The Oregon Biz Report - Business News from Oregon

Fast Fact: Total US debt = $450,000 per family

“Estimates for what the government is willing to spend on bailouts and stimulus efforts for this year reach as much as $7.7 trillion according to Bloomberg.com — a full half of the United States’ yearly economic output…That trillion-dollar figure is the tip of the iceberg when it comes to checks written by the federal government that it can’t cash. Former U.S. Comptroller General David Walker puts our nation’s total debt and unpaid promises, like Social Security, at roughly $52 trillion — an invisible mortgage of $450,000 on every American household. .”
Texas Governor Rick Perry

Hospitals react to Governor’s 4% hospital tax

Andy Davidson, president & CEO
Oregon Assoc. of Hospitals and Health Systems

Oregon’s hospitals have a shared objective with the governor, the Oregon Health Fund Board and members of the Oregon Legislature when it comes to increasing health care access for all Oregonians, especially children.  Access to appropriate care, as well as to state, federal and commercial insurance programs remains one of our single most important policy priorities.

At the same time, however, we struggle to understand the rationale and wisdom of financing the lion’s share of this critical increase to the Oregon Health Plan through a 4% hospital tax on Oregon’s community hospitals.  This financing approach has implications that will ripple through communities across the state at the very time when Oregon’s hospitals are facing a severe downturn in their net operating revenue.  On average, hospital margins in this state continue to decline year over year.  In 2007, the average margin was 3.9%, an amount less than the amount of the proposed hospital tax itself.

Fast Fact: Cyber Monday web traffic up 46%

Global visitors per minute comparisons:
2008 =  6.7 million
2007 = 4.6 million

ZDNet reports that web traffic (although not sales) was significantly up on Cyber Monday — the heavily watched day for internet shopping after Black Friday.

Oregon Restaurant Industry Hit by Economic Downturn

By Nike Kern, Biz Reporter

With today’s economy in a tailspin one of our state’s leading industries is being hit harder than most.  The Oregon restaurant industry employs an estimated 110,000 and creates a whopping economic impact of 9.7 billion dollars annually into our economy.  With more than 9,000 restaurants and food service outlets throughout the state it appears the short end of the stick has been given to the restaurant industry during today’s economic downturn.

“Three to four weeks ago the restaurant business just dropped off,” explains Bill Perry vice president of government affairs for the Oregon Restaurant Association.  “People just stopped going out to eat and a 30-40 percent decline appeared to occur over night.”

Fast Fact: Black Friday shopping up 7%

FAST FACTS:

2008  — Shoppers: 172 million,  Average spent: $372.57
2007 — Shoppers: 147 million, Average spent: $347.55

National Retailers Foundation shows shoppers spent 7% more. and 30 million more shoppers durign Black Friday weekend.

Latest Federal Stimulus Program Will NOT Help Housing Market

By Bill Conerly, Businomics, Conerly Consulting LLC

The government’s latest plan (as of today, November 26, 2008) has the Fed buying mortgage-backed securities from Fannie, Freddie and the gang.  I’m OK with the program in general, but here’s a bit of hubris I cannot tolerate: the claim that it will help the housing market.

Housing consists of owner-occupied (or increasingly owner-unoccupied) plus rental housing.  The proportions are roughly two-thirds owned, one-third rented.  Bringing down mortgage interest rates will help one sector of the market, but only at the expense of the other.  As I showed with charts in this post from a couple of weeks ago, we have an excess supply of both types of housing.  There is no solution to the excess supply of housing other than to have a good-sized fire, or grow our population.  The latter solution works, and works well, but at a slow pace.  We grow our population by about one percent per year, so we’ll eventually grow to fit our housing stock.

Black Friday: Deals up 21%, freebies down

By Biz Reporter,

ShopLocal reports a 21% increase in Black Friday deals compared to 2007.  Stores are scrambling to get the most out of a drop in consumer spending and a diminishing economy.

Deals may be up, but freebies offered by stores appeared to be in decline in Oregon.  The Oregonian Black Friday advertisements show only one department store offering free gifts to the first customers compared to two to three stories in years prior.  In 2007, two sporting goods stores offered free gift cards ranging from $5 to $500 to the first 200 customers.  This year saw only one outlet (Joes) offering such free gift cards.

Happy Thanksgiving

Best wishes and thankfulness from Oregon Report

Oregon gas prices lowest since 2006

BY AAA Oregon,

“Oregon?s gas prices are at their lowest level since March 2006. The statewide average for regular unleaded drops another 16 cents this week to $2.22. The national average falls another 15 cents to $2.07 and is at its lowest level since March 18, 2005.”AAA Oregon Public Affairs Director Marie Dodds says, “Both averages are about a dollar lower than they were a year ago, and are about 50% lower than the record highs of more than $4 a gallon we set in July.”

The national average for diesel also drops below $3 per gallon this week for the first time since September of last year. And Oregon?s average for diesel is just above $3 per gallon, also at the lowest point since September 2007.

A closer look at the Starbucks 97% profit drop

By Alyssa Williams, Biz Reporter

With the recent announcement of Starbucks’ new evolution of card rewards that “takes the next step in putting money back in loyal customers’ wallets,” one may think Starbucks needs the money in its own back pocket after a 97 percent profit drop. However, Starbucks is one of many businesses to suffer severe reduced profits in the current economic crisis, and there is no evidence to conclude that these businesses cannot recover from the profit decrease.

Businesses from all sectors are beginning to feel the pinch of the poor economy.   For example, retail store J.C. Penny’s profits dropped 52 percent and the Cheesecake Factory Inc. dropped 36 percent in their third quarters.    More locally, the Oregon Shakespeare Festival announced they will cut back $1 million for its 2009 budget, one of the greatest financial crises in the history of the organization.

Starbucks rebound plan

Did We Economists Miss the Housing Problem?

By Bill Conerly, Businomics, Conerly Consulting LLC

A reporter called yesterday for a retrospective on my forecast of a year ago.  I groaned, thinking the headline would be “Gotcha!”  Be the actual quotes he had weren’t so bad.  Apparently I said that we had overbuilt housing and that it would take a couple of years at least to work off the excess supply.  Boy, that sounds right.

Confirming that is an interesting article from the Wall Street Journal’s Real Time Economics which says in 2005 there was a burst of stories about a housing bubble.  Here’s their chart, based on 50 major daily newspapers and how often stories refer to a housing or real estate bubble. (Hat tip to Arnold Kling at EconLog.)

Weekly News Quiz 11/21

Test your knowledge on what happened this week.

1. What economic index saw its largest single month fall since before World War II this week?
1) Consumer Confidence
2) Consumer Prices
3) Oil prices

2. Which Oregon museum announced 10% layoffs this week?
A) OMSI
B) Evergreen Aviation
C) Portland Art Museum
D) Oregon Zoo

Oregon Heating Oil Customers Get Price Relief as Economy Falters

From Oregon Petroleum Association,
PORTLAND, Ore.–(BUSINESS WIRE)–For Oregonians who use home heating oil, the struggling economy has delivered at least one bright spot: heating bills are dropping along with the temperatures.

Crude oil prices, which reached a record high of $145 a barrel in July, fell below $56 a barrel this week — a drop of more than 60% in four months. “Worldwide and domestic oil consumption has plummeted,” explained Molly Brady, President of the Oregon Petroleum Association. “Prices could keep dropping if a weak economy continues to dampen oil usage.”

Poll: Protecting Jobs vs. Protecting the Environment

By Moore Information,

As economic conditions have continued to worsen throughout 2008, voters have grown more concerned about protecting jobs than protecting the environment. Asked which issue they are more concerned about today, 65% of U.S. voters say they are more concerned about protecting jobs, while only 27% are more concerned about protecting the environment. This is a notable change from six months ago, when concern about jobs was higher than concern about the environment, but to a lesser degree than today. Further comparison to past data reflects a pattern of concern consistent with the economic ups and downs over the past three years, as reflected in the following table:

Europe frees the market for ugly fruits and vegetables

By Economist Dr. Eric Fruits, Econinternational

The BBC reports that the European Commission has scrapped rules that prevent oddly-sized or misshapen fruit and vegetables being sold in Europe. The EU’s agriculture commissioner called it “a new dawn for the curvy cucumber and the knobbly carrot.”

Proponents of the scrapped rules say they were introduced to ensure common EU standards.  Critics decried the rules as examples of Euro-madness.  If the rules were madness, then surely everyone would have voted to scrap the rules.  Instead, the BBC’s blog notes that that 16 countries–mainly the big fruit and vegetable producers–voted against scrapping the rules.

If the rules were such Euro-madness, why would 16 countries vote to continue the madness?

TARP: Banks give Congress the right to screw them

By Bill Conerly, Businomics, Conerly Consulting,

TARP is, of course, the Treasury plan to provide capital to banks.  There are terms of the deal described in the press and in official documents from the Treasury.  However, the deal is subject to any modification that Congress wants to make.  Section 5.3 says that Treasury may unilaterally change the terms of the deal to conform with laws passed by Congress.  This is a huge danger.

Back in the savings and loan crisis, Congress changed the terms of deals made between the government and banks.  The Supreme Court said that whenever Congress does that, the government may owe damages to the banks for violating the contracts.  (I was an expert witness in two of the damages lawsuits.)  This time round, it won’t be a violation of contract for the terms to be changed, because the contract says the terms are whatever Congress wants them to be.

Weekly Current Affairs Quiz 11/14

Test you knowledge on these current affairs questions

1. Which Oregon County has moved to a four day work week?
A) Multnomah
B) Clackamas
C) Washington
D) Jackson

2. Researchers announced that ______ was a better indicator of premature death than traditional weight measurements.
A) Cholesterol level
B) Alcohol consumption rate
C) Blood pressure levels
D) Waist Size

New report to boost business fight against prostitution on 82nd

By Allyssa Williams, BIZ Reporter.

A comprehensive citizens’ report detailing the root causes and basic problems of prostitution along Northeast 82nd Avenue should be released in early December, according to Dawn Rasmussen, president of the Save Northeast 82nd Avenue Coalition. The report would help guide businesses and neighborhoods in the area on how to effectively handle prostitution.

The plan, a brainchild from meetings uniting Northeast neighborhoods and featuring such panelists as City Commissioner Randy Leonard, President of the 82nd Avenue of Roses Business Association Ken Turner and Lila Lee from the Council for Prostitution Alternatives, will be the first aggressive attempt from the community to curb prostitution by addressing the core of the issue.

Columbia Sportswear news mixed: Lose 75 employees, adds 3 new stores

BIZ REPORT — Portland based Columbia Sportswear announced this month it is laying off 75 employees which is 4% of their workforce.  At the same time Columbia is opening a store at Portland International Airport and also at three other locations in Minneapolis, Seattle and Chicago.

President Tim Boyle stated, “We believe Columbia Sportswear has tremendous long-term growth opportunities.  However, our recently announced 11 percent decline in orders for spring 2009 and our expectation that U.S. market conditions will remain challenging through 2009, make it necessary for us to better align our planned spending with those realities.  We have approached this decision thoughtfully to ensure that we are able to continue investing in our expanding retail store platform and increased marketing.  Although difficult, we believe these actions will ultimately strengthen the company and position us well for when the economy recovers.”