The lack of construction jobs means that people do not have enough money to buy other items, and this hurts other businesses, who must also lay off their workers. Unemployment, although it is entrenched in the construction industry, has been spiraling out of control in all sectors, in Oregon. “Thousands more of the unemployed will exhaust their jobless benefits in coming monthsThis region, and others like it around the state and nation, face the prospect of growing hunger and homelessness this winter as our neighbors run out of benefits and lose their ability to provide food and shelter for their families” wrote Read in the Oregonian (Read 2010).
“Nationally in terms of monetary policy, the Federal Reserve appears ready to actquantitative easing” or steps to increase the money supply seem likely in the near future (Read 2010). When the Fed wishes to expand the money supply, it expands its purchase of Treasury bond on the open market. By buying up government bonds, the Fed infuses dollars into the economy. Projected Fed purchases “could be anywhere from $50 billion to $200 billion (Read 2010). Given the recent losses in the mid-term elections, widely attributed to dissatisfaction with economic growth, the Fed may act even more aggressively. Although a nonpartisan entity, the Fed clearly should have read from the results how much people are suffering, particularly in construction-dependent areas like Oregon. It is also hoped in Oregon that the Fed will tolerate higher inflation, in an effort to stimulate the economy overall. What is needed is more money for people to spend, to fuel economic growth.
However, the influx of deficit-conscious Republicans into the House of Representatives could mean that additional stimulus spending may be hard to come by. President Obama had pledged to give federal support to shovel ready construction projects, but much of the stimulus revenue has been diverted to plugging holes in state budgets, and its reduced size after partisan bickering meant that it did not have the desired impact upon the construction sector of the economy. Given the reliance of Oregon on construction, one potentially helpful move on a federal level might be to institute another homebuyer tax credit.
“In June, construction starts on residential buildings declined in June to the lowest level since October the numbers also highlighted the dependency of the [housing and construction] market on government support in the form of an $8,000 tax credit for buyers who signed contracts before April 30” (Hauser 2010).
Oregons government is already cash-strapped, because of the need to extend unemployment benefits to residents. However, it could offer tax incentives to businesses who agree to come to the state and employ individuals in the construction industry, like Intel. Only by taking active steps to increase employment, particularly in hard-hit sectors like construction, can the state of Oregon revive its fortunes. Some economists have suggested giving all Oregonians direct infusions of cash through income tax credits or suspending the state sales tax. This would theoretically give consumers more money and encouragement to spend (Read 2010). But Keynesian wisdom holds that when jobs are insecure, individuals stuff money under the mattress and save, until they feel they can spend their earnings with the security that unemployment is not lurking around the corner. Oregonians at present still lack that security.
Hauser, Christine. (2010, July 21). Home construction decline. The New York Times. Retrieved November 13, 2010 at http://www.nytimes.com/2010/07/21/business/economy/21econ.html
Hooson, Paul. (2009, April 15). Oregons unemployment rate soars to the worst in the nation.
Wiz Bang blue. Retrieved November 13, 2010 at http://wizbangblue.com/2009/04/15/oregons-unemployment-soars-to-the-worst-in-the-nation.php
Manning, Jeff. (2001, October 19). Intel announcement promises thousands of jobs in Hillsboro.
The Oregonian. Retrieved November 13, 2010 at http://www.oregonlive.com/hillsboro/index.ssf/2010/10/intel_announcement_promises_thousands_of_construction_jobs_in_hillsboro.html
Read, Richard. (2010). Oregons unemployment rate remains stuck in a narrow band.
The Oregonian. Retrieved November 13, 2010 at http://www.oregonlive.com/business/index.ssf/2010/10/oregons_unemployment_rate_rema.html
State unemployment spike. (2009, April 19). EconomPic. Retrieved November 13, 2010 at http://econompicdata.blogspot.com/2009/04/state-unemployment-spike.html
What is a seasonal adjustment? (2007). Labor Market Info. Retrieved November 13, 2010 at http://www.labormarketinfo.edd.ca.gov/article.asp?articleid=634.