Editor’s note: The Bulletin has partnered with the University of Oregon’s College of Arts and Sciences and Department of Economics to produce the Central Oregon Business Index. The index provides a regular snapshot of the region’s economy using economic models consistent with national standards. The index, exclusive to The Bulletin, appears quarterly in the Sunday Business section.

The pace of Central Oregon’s economic growth slowed in the third quarter, but there was no sign the overall upward climb will reverse itself in the near term, University of Oregon economics professor Tim Duy said. The Central Oregon Business Index, compiled by Duy, rose to 144.0, a 0.8-percent gain over the second quarter. The index was up 3.8 percent from the third quarter 2016.

“The COBI points toward sustained economic growth in Central Oregon,” Duy said. “Continued in-migration to the region with the backdrop of an ongoing national and state economic expansion is likely to provide continued support for the region for the foreseeable future.”

Wildfire smoke in September ended a 61-month winning streak for Bend’s tourism industry, but looking back at the quarter as a whole, Duy said the impact appears to be limited to that month.

Lodging-tax revenue data also reflected a delay in submissions and might even be revised upward next quarter, he said. While hotels and tourism-driven businesses took a one-month hit, Duy noted that traffic at Redmond Airport remained strong. Average monthly airline traffic reached a new record of 68,289 passengers, both enplaning and deplaning, he said.

Bend lodging-tax revenue and airline traffic are among nine components of the index, which is a snapshot of business activity.

September’s smoke served as a reminder that Bend remains vulnerable to unforeseen natural events, and, Duy said, it’s worth pondering potential long-term effects on the region and Oregon.

“Does it reduce the attractiveness of the region in general?” he said. “Are people going to continue to move from California to Bend and endure two months of choking smoke as a reward? If this is the trend for the future … it seems likely to weigh on economic activity going forward.”

Most newcomers to Central Oregon are coming from elsewhere in the West, where wildfires are a familiar threat, said Damon Runberg, Central Oregon regional economist for the Oregon Employment Department. He doubts that fires and smoke will pose a long-term threat to the migration pattern that contributes so much to Central Oregon’s growth.

Central Oregon, and Bend in particular, doesn’t have many competitors among similar-size economies that also offer outdoor recreational opportunities, Runberg said. Bend’s closest competitor is probably Bellingham, Washington.

Economic output in the Bellingham, Washington, metropolitan statistical area was $10.1 billion in 2016, compared with $9.4 billion in Bend-Redmond. Bellingham employed 91,000 people to Bend-Redmond’s 78,400.

The question for many Central Oregon residents and potential new residents — most of whom are working age — is whether there’s a place that offers a similar lifestyle with more affordable housing, Runberg said.

Bellingham also struggles with affordable housing and homelessness, said Sylvia Goodwin, planning and development director at the Port of Bellingham, which is an economic development agency for Whatcom County.

Like Bend, Bellingham attracts people who appreciate good beer, skiing and bicycling, and it’s trying to grow its technology sector, Goodwin said. Much of Bellingham’s growth has come from companies that are already located there, Goodwin said.

When recruiting new companies, the community faces competition from the Seattle area, where there’s more qualified labor, and more affordable places, such as Spokane, Washington, and the small town of La Conner, Washington. Meanwhile, she said, “There are a lot of little towns in Montana.”

Likewise, Bend should keep an eye on places like Billings, Montana, Bremerton-Silverdale, Washington, and Yakima, Washington, Runberg said. Those places are not far from outdoor recreation spots, and they have similar-size economies, which means jobs, he said.

Comparing Bend to other skiing destinations with expensive real estate is a “lazy shortcut,” Runberg said. “You start to dig into the economic figures, we’re more like Yakima,” he said. “It’s not as sexy as Jackson Hole, Wyoming, or Vail (Colorado). In a weird way, it’s encouraging to know we’re more like Bellingham than Vail. There’s a sustainable economy that can support your family in the long term.”

Central Oregon employment grew but at a much slower pace in the third quarter, Duy said. Employers added 500 workers, down from 1,200 in the second quarter. The pace of job growth has been slowing since hitting a peak in the third quarter of 2015, but that’s to be expected in a more mature stage of the business cycle and shouldn’t be taken as a sign that the expansion will end soon, he said. Initial unemployment claims continue to hover near historic lows, he said.

At the same time, home prices continue to rise, and average monthly home sales continue to range from 440 to 490, the pace established at the beginning of 2015, Duy said. Construction activity continues to lag the pace of sales, which means housing won’t become more affordable anytime soon.

Central Oregon could use lower home prices, Duy said. “I don’t think the market is over-supplied in any way, shape or form.”

—Reporter: 541-617-7860, kmclaughlin@bendbulletin.com