Climbing economic indicators suggest a promising future for small businesses in Salem, Oregon, but what challenges could still lie ahead?
By 2025, small businesses in Salem, Oregon, are expected to benefit from a robust economic forecast, highlighted by a 5.4% increase in overall employment and a substantial rise in personal and corporate tax revenues. The health care and social assistance sector, accounting for 24% of private employment, is rebounding strongly, having grown by 17%. While challenges remain, including a shift towards online retail and inflation affecting consumer spending, local resources such as tax abatements and SBA funding opportunities support business growth. Understanding these dynamics will be essential for maneuvering future opportunities and challenges in Salem's evolving economy.
How's the economy shaping up in Salem? The recent growth in employment indicates a positive trajectory, with overall employment increasing by 5.4% from July 2022 to July 2024. This growth has been fueled by a labor force expansion of about 5,000 workers over the past year, which has helped drive the unemployment rate down to below 4% for the first time since last December. Significantly, the health care and social assistance industry has led this growth, increasing its employment by 17% and regaining pre-pandemic levels late in 2022.
As the largest sector in Salem, health care and social assistance comprises 24% of private employment, highlighting its significance in the local economy. The addition of thousands of home care aides reclassified from state roles to the private sector further underscores the industry's growth. While low-wage industries faced substantial job losses during the pandemic, they have also experienced significant wage gains, contributing to overall economic stability. Moreover, the projected increased General Fund revenues of $532 million compared to previous forecasts will provide additional support for local businesses and services.
With approximately 140,800 workers in selected industries that represent 85% of Salem's private sector, the labor market dynamics reveal mixed results. Despite some fluctuations, the overall employment growth reflects a healthy market demand for labor, which is essential for sustaining economic stability moving forward. The local economy's current trajectory indicates a promising outlook for small businesses, particularly as the demand for services continues to rise in response to population growth and changing demographics.
Examining revenue trends reveals a robust financial landscape for Salem, with notable increases in both personal income tax and corporate revenues. Personal income tax revenues have risen by $547.4 million, marking a 2.6% increase from the 2023 Close of Session forecast, while corporate revenue has surged by $588.0 million, reflecting a remarkable 26.4% increase. Overall, the General Fund gross revenue stands at $1.17 billion, a 4.6% uptick from previous forecasts.
Looking ahead, revenue projections for the 2023-2025 biennium show promising growth, with projected Net General Fund Resources reaching $954.4 million—an increase of 2.7% from earlier estimates. Consumption trends indicate that resources from the Oregon Lottery are also up by $37.1 million, or 1.9%. Additionally, the combined Net General Fund and Lottery Resources have seen an increase of $982.5 million. Economic transition is anticipated to support these revenue trends, potentially leading to increased investments in local businesses.
For the 2025-2027 biennium, while available resources have been revised down by $66 million due to the personal kicker payout, projections still indicate that General Fund resources are expected to exceed the previous forecast by 2.5%. Despite a slight decrease in consumption-based tax collections, the anticipated personal kicker of $1.8 billion and the corporate kicker of $1 billion will greatly impact funding, especially for the K-12 education system. Overall, the revenue landscape in Salem reflects a trend of stability and growth, essential for supporting the local business environment.
Small businesses in Salem are poised to thrive, thanks to a robust array of support resources available to entrepreneurs. The Small Business Administration (SBA) provides essential funding opportunities, including various loans and grants specifically tailored for small businesses in the area. Additionally, the Oregon Governor's Office of Economic Development offers resources aimed at business expansion and innovation, while the City of Salem's Economic Development Department presents incentives such as tax abatements and fee reductions, which can notably reduce operational costs.
Local business networks also play an important role in fostering growth. The Salem Chamber of Commerce and the Mid-Willamette Valley Chamber of Commerce provide invaluable networking strategies, offering opportunities for entrepreneurs to connect with peers, share experiences, and access business education and advocacy. For more personalized assistance, the Oregon Small Business Development Center Network provides free business advising and low-cost training, ensuring that business owners have the resources they need to succeed.
Financially, community banks like Salem Five and Umpqua Bank offer small business loans and lines of credit, while credit unions such as Oregon State Credit Union present competitive financing options. For those who may not qualify for traditional loans, the Oregon Business Development Fund serves as a essential alternative. Additionally, crowdfunding platforms like Kickstarter and GoFundMe enable local businesses to tap into community support, diversifying their funding sources and enhancing their growth potential.
Salem's job market is on the rise, with employment growing by 5.4% from July 2022 to July 2024. The health care and social assistance industry has led this growth, increasing employment by 17%, making it the largest share of private employment in the area at 24%. This sector, along with transportation, warehousing, and utilities, is projected to account for 41% of all industry employment growth. Despite this, the leisure and hospitality industry only grew by 3.1%, still recovering from significant pandemic-related job losses.
In contrast, retail trade employment has declined by 4.1%, reflecting the shift towards online shopping, which has impacted 13% of total employment. Workforce demographics play an essential role in this evolving landscape. Oregon's overall labor force participation rate stands at 62%, with the highest rates among individuals holding bachelor's degrees. The growing demand for skilled positions is evident, with top growth occupations including home health aides, registered nurses, and medical assistants. As Oregon's population declines, the state anticipates 351,301 replacement openings over the next decade, with 22% occurring in similar service-related occupations. This trend underscores the need for increased participation from existing Oregonians to fill these gaps. By understanding these employment trends and sector dynamics, small businesses in Salem can better position themselves to attract talent and adapt to the changing workforce landscape.
In the face of rising economic pressures and shifting consumer behaviors, local businesses are maneuvering a landscape fraught with challenges and risks. Inflation continues to squeeze budgets, increasing supply and utility costs while leaving consumers with less disposable income, which ultimately reduces their support for small businesses. This trend is compounded by the growing preference for online shopping, diverting foot traffic from physical stores, particularly in downtown Salem, where recent months have seen a notable decline in visitors.
Moreover, urban development poses additional hurdles. Parking issues create significant barriers for both businesses and customers, while safety concerns deter potential tenants from leasing space in the downtown area. The prevalence of homelessness in these regions further exacerbates these challenges, leaving vacant storefronts, such as the former Cooke Stationery Company, unoccupied and decreasing overall appeal.
As consumer behavior shifts towards prioritizing essential purchases, non-essential businesses struggle to remain viable, with restaurants increasingly dominating the downtown landscape. Concurrently, changes in fiscal policies, including tax reforms and interest rate adjustments, threaten local economies and may adversely affect businesses' financial health.
The projected increase in demand for commercial land, particularly for office and retail services, underscores the need for strategic planning amidst these challenges. Steering through this complex environment will require local businesses to adapt proactively, understanding that their success hinges on recognizing and responding to evolving consumer behaviors and urban development dynamics.
To sum up, Salem's small business landscape is poised for growth through 2025, driven by supportive resources and projected job increases. For instance, a local coffee shop, which expanded its offerings to include catering services, experienced a 30% revenue increase in one year, exemplifying the potential for innovation. However, businesses must remain vigilant about emerging challenges, such as supply chain disruptions and shifting consumer preferences, to sustain their growth trajectory and capitalize on opportunities in the evolving economic environment.
