What’s Different in the Oregon Labor Market?

Tim Duy takes a look at the labor force participation issue and notes some interesting differences between Oregon (blue line in the graph) and the US (red line):

I recently came across data for Oregon’s labor force participation rate.  The data is compiled by the Oregon Department of Labor, but I don’t believe it is published anywhere.  I tried to derive it once, but could not find monthly data on Oregon’s working age population.  I was fortunate enough to learn of this data via Brent Hunsberger, a reporter with The Oregonian, who passed it on to me this week.

The data speaks to the debate regarding the usefulness of the labor force participation rates as an indicator of labor market health – see my thoughts here and James Hamilton’s here.  To me this data raises more questions than it answers.  A look at the data:

Oregon’s LFP rate follows the general US trend, a steady decade’s long increase, a plateau in the late 1990s, and a general decline beginning, for Oregon, at the end of 2000.  What is surprising is the steepness of the decline in Oregon’s LFP rate!  On average, between 1976 and 2000, Oregon’s FLP rate was, 1.7 percentage points higher than the US.  Over the past five years, however, that gap has steadily narrowed and the rates have converged.

I suspect that we can tell a cyclical story for Oregon – indeed, the cyclical story I cautioned against applying to the US as a whole.  For a period, Oregon suffered from the highest unemployment rate in the nation during the last downturn, peaking at 8.5% in June 2003.  It is likely that the weak job market drove a substantial number of workers out of the labor force, and perhaps out of the state altogether.  And, arguably, the labor market recovery since mid-2003 has not been strong enough to lure many back into the labor force.  Moreover, the lower than normal LFP rate for Oregon could explain why I hear from so many employers complaining that they can’t find workers.

Still, I am not completely happy with this explanation.  During the early 1980’s, Oregon experienced a deep recession that, again, exceeded the national average – the unemployment rate climbed to 12.1% in November 1982 (the national peak was 10.8%).  But during the early 1980’s the Oregon LFP rate rose and exceed the national figure by as much as 2.8%.  So it doesn’t seem that the same dynamics are at play in these two episodes.  Demographics are likely exerting some force as well.  Perhaps there has been an influx of retirees into Oregon in the past five years. Unfortunately, I don’t have the Oregon LFP rates by age or sex.  It would be nice to have state level discouraged worker data as well. 

The data does suggest a possible approach to disentangling the structural versus cyclical forces.  If LFP rates exist for all 50 states, it might be possible to identify the cyclical influences via differences in state economies.