The Collected Thoughts and Musings of an Aspiring Political Philosopher

Monday, March 16, 2009

Lack of economic diversification is killing states

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Oregon unemployment hit 10.8% for February, a full percentage point above last month. It was less than 6% last June. It's jumped 3% JUST SINCE DECEMBER. And although I can't find info on the Portland-Vancouver Metro area for February, in January it was 9.1%, and it'll probably show more than 10% for February when the numbers come out.

I should know, I've been looking for work in the Portland area since September, and Julie has been since October. Nada, unless we want to flip burgers or stand on a corner in a funny suit holding a sign (not that we haven't considered the lucrative nature of these pursuits, however I would probably get tossed for constantly providing my own recipe hints to the restaurant manager, and although Julie likes stuffed animals, she'd prefer not being the stuffing).

By contrast, Colorado (we're moving to Aurora, CO in about two weeks) went from 4.4% last June to 6.6% in January (February's stats aren't available yet). The Denver Metro area is 7.4%, nearly 2% lower than the Portland area.

Towards the bottom of the Forbes article was an interesting tidbit:

"State economists say Colorado is not hurting as bad as some states because it has a diverse economy, meaning fortunes don't rise and fall based on a single industry. Colorado's chief economist, Alexandra Hall, said the state also has been spared the biggest drags on the national economy - manufacturing jobs and the housing collapse. 'Manufacturing has never been the most dominant employer here, and we also didn't suffer the overbuilding we saw in California and other places,' Hall said."

This makes a case for diversification of a state's economy all right. Mississippi and other Southern states relied on cotton for the textile industries. When textiles went overseas, it brought the entire Southern economy to its knees. Oregon and other states have relied on IT, software, and silicon manufacturing industries for their economic base, and when things went in the toilet during the DotCom Crash in the early 2000's, they just rode it out and essentially reformed around the smaller, but still powerful tech industry.

But now that the entire economy is on the skids, and nobody is buying consumer goods (including electronic gizmos that require all those chips and computers and software), states that relied on the tech industry as their economic core are adrift and headed for the rocks, with nobody on board sure of how to steer the ship to safety.

The only answer is what Colorado and other states have done: diversify your economic base. Oregon, Washington, and other "silicon forest" states have made efforts to add new core industries, such as biotech, nanotech, solartech, windtech, healthtech, and more, but they're still in the nascent stages of this and are going to go through a tough time recovering. States that have developed a strong diversification posture not only ensure that on a whole the state's economy can withstand a heavy recession hit, but it helps ensure that even the sectors most effected have a strong government and social infrastructure to rely upon and help keep them afloat during tough times.

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