This morning, the Oregon Bureau of Economic Analysis released the latest quarterly economic and income forecasts. For the full document, slides and forecast data please see our main website. Below is the summary of the forecast and a copy of our presentation slides.
The economic outlook remains good. High household incomes, significantly boosted by federal aid during the pandemic, are the underlying driver. Consumers have no shortage of firepower if they want to and feel secure enough to spend. The key to the outlook remains to translate this firepower into real consumer spending, especially in hard-hit service industries. Today, companies are trying to recruit as quickly as possible to meet this growing demand. The actual number of jobs created this year will be the highest on record in Oregon. The state’s labor market is now expected to regain all of its lost jobs by next summer, a quarter earlier than in the previous forecast.
Although this dynamic remains intact, the risks are tilted to the downside. Growth in an economy constrained by supply is a challenge. Businesses grapple with supply chains and a tight labor market. Wages are rising rapidly to attract and retain workers. Prices rise as demand continues to exceed supply. On top of that, the current delta wave of the pandemic complicates the near-term outlook. What matters most economically are downtime. A slight decline in consumer spending in a few categories will not lead to massive layoffs. On the contrary, any slowdown in spending today will likely turn into larger gains in the coming quarters.
This cycle is different. The current recovery will be faster, more comprehensive and more inclusive than recent experiences from technology and real estate bubbles. As some of the challenges specific to the pandemic recede, the underlying economy is on a solid footing due to strong corporate and household balance sheets.
In September of odd-numbered years, the revenue forecast closes the biennium ended June 30e. Currently, the session-closing forecast is calculated by incorporating any changes in tax legislation made during the legislative session into the outlook for May 2021. This sets the bar for the balanced budget requirement of Oregon and its unique kicker law. Changes to tax legislation were relatively minor during the 2021 session, with a net revenue impact of – $ 3.6 million from General Fund resources during the 2021-2023 budget period.
The September forecast also reveals where revenue landed in the previous budget period. In a typical year, there are few surprises, as tax collections are relatively low at the start of summer. This year was different. Due to a delayed tax filing deadline, great uncertainty remained after the May forecast. When the forecast was made, the peak tax season had just started.
At the end of the fiscal year, the 2021 tax season turned out to be very important. Personal income tax, corporate income tax, lottery sales and the new tax on corporate activities have all increased. Recent personal income tax withholding is up 17% from last year. Payments during tax season have also been significant, primarily due to collections from high income taxpayers. A personal income tax credit of $ 1.9 billion is expected for tax year 2021. The median taxpayer can expect to receive a credit of $ 420, while the average is estimated at $ 850.
The strong revenue growth seen in the 2019-21 biennium brought an end to a decade of unprecedented revenue expansion for the Oregon General Fund. Over the past decade, General Fund revenues have nearly doubled from about $ 12 billion annually to about $ 24 billion. Over the decade as a whole, stimulus payments amounted to $ 2.6 billion, reducing the cumulative resources of the General Fund by 2.6%. In the past biennium, stimulus payments reduced the growth of the General Fund to half. Going forward, the current $ 1.9 billion kicker will also reduce 2021-2023 revenue.
See our full site for all forecast details. Our presentation slides for the release of the forecast to the Legislature are below.