Kathleen McLaughlin
The Bulletin

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 Central Oregon Business Index rose less than half of one percentage point in the third quarter, reflecting an era of stability in certain areas of the region’s economy.

For the three months that ended Sept. 30, the index was 146.6, up 0.3 points, or 0.2 percent, from the previous quarter

Compared to the same quarter a year ago, the index was up 2 percent.

The index benchmark is 100 in 1998. It comprises nine variables, which are adjusted for seasonality.

“Initial unemployment claims, housing starts, housing sales — those are already flat,” said Tim Duy, University of Oregon economics professor and author of the index. “What I tend to be watching for or looking for, in aggregate, (is) do you see the index turn downward? And do you see a large number of the underlying components turn downward?”

There’s no reason to think a downturn is just around the corner, Duy said. The housing market in Deschutes County appears to be stronger than in Eugene, and Portland saw September home sales decline 14.64 percent over the prior year, he noted.

In Deschutes County, average monthly home sales have ranged from 450 to 500 since the middle of 2015. In the third quarter, the average was 467 sales, which is on par with 468 closings in the second quarter.

Homes spent more time on the market in the third quarter, an average of 118 days, compared with 114 days in the second quarter. Duy said the uptick comes after a long period of decline.

“Permitting activity’s been fairly consistent, too,” Duy said.

Construction company owners are relieved to see the pace of growth slow down, said Evan Dickens, a partner in the Bend office of Jones & Roth CPAs.

Working primarily with construction industry clients, Dickens said, “There was a lot of fear about the rate of growth and it being so unsustainable. It would essentially function as a rubber band, and it would snap back pretty violently.”

Dickens said most of his clients, whether in construction or other industries, can’t find enough labor to keep up with demand.

One business owner was sleeping at his business over the summer to finish all the work he’d contracted, he said.

Employment in Central Oregon was 5.1 percent higher than in the third quarter of 2017, and firms added 1,200 jobs, Duy said.

Measures of travel and tourism were mixed in the third quarter, Duy said. Lodging tax revenue, which is adjusted for inflation, fell from $2.94 million in the second quarter to $2.82 million, a 4 percent decline.

Redmond Airport activity continued to climb with 79,082 passengers arriving and departing, up 6 percent from 74,638 the previous quarter.

Other Oregon airports are seeing the same growth in activity, which reflects tourism and a local population that has the means to travel, Duy said. Central Oregonians are also spending money on their homes, said Gavin Hepp, co-owner at Webfoot Painting.

The third quarter was the best on record for the company, which also does light carpentry, Hepp said. The firm works exclusively with homeowners, rather than the new-home construction industry.

While local mortgage brokers and real estate agents worry about a looming change in the real estate market, Hepp said he hasn’t seen that materialize. And he’s optimistic about 2019.

“We’re coming out of the strongest November we’ve ever had,” Hepp said. “We’re scheduled out farther than we’ve ever been for all divisions.”

Chris Justema, president at Cascade Lakes Brewing Co., said he’s also looking forward to more growth next year. In the third quarter, business at the company’s two pubs in Redmond and Bend was up 8 percent to 10 percent over the previous year, he said.

One reason for that difference is the 2018 tourism season was much smoother than last year, when the solar eclipse drove away locals, and wildfires brought smoke, he said.

Cascade Lakes also benefited from Bend’s continued growth this year and a stable workforce in a labor-scarce market, Justema said.

Bend business owners are right to be optimistic, Duy said.

“If you look at a lot of the headlines emanating from Wall Street, there are some substantial concerns about where the economy is headed in 2019.”

Rising interest rates and tariffs are potential threats to the economy, Duy said.

“Those are concerns of the future still,” he said. “As the data stands right now, the local economy really stands pretty strong and is likely to do so for the foreseeable future.”

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