Who Took Our Jobs?

Oregon's unemployment is at the top of the charts—again. Here's why.

If you lived in Nebraska, you'd probably have a job.

Sure, Oregon is progressive and green and trendy and filled with magic bicycles that cause The New York Times to spontaneously orgasm. But our unemployment rate is twice that of the Cornhusker State. With 11.5 percent of Oregonians out of work, we regularly rank in the bottom five states in the country, sharing the dubious distinction with every backward flyover state we love to mock: Ohio, Arkansas, Mississippi, Alabama. Heck, in Alabama, Nissan and Honda reportedly had to use "pictorials" to train new hires at their assembly plants. This means we rank worse than a state where workers don't know how to read.

Portland isn't any better. Sure, this city is filled with young creatives and was just named one of the Huffington Post's 10 smartest cities. But we have more joblessness than hardscrabble Trenton, N.J., or Lansing, Mich. Our unemployment rate more than doubles that of coal-mining Morgantown, W.V.

Our dilemma isn't new. Every time the nation has felt employment pain, Portland and Oregon have felt it worse. At the nadir of the most recent economic collapse, Oregon ranked second for joblessness in the country—only Michigan's failing auto industry kept us from seizing the top spot. During the recession of the 1980s, we actually were No. 1.

The only thing more consistent than our high unemployment rates (see chart, page 17) has been the parade of elected officials promising to do something about it. During the eight years he was governor, Democrat John Kitzhaber warned of a need to attract new business and pledged to "develop a strategic plan to direct some of that development away from high-growth areas and into those areas that desperately need jobs and a more diversified economic base."

Not long after he said that, as the Oregon Business Plan was launched, Oregon spent three years as the most unemployed state in the nation.

But you're not interested in politicians' empty promises. You have a more fundamental question: Why can't you get a job?

Studying unemployment figures in Oregon is like being a homicide detective in Baltimore—there's no lack of casework. The problem is, how to piece together so much evidence.

There's no shortage of theories why our unemployment is always among the nation's highest. Some argue Oregon's comparatively high $8.40-an-hour minimum wage (only Washington's is higher) reduces jobs; others think it stimulates spending and creates more jobs. Some suggest our workforce isn't educated enough, and blame expensive tuition at state colleges. Others say the Legislature is killing jobs by permanently raising taxes on corporations and personal income taxes on the wealthiest Oregonians—these two controversial tax measures just ended up on next January's statewide ballot. Some even think "unemployed" Oregonians actually have jobs, but on the black market: After all, the state's employment rolls do not include sex workers or weed dealers.

(LEFT) BAD NEWS BEARER: Art Ayre announces the latest Oregon unemployment rate—11.5 percent—on Monday morning. (RIGHT) A TREE GROWS OUTSIDE PORTLAND: Jeff Stone believes nursery farmers will rebound. "These are hearty men and women," he says. PHOTOS: CameronBrowne.com

Art Ayre urgently wants to figure this all out. Every month, Ayre, Oregon's employment economist, drives from Salem to a podium in Tualatin and tells the gathered reporters there aren't enough jobs.

He hates this part of his job.

"Every time I go up there and deliver the bad news, I feel a certain kind of responsibility for it," Ayre says. "I imagine it feels like delivering news in wartime that you've lost a son or daughter. There's a lot of what I guess you'd call secondary trauma."

For the past two months, Ayre has been at work on a pet project: a report, titled "What's Different About Oregon?," that tries to explain the state's consistently wretched job numbers. The report hasn't been published, but Ayre was willing to share portions of it with WW.

It's complicated, says Ayre, a 53-year-old Alaskan who tries to relieve stress by reading (his current choice is the natural-history book Why Big Fierce Animals Are Rare). "It's not like Michigan. You can't look at the automotive sector and say, 'That's it.' You have to look around at a lot of different factors."

As WW reviewed Ayre's report, talked to other statisticians and crunched our own numbers, we kept running into four problems unique to Oregon. In the Case of Oregon's Missing Jobs, these are the suspects.

Theory No. 1:

We Make Things People Don’t Have to Buy

If you want to understand Oregon high unemployment, it's not a bad idea to look at the hulking shell that was once the Sauer-Danfoss plant in Hillsboro.

Sauer-Danfoss, which is headquartered in Illinois, made valves. Directional control valves, hitch control and rock shaft valves, PVG load independent spool valves—a real medley of valves. It's likely you do not know what these valves do, and even more likely that you don't care. What they do, for the record, is control the hydraulic power flow of cranes, tractors and road-paving machines. What they also did was provide 180 jobs in Washington County—until Sauer-Danfoss shut down the plant in January, shrinking its operations down to a South Carolina location.

That Hillsboro factory was like so many others in Oregon: It built things you will never buy. In fact, a lot of Oregon's workforce is tied to making items that don't go directly to store shelves. Freightliner makes heavy trucks, Esco makes forgings for industrial machinery, Precision Castparts makes titanium bits that go into jets. Intel, the state's largest for-profit private employer, makes microprocessors.

The state's manufacturing is unusually weighted toward durable goods—items that are sold to other companies, as opposed to consumer goods that are sold directly to customers. More than 8 percent of the 198,400 manufacturing workers Oregon employed before the downturn were making durable goods. That's 34 percent higher than the national proportion.

Employees in these sectors often make good money, but there is one huge drawback to manufacturing durable goods: It's a cyclical industry. That means it's the first to grow with a prosperous economy, and it gets hit first and hardest in a downturn.

"We're on the back of the production line," Ayre says, "and we're the ones who tend to lose orders when we go into a downturn. Companies say, 'I've already got inventory. I don't know when this thing is going to bottom out. I'm going to hold out until I need to order more.'"

Durable items, as you might guess from their name, can sit around in inventory for a long time. The minute the economy goes south, demand dries up for anything a company might have a surplus of. People still buy toothpaste and toilet paper, but grocers don't order any more Freightliner trucks. Sure, Microsoft and Intel both sell fewer units of software to computer shoppers, but Intel sells even fewer microprocessors to computer companies.

University of Oregon economics professor Tim Duy calls Oregon's dependence on durable goods "a historical accident…. The world would be a different place if Intel had moved their operating facility to Seattle and Bill Gates had put his headquarters in Portland."

Over the course of 2008, Oregon lost 17.6 percent of its durable-goods jobs. That's 3 points higher than the percentage lost nationwide—and remember, the rest of the nation already wasn't so dependent on those jobs.

And two weeks after the Sauer-Danfoss plant shut down, there was an announcement from another Hillsboro durable-goods company—one you have heard of. Intel laid off 1,000 workers.

Theory No. 2:

We Depend on Flowers and Trees

Oh, you think you know what this is about: The same old sob story about laid-off loggers.To some degree, you're right. Wood-products jobs are down, and have been ravaged by the crash of the housing boom. But logging and the making of new windows and doors are actually a much smaller fraction of the state's job market since the 1980s, when their decline helped push the state to the top of the unemployment charts.

No, Oregon relies on its flora for more than lumber. Just ask Jeff Stone.

"A little-known fact is that Oregon is the second-largest nursery state in the country," says Stone, government relations director for the Oregon Association of Nurseries.

"We don't really boast about our size," continues Stone, who then goes on to boast about exactly that, noting that Oregon exports 80 percent of its nursery crops—rhododendrons, Japanese maples and all kinds of conifers—out of state, and half east of the Mississippi River. "We're the largest shade-tree grower in the country. We grow azaleas. If you think of woody plants, that's us."

But nursery crops, like lumber, are cyclical. No new houses means no new yards—and no new azaleas or shade trees. In 2008, the state lost more than 2,000 of its 12,000 nursery jobs.

Making matters worse, most of these crops aren't annual, so they can't turn on a dime. "A lot of these guys are planning for five or seven years from now," Stone says. "It's not like a jet boat. It takes time to grow. We're being faced with decisions of planting vs. keeping all my employees."

Even the state's most reliable crops are nearing trouble. Stone welcomes the distraction of the annual Christmas tree harvest—Oregon ranks first in that market. "It is chainsaws and helicopters, man," he says. "It is freaking awesome."

But while Christmas tree sales actually rose last year (people are more likely to buy them when the economy is bad, as a Yuletide pick-me-up), the prices were down, and so were the jobs. North Carolina fir tree growers have used that state's low hourly minimum wage ($7.25 to Oregon's $8.40) to undercut Oregon's prices.

"That has turned out to be a pretty big blood sport, Oregon vs. North Carolina," Stone says. And growers fear that if the economy stays down, people will start buying artificial trees. "The storm clouds on the horizon are the plastic Christmas trees," Stone says.

Not every agriculture sector has been harmed. Oregon's farmers of crops like wheat and fruit still need workers. But that's a mixed blessing, statistically—those jobs are mostly seasonal, dropping from 80,000 each July to 45,000 each January. Get a job picking Royal Anne cherries and you're probably on the unemployment rolls for some part of the year.

And dig this: Art Ayre says early evidence supports his theory that Oregon is moving away from manual-labor produce—"the strawberry fields are not nearly as common as they were"—to machine-harvested crops, like wheat. That means when the job market shrinks, people can't head back to the farm like they did in the '80s, "shifting the job loss onto the migrant-labor pool." In other words, illegal immigrants didn't take our jobs: We eliminated their jobs, and now we can't take them back.

Theory No. 3:

The World Stopped Buying Everything We Ship

(LEFT) GONE TO POTASH: The Port of Portland's Terminal 5 receives bulk minerals from Saskatoon trains. (RIGHT) FERTILE CRESCENT: The potash storage facility is heavily guarded to prevent sabotage by water or plant seeds. "If you get seeds in there," says Josh Thomas, "they will grow." PHOTOS: Courtesy of Port of Portland

Oregon's jobs depend on selling things overseas. We have a larger share of export-supported employment than all but four other states: Washington, Kansas, South Carolina and Vermont.

If you have any doubt about what this means, take a drive out to the Port of Portland's Terminal 5. Sitting 11 miles northwest of Portland on the north bank of the Willamette River, it's among the largest wooden structures of any kind west of the Mississippi.

It stores potash—a potassium-rich mineral used to make fertilizer. Potash is mined outside Saskatoon, Saskatchewan, and transported by train to Portland, where it is loaded onto ships bound for Japan, Brazil and South Korea. Along with soda ash, it's the reason Portland is the largest mineral bulk port on the West Coast. (Portland is also the biggest wheat export hub in the United States, but the state's No. 1 export is computers and electronics.)

The potash business was terrific in 2008—historically good. The Port shipped 5.46 million tons of bulk minerals last year. But this year, we are on track to export less than half that much.

"You had your feast years and now you have your famine years," says Port spokesman Josh Thomas.

All those tons of minerals are only a tiny sliver of the problem. Oregon's overall foreign exports have dropped by 33 percent over the past year, the ninth-worst plunge in the country.

Demand for everything Oregon ships (with the sole exception of petroleum products) has ceased from pretty much everywhere on the globe. Shipments to South Korea—Oregon's fifth-largest trade partner—are down by 59 percent. That's nothing compared with the Philippines and Mexico, which were our eighth- and ninth-largest export destinations until they fell by 71 and 77 percent, respectively. "It's pretty much Intel's products," Oregon economic development division manager Karen Goddin says of those two drop-offs. "Now that production's been shut down and shifted to China."

(China: That's the one country that still wants to do business with us. Exports to the Commies' riotous free market went up by 24 percent at the same time other trade partners "dropped off a cliff," in the words of Oregon's ports manager, David Harlan. Chinese exports brought Oregon over a billion dollars between January and June of this year, with demand for chemical manufacturing increasing by 73 percent and shipments of waste and scrap up by 115 percent.)

The formula for translating lost shipping into lost jobs is simple: 10 jobs for every million dollars of annual export sales lost. Oregon has lost $6.5 billion in a year. That's an estimated 65,000 jobs connected to shipping—all lost at sea.

Theory No. 4:

The Damn Kids Won’t Stop Moving Here

It's true. College-educated young people flock into this state, even though they know perfectly well there's no work.

"People keep moving here," says Joe Cortright, a consultant who heads Portland-based Impresa Economics.

Migration-flow studies by the Pew Research Center show Oregon is a magnet state—58.2 percent of residents were born someplace else. A Wall Street Journal report that featured WW's own semi-employed music scribe Matt Singer showed that from 2005 to 2007, more college grads moved to Portland than all but eight other cities in the country. Cortright says the trend has continued, even with our economy floundering: Last year, "Oregon had one of the highest rates of inbound United Van Lines." Those are moving vans, headed to Portland.

While this migration spikes our unemployment rate, it is arguably a good sign.

Ethan Seltzer, an urban studies and planning professor at Portland State University, gets a little combative when talking about this. "Unemployment's real low in North Dakota," he says. "But let's say for the sake of argument that Willamette Week folds. Are you going to North Dakota? Why isn't Willamette Week opening a sister publication in Fargo? It could be that nobody wants to be there."

So maybe the state's small quantity of work has something to do with why Oregonians rank sixth in the country in satisfaction with the quality of their work, according to a Gallup survey. And Cortright says Oregon's best shot for recovery is new ideas fermenting among the state's latest arrivals. "This is not an original thought," he says. "This is what Jane Jacobs"—the famed city planner—"said decades ago."

Duy warns that Portland's newbies shouldn't be too self-satisfied. "You come here and you stay underemployed for three or four years, businesses won't look at you," he says. "They'll look at the new college graduates. Skills deteriorate without use. Just try doing math for the first time after four years."

What does any of this have to do with your job woes if you don't grow azalea bushes, make valves or work on the docks and you didn't move here in the past four years?

Because you live in Oregon, and this is how Oregon works. The backbone of this state's economy is manufacturing, agriculture and the exports they create. As more people move into Portland every day, we're all piggybacking that much more on those mainstay industries, which sustain our own jobs.

Every time a bushel of wheat isn't shipped out of the Port of Portland, a barista cries. Or she should.

But there's a good chance she doesn't know that. Oregon has become two states—divided not by politics or even location, but by the kind of work we do. On one side, longtime residents plug away in industries extremely vulnerable to any shift in global fortunes. On the other side, people keep coming to live in Portland, thinking it looks cool. In the past 10 years, 250,000 new residents have settled in Portland's metro area, and, statistically speaking, the city hasn't added a single job. Not one.

"Here's what I'm worried about," says Duy. "Portland's a very nice city. But I'm worried that we're creating a city that is good for 20 percent of the population—the creative class—and throws the other 80 percent of the population under the bus."

Some of this is impossible to solve. "I don't see anything that we could change that would make a difference," Ayre says. "Our unemployment at the best of times will be middling."

KITZHABER: The ex-governor, running in 2010 for his old job, says Oregon still depends too much on durable-goods manufacturing. PHOTO: Darryl James

There are some things Oregon's leaders can do—and with gubernatorial and legislative elections coming up next year, it's time to ask some hard questions. We should not allow candidates to get away with bromides like Kitzhaber's online pledge to "develop the jobs of the future…and enhance Oregon's ability to compete globally." (Kitzhaber told WW the state should continue to follow the Oregon Business Plan. "I think forest services could be a sunrise in Oregon," he added. "There's an emerging biomass energy technology that dovetails with timber.")

Nor should we assume that the answer is a glamorous gimmick—our leaders have pissed themselves over solar energy and ethanol before. "I'm always wary of specific industries as our next future," Duy says. "I'm not looking for the guy to pave the way for the next fad. I'm looking for the guy to pave the way for the next Bill Gates."

Attracting that next big job creator depends a lot on serendipity. Phil Knight didn't give Oregon a Fortune 500 company, Nike, because of our proximity to cheap Asian sneakers—he did it because he went to the University of Oregon. Bill Gates grew up in Seattle—and then he put Microsoft there.

But we won't be ready for good luck if Portland doesn't partner with the rest of the state on infrastructure and education: Tasks as overdue as replacing the Sellwood Bridge and as unpopular as challenging the teacher unions that, by leaving educators undercompensated and overprotected, allow our classrooms to remain second rate from kindergarten to college. As you sit in Portland sipping your fair-trade coffee, your hope of getting hired tomorrow depends on the whole state rethinking how it functions.

"You can only wait tables for so long," Duy says of Portlanders. "They need to turn to City Hall and the power structure and say, 'You've created a great environment for me at 22. What are you going to do to create an environment for me at 35 with a family?'"

If Portland really wants to be the smartest city in America, it's time for its big brains to concentrate on getting the entire state working.

Otherwise…well, they're hiring in Nebraska.

Three Decades Of Joblessness In Oregon

Governors: Victor T. Atiyeh (R) : 1979-1987 Neil Goldschmidt (D): 1987-1991 Barbara Roberts (D): 1991-1995 John Kitzhaber (D): 1995-2003 Ted Kulongoski (D): 2003-Present

Year Unemployment Rate National Ranking
1979 6.7 9
1980 8.4 6
1981 9.8 3
1982 11.6 8
1983 10.9 13
1984 9.4 7
1985 8.7 9
1986 8 16
1987 6.3 21
1988 5.8 20
1989 5.4 20
1990 5.4 23
1991 6.4 26
1992 7.3 19
1993 6.9 18
1994 5.5 23
1995 4.9 29
1996 5.6 12
1997 5.6 9
1998 5.7 5
1999 5.5 4
2000 5.1 4
2001 6.4 1
2002 7.6 1
2003 8.1 1
2004 7.3 2
2005 6.2 6
2006 5.3 7
2007 5.1 9
2008 6.4 10
2009 11.5 3

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