When John Tapogna, president of the Portland economic consulting firm ECONorthwest, spoke to the Roseburg Area Chamber of Commerce in November, he said the unprecedented growth and record low unemployment Oregon was experiencing had one potential downside: the chance of a recession in 2020.
Although Tapogna acknowledged that economists have a “terrible” track record when it comes to making predictions about a possible recession, he said there was a 1-in-3 chance that the nation will experience one in 2020.
“This is a fascinating time to be discussing the economy, we’re in historic times,” Tapogna said back then. “This is the 11th straight year of economic expansion in Oregon and that’s never happened. We are now in unchartered waters.”
As Oregon’s strong economic engine rode into 2020 — the state’s unemployment rate declined to 3.3% in January, the lowest on comparable records dating back to 1976 — Tapogna lowered his predictions for a possible recession to a 1-in-4 chance, according to media reports.
But that all changed with the outbreak of the coronavirus and its implications not only for our physical health, but the economic health of the state and, also, the nation.
In an interview this week with Mike Rogoway of The Oregonian, Tapogna upped his odds of a recession coming this year to 50-50.
A big reason for the potential economic downturn — workers in China and other Asian countries being quarantined and therefore staying away from work, and the ripple effect that would have on the international supply chain.
“Even if people have money in their pockets, they may not have the new smartphone they want to buy or the new, fancy sneaker because the supply chain can’t create them,” Tapogna said.
Add to that the fear factor, and how that may very well cause consumers to tighten their wallets, and you have the makings for a tight economy, Tapogna said in the interview.
“That uncertainty is playing in every consumer’s mind,” he said. “They are less certain about their wealth at this moment. They are going to think twice before starting a remodeling project or making a substantial investment they might have been confident about two or three weeks ago.”
Bob Whelan, another senior economist with ECONorthwest, generally agreed with Tapogna.
In an interview with Oregon Public Broadcasting, Whelan said while the economic outfall from the Coronavirus is a bit of a moving target, he expects it to slow the local economy.
The biggest initial impact will be felt in the tourism industry with the loss of Asian tourists, Whelan said. That prediction hit close to home this week when delegates from Kuki, Roseburg’s Sister City in Japan, announced they had cancelled their planned annual summer trip here due to travel restrictions put in place in Japan.
Whelan also said we should expect a loss of European tourists due to the double-whammy of a lingering recession there and general nervousness over the Coronavirus.
The outbreak has already impacted airline travel, with Delta Airlines announcing this week that it had scuttled plans for daily flights between Portland and Tokyo due to lessened demand as a result of the Coronavirus. The outbreak also prompted United Airlines to reduce international flights by 20% in April, and domestic flights by 10%.
Whelan also hit at the expected squeeze on the supply chain, which could impact the Oregon economy particularly hard — things could get “terribly bad,” he said — although just how bad and for how long is difficult to predict.
Oregon’s top three export products — integrated circuits, such as parts from Intel; heavy machinery; and agriculture, particularly wheat, could all be affected if the Coronavirus continues to spread here, Whelan said.
The virus is also impacting sales of Oregon-based brands like Columbia Sportswear and Nike overseas. Columbia CEO Tim Boyle said in a news release that China represents 5% of the company’s sales, and with about half of Columbia’s stores in China closed, those sales are certain to drop, he said.
Nike also announced it had closed at least half its stores in China.