve is now talking about and accelerating their tapering, they’re going to raise interest rates a little bit sooner than they had initially thought. So they have accelerated their monetary policy tightening to try and head off some of this inflation before it really starts to broaden out further and become more entrenched in the overall economy.
Miller: Josh, thanks very much.
Lehner: Thanks Dave.
Miller: Josh Lehner is an economist with the state of Oregon.
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